Crisp v. State Farm Mutual Automobile Insurance Co.

124 S.E.2d 149 (1962)

256 N.C. 408

Ernest G. CRISP v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY.

No. 99.

Supreme Court of North Carolina.

February 28, 1962.

*152 Williams, Williams & Morris and James N. Golding, Asheville, for plaintiff, appellant.

Van Winkle, Walton, Buck & Wall, O. E. Starnes, Jr., and Roy W. Davis, Jr., Asheville, for defendant, appellee.

MOORE, Justice.

The judge instructed the jury as follows: "* * * (T)he court charges you * * * that if you believe all of the evidence in this case and find the facts to be as the evidence tends to show, that you would answer the issue NO." The jury did answer the issue "No."

In the first place, the instruction is insufficient in form. When a peremptory instruction is permissible, the court must leave it to the jury to determine the credibility of the testimony. Reynolds v. Earley, 241 N.C. 521, 85 S.E.2d 904; City of Shelby v. Lackey, 236 N.C. 369, 72 S.E.2d 757. Where the peremptory instruction is favorable to the party having the burden of proof, it must be in such form as to clearly permit a verdict unfavorable to such party in the event the jury finds that the evidence is not of sufficient weight and credibility to carry the burden. Hunnicutt v. Shelby Mut. Insurance Co., 255 N.C. 515, 122 S.E.2d 74.

Furthermore, the instruction given, had it been in proper form, was inappropriate in this case.

On this record the pleadings raise two issues. These may be stated as follows: (1) Did defendant issue and deliver to Julius Creed Robinson an automobile liability insurance policy which insured a 1947 Chevrolet, owned by Julius Creed Robinson and involved in a collision in which plaintiff was damaged on December 4, 1959, as alleged in the complaint? (2) If so, was the insurance policy cancelled and terminated prior to said collision? Plaintiff has the burden of the first issue, and defendant has the burden of the second.

The following facts do not appear to be controverted on this appeal: The 1947 Chevrolet described in policy No. 473 166-F19-33 was involved in an accident on 4 December 1959 in which plaintiff was damaged, and was being operated at the time by Robinson, the insured named in the policy. Plaintiff recovered judgment in the amount of $2500 against Robinson in a damage suit growing out of the accident. The judgment has not been paid.

In addition, plaintiff's evidence tends to show: Policy No. 461-373-F19-33 was issued and delivered by defendant to the named insured for the policy period 19 June 1959 to 19 December 1959. By its terms it insured not only the Ford automobile described therein but also any automobile acquired by insured during the policy period to replace the Ford described. In the Fall of 1959 insured traded the Ford for the 1947 Chevrolet which was involved in the collision in question.

This makes out a prima facie case for plaintiff. Defendant disagrees, and contends *153 that plaintiff has the further burden of showing that the premium was paid.

As to whether one who claims benefits under a policy of insurance has the burden of proving that the premium has been paid, or whether nonpayment is a matter of defense, depends on the provisions of the insurance contract and the circumstances of the case. Nonpayment of premium has been held in some instances to be an affirmative defense. Abernethy v. Mecklenburg Farmers Mut. Insurance Co., 213 N.C. 23, 195 S.E. 30; Harris v. National Council Junior Order United American Mechanics, 168 N.C. 357, 84 S.E. 405; Wilkie v. National Council, 147 N.C. 637, 61 S.E. 580; Page v. Life Insurance Co., 131 N.C. 115, 42 S.E. 543. "The burden is on defendant to prove nonpayment of a premium or assessment * * * where the fact of payment has been prima facie proved, as where acknowledgment of payment is made in the policy, or where plaintiff is in possession of and produces the policy, and the other essentials to recovery are prima facie proved or admitted." 46 C.J.S. Insurance § 1316 b(5)c, p. 397. Furthermore, payment of premium as a condition for effective insurance may be waived. Pender v. North State Life Insurance Co., 163 N.C. 98, 79 S.E. 293; Rayburn v. Pennsylvania Casualty Co., 138 N.C. 379, 50 S.E. 762.

The insurance policy in the instant case is subject to the provisions of the Vehicle Financial Responsibility Act of 1957, G.S. Ch. 20, Art. 13. "Where a statute is applicable to a policy of insurance, the provisions of the statute enter into and form a part of the policy to the same extent as if they were actually written in it." Howell v. Travelers Indemnity Co., 237 N.C. 227, 74 S.E.2d 610. Plaintiff, in the case at bar, issued certificate FS-1, and it was delivered to the North Carolina Department of Motor Vehicles. By the issuance of the certificate (FS-1) an insurer represents that it has issued and there is in effect an owner's motor vehicle liability policy. Swain v. Nationwide Mutual Insurance Co., 253 N.C. 120, 126, 116 S.E.2d 482. In substance, by the issuance of the certificate the insurer represents that everything requisite for a binding insurance policy has been performed, including payment, or satisfactory arrangement for payment, of premium. Once the certificate has been issued, nonpayment of premium, nothing else appearing, is no defense in a suit by a third party beneficiary against insurer. To avoid liability insurer must allege and prove cancellation and termination of the insurance policy in accordance with the applicable statute, unless it is established by plaintiff's evidence or admissions.

"* * * (T)he party asserting the cancellation of an automobile policy as a defense has the burden of proving it." Blashfield: Cyclopedia of Automobile Law and Practice (Perm. Ed.), Vol. 6 (Part 1), s. 3765.5, p. 405. See also Barnes v. Security Life Trust Co., 229 N.C. 409, 50 S.E.2d 2.

Defendant contends that its evidence shows that the subject insurance policy was duly cancelled for nonpayment of premium and that this entitles it to a peremptory instruction that the policy was not in force on the date in question.

G.S. § 20-310 is the applicable statute in this case for the cancellation and termination of automobile liability insurance policies. It provides: "No contract of insurance or renewal thereof shall be terminated by cancellation or failure to renew by the insurer until at least fifteen (15) days after mailing a notice of termination to the named insured at the address shown on the policy. Time of the effective date and hour of termination stated in the notice shall become the end of the policy period. Every such notice of termination for any cause whatsoever sent to the insured shall include on the face of the notice a statement that proof of financial responsibility is required to be maintained continuously throughout the registration period and that operation of a motor vehicle without maintaining *154 such proof of financial responsibility is a misdemeanor. Upon the termination of insurance by cancellation or failure to renew, notice of such cancellation or termination shall be mailed by the insurer to the Commissioner of Motor Vehicles not later than fifteen (15) days following the effective date of such cancellation or other termination."

In order to effectively cancel a policy an insurer must substantially comply with the requirements of this section. The notice mailed by defendant to insured failed to include on the face thereof "a statement that proof of financial responsibility is required to be maintained continuously throughout the registration period and that operation of a motor vehicle without maintaining such proof of financial responsibility is a misdemeanor." The statute provides that such statement shall be included on the face of the notice. "The manifest purpose of the 1957 Act was to provide protection, within the required limits, to persons injured or damaged by the negligent operation of a motor vehicle * * *." Swain v. Nationwide Mutual Insurance Co., supra. It was the intent of the Act that motor vehicle owners maintain financial responsibility continuously and that the law enforce this purpose. It is our opinion that the statement required by G.S. § 20-310 to be placed on the face of the notice of termination is not merely formal and directory. It is intended as a firm reminder to vehicle owners of the requirements of the law, and as a notice that failure to comply constitutes a criminal offense. It is to be given at the very time when insurance protection and financial responsibility is being withdrawn. The substance of the required statement appears nowhere in the language of the notice given by defendant. In the absence of circumstances in a civil action which might constitute a waiver or an estoppel, or render harmless the failure to include such statement, it is essential to a valid cancellation or termination, especially when the suit is by a member of the class the Act is designed to protect.

In passing, we observe that insurer did not mail to the Department of Motor Vehicles notice of the purported cancellation within 15 days following the effective date of cancellation stated in the notice to insured. Insured was advised that the effective date of cancellation was November 6, 1959. Notice was mailed to the Department November 25, 1959, and this notice stated that the effective date of cancellation was November 10, 1959.

We do not know, of course, what evidence may be adduced upon a retrial. It is our opinion that the uncontradicted evidence offered by defendant does not entitle it to a peremptory instruction that the alleged insurance policy was not in force on 4 December 1959.

We are not unmindful of defendant's argument that plaintiff fails to make out a prima facie case in accordance with the allegations of the complaint for that, it contends, the 1947 Chevrolet did not replace the Ford described in policy No. 461 373-F19-33 (the policy applied for in June 1959 and delivered in July 1959). The evidence tends to show: In June 1959 insured went to the office of defendant's agent to apply for insurance. He owned only one automobile, a Ford. The Ford had a 1947 body and chassis and a 1948 motor. The correct motor number was given the agent. This motor number appears in the policy, and the policy describes the automobile as a 1948 Ford. This car was traded by insured for a 1947 Chevrolet in September 1959. According to policy provisions, insured reported the replacement, and a new policy (No. 473 166-F19-33) was issued insuring the Chevrolet.

Defendant now contends that, since plaintiff sues upon the first policy, he has not made out a prima facie case for the reason that the Chevrolet replaced a 1947 Ford, and not the 1948 Ford described in the policy. The contention is not sustained. Insured owned only one Ford at the time of the application. There is no suggestion by pleadings or otherwise that insured *155 practiced any deceit, withheld any information, or gained any advantage. The proper motor number was given. The inference is permissible that the policy sufficiently describes the automobile owned by insured at that time, and that it was the intention of the parties that this particular automobile be insured. It was traded for the Chevrolet. The second policy, describing the Chevrolet, was merely an extension of the first policy. Its policy period ended 19 December 1959 as did that of the first policy.

New trial.

WINBORNE, C. J., not sitting.