Green Mtn. Ins. v. Maine Bonding Casualty

Annotate this Case
 NOTICE:  This opinion is subject to motions for reargument under V.R.A.P.
 40 as well as formal revision before publication in the Vermont Reports.
 Readers are requested to notify the Reporter of Decisions, Vermont Supreme
 Court, 111 State Street, Montpelier, Vermont 05602 of any errors in order
 that corrections may be made before this opinion goes to press.


                                 No. 91-113


 Green Mountain Insurance Company             Supreme Court

      v.                                      On Appeal from
                                              Orleans Superior Court
 Maine Bonding & Casualty Co.,
 Carol Carter, Alan Buck, Judye               June Term, 1991
 Cheney, Individually and as Next
 Best Friend of Sheena Cheney Buck
 and Gregory Hammond.


 John P. Meaker, J.

 Bruce C. Palmer of Downs Rachlin & Martin, St. Johnsbury, for plaintiff-
   appellant

 Allan R. Keyes and John A. Serafino of Ryan Smith & Carbine, Ltd., Rutland,
   for defendant-appellee


 PRESENT:  Allen, C.J., Gibson, Dooley, Morse and Johnson, JJ.



      JOHNSON, J.   This is a declaratory judgment action to establish which
 insurance carrier is primarily liable for damages resulting from an automo-
 bile accident.  Plaintiff Green Mountain Insurance Company (Green Mountain)
 appeals from an order of the Orleans Superior Court granting summary judg-
 ment to defendant Maine Bonding & Casualty Company (Maine Bonding).  Maine
 Bonding had insured a vehicle involved in a collision with a car insured by
 Green Mountain, but claimed that its policy had been cancelled.  We affirm.
      On October 4, 1987, Gregory Hammond was driving a car lent to him by
 its owner, Carol Carter, when it collided with a car driven by Alan Buck.
 Hammond was insured by Green Mountain, and the Carter vehicle carried the
 policy that Maine Bonding claims was cancelled.  Each policy provided that
 its coverage was primary with respect to the policy owner's vehicle and
 excess with regard to non-owned vehicles, with the result that the Maine
 Bonding policy would afford primary coverage if it were in effect.  The
 Maine Bonding policy had initially covered a 1976 Ford Pinto, but in March
 1987 Carter notified Maine Bonding that she was substituting a 1985 Ford
 Escort for the Pinto.  Prior to learning of the change in cars, Maine
 Bonding issued declarations of coverage for the period April 7 to October 7,
 1987, and on March 16, 1987, sent a bill for $81 for the renewal, with a
 minimum payment due of $27.  The due date for payment was April 8, 1987.
 Carter received the bill.
      On March 23, 1987, Maine Bonding issued Carter two amended declarations
 with respect to her new car, one covering the initial policy period from
 October 7, 1986 to April 7, 1987, and the second covering the renewal period
 from April 7 to October 7, 1987.  The first amended declaration reflected a
 "full term total premium" of $237 and stated at the bottom of the document,
 "Above amendments identified by * developed a premium of $24.00."  The
 second amended declaration also stated a "full term total premium" of $237
 and indicated at the bottom of the document that the amendments identified
 "developed a premium of $156.00."
      By check dated April 3, 1987, Carter paid Maine Bonding $27, apparently
 in response to the March 16, 1987 bill.   Maine Bonding received and negoti-
 ated the payment on April 6, 1987, applying $24 of the $27 toward the
 additional premium due for the new car for the remainder of the initial
 term, i.e., from March 10, 1987 through April 7, 1987, and applying the
 balance of $3 to the renewal period.
      On April 6, 1987, Maine Bonding rebilled Carter for $24, the difference
 between the minimum due for the renewal period ($27) and the $3 credit
 remaining from the check received from Carter on April 6, 1987.  Receiving
 no further payment thereafter, Maine Bonding on April 20, 1987 mailed the
 following notice to Carter:
           YOUR PREMIUM PAYMENT DUE APRIL 08, 1987 HAS NOT BEEN
           RECEIVED.  YOU HAVE AN OPPORTUNITY TO KEEP YOUR POLICY
           IN FORCE IF THE MINIMUM DUE OF $24.00 IS RECEIVED BEFORE
           THE CANCELLATION OF MAY 05, 1987.  SEND PAYMENT TO P.O.
           BOX 226, PORTLAND, MAINE 04112.  IF YOU HAVE ALREADY
           MAILED YOUR PAYMENT, PLEASE DISREGARD THIS NOTICE.

 Carter testified in deposition with respect to this notice that "I threw it
 away, because I'd already paid it."  The reason for her impression that she
 had paid the bill was the similarity of the $27 she had paid and the $24
 billed.
      Nearly five months later, Carter's Ford Escort was involved in the
 collision that resulted in the present action.
      Both Green Mountain and Maine Bonding filed motions for summary
 judgment.  Green Mountain stated that "the essential facts of this case are
 undisputed" and argued that Maine Bonding could not establish an effective
 cancellation as a matter of law because its notices to Carter were
 ambiguous.  Maine Bonding's motion also asserted that there were no material
 facts at issue and argued that its policy had been effectively cancelled as
 a matter of law.  The trial court ruled that Green Mountain had not met its
 burden of demonstrating that the cancellation notice was ambiguous, finding,
 on the contrary, that "the surrounding circumstances verify that the cancel-
 lation notice was an accurate integration of the bills sent by Maine Bonding
 and the payment received from Ms. Carter."  The court stressed that Carter
 should have been aware that her new car would require an additional premium
 and that she made no inquiry of the company after receiving a cancellation
 notice.  The court concluded that retention of the $3 toward payment of the
 renewal period premium did not estop Maine Bonding from relying on the
 cancellation notice.
                                    I. Standing
      Maine Bonding argues that Green Mountain has no standing to assert that
 its policy was not validly terminated for nonpayment of the premium.  Maine
 Bonding contends that the present issue is "personal to Carter and Maine
 Bonding."  We disagree.  That Carter has a significant interest in the
 issue cannot be disputed, because her vehicle was involved; but so does
 Green Mountain, for if the Maine Bonding policy was in force on the date of
 the accident, then Maine Bonding was the primary carrier, and Green Mountain
 the excess carrier.  It is hard to think of a question that would bear more
 on both Green Mountain's and Maine Bonding's respective interests in the
 underlying litigation and the declaratory judgment action is designed to
 raise and resolve such issues.  12 V.S.A. { 4722 (purpose of the declaratory
 judgment is "to settle and afford relief from uncertainty and insecurity
 with respect to rights, status and other legal relations and it is to be
 liberally construed and administered.").
      Maine Bonding cites no cases in which standing has been denied in a
 suit between insurance companies over the validity of, or the meaning of a
 term or clause within, one of the company's policies.  Declaratory judgment
 actions involving such issues are legion.  See, e.g., Concord General Mut.
 Ins. Co. v. Home Indem. Co., 368 A.2d 596, 597 (Me. 1977); Motor Club of
 America Ins. Co. v. All American Rental, Inc., 14 Mass. App. 1031, 442 N.E.2d 739 (1982); Lumberman's Mut. Casualty Ins. Co. v. Progressive
 Casualty Ins. Co., 168 A.D.2d 708, 563 N.Y.S.2d 566 (1990).  We therefore
 conclude that Green Mountain Insurance Company had standing to assert that
 its policy was not validly terminated for nonpayment of premium.
                          II. Cancellation of the Carter Policy
      Green Mountain argues that Maine Bonding did not effectively cancel the
 policy with the insured because its billing and crediting procedures created
 ambiguity in the notice of cancellation.  As we stated in Isbrandtsen v.
 North Branch Corp., 150 Vt. 575, 579, 556 A.2d 81, 84 (1988), "Ambiguity
 will be found where a writing in and of itself supports a different inter-
 pretation from that which appears when it is read in light of the surround-
 ing circumstances, and both interpretations are reasonable."  Thus, for
 example, a purported notice of cancellation can fail to include the word
 "cancellation" and hence not deliver its primary message with sufficient
 clarity.  Travelers Ins. Co. v. Hendrickson, 1 Conn. App. 409, 413, 472 A.2d 356, 358 (1984).  Or a cancellation notice plain on its face can fail to be
 explicit and unequivocal under unusual circumstances.  Caduff v. Universal
 Underwriters Ins. Co., 381 N.W.2d 9, 12 (Minn. Ct. App. 1986).
      In the present case, Green Mountain does not argue that the
 cancellation notice itself was ambiguous, but rather that in the context of
 surrounding events, its message could not be adequately deciphered.  We
 disagree.  Carter notified Maine Bonding of a change in the covered vehicle
 at or near the time when she was renewing her policy with Maine Bonding.
 Because she gave notice of her new car during the initial coverage period,
 she incurred an additional premium for that period and should have expected
 to do so.  Although the March 16, 1987 bill arrived before Maine Bonding
 had processed her request regarding the new car, the premium bill
 specifically referred to the old car, "1 76 Ford Pinto."  The declarations
 she received a week later, on March 23, 1987, referred to the new car and a
 new premium.  Therefore, she could not reasonably conclude that her
 obligation to pay her insurance premium was satisfied when she paid the
 March 16 bill, which referred to her old car.
      Maine Bonding received the $27 payment on April 6, 1987, after it had
 processed Carter's request to change the covered vehicle and after the
 company sent the March 23, 1987 declaration stating that an additional $24
 would be due by subsequent billing for the initial coverage period on
 account of the new car. (FN1) Although Green Mountain contends that Maine
 Bonding "credited payments out of sequence" when it applied the $27 first to
 the initial premium period and then to the renewal period, that procedure
 was proper, even though the due date for the initial premium surcharge was
 later than the due date for the renewal premium.  Maine Bonding's crediting
 procedure prevented a current policy from lapsing, after Carter initiated a
 change in vehicles.  Carter received notice that her vehicle change would
 result in premium increases for the initial coverage period as well as the
 renewal period.  She was also on notice that the $27 she paid was
 sufficient only for the minimum renewal payment for her 1976 Pinto and
 could not have been sufficient to insure her new vehicle because she had
 received two declarations from Maine Bonding stating that her premiums for
 the initial and renewal periods would be increased.  She ignored what Maine
 Bonding's notices stated because the $27 she paid was similar to the $24 she
 was later billed.  Finally, when she received notice that Maine Bonding was
 about to cancel her policy, she made no inquiry whatever.
      The facts of the present case are far different from those in the
 cases relied on by Green Mountain.  In Caduff v. Universal Underwriters
 Insurance Co., 381 N.W.2d  at 11, the termination notice was followed five
 days later by a new declaration sheet amending the policy to provide
 coverage, and stating in the space for "Return or additional premium" the
 amount of "$.00."  In Automobile Club Ins. Co. v. Donovan, 550 A.2d 622
 (R.I. 1988) the insurer billed the insureds for a premium to cover their son
 as an additional insured, and received notice that March 24, 1983 was both
 the "due date" and the "expiration date," without stating whether the entire
 policy or just the added coverage would expire on that date.  The court held
 that the purported cancellation did not meet state regulatory requirements.
 Id. at 624.  In Fifty States Management Corp. v. Public Service Mut. Ins.
 Co., 67 Misc.2d 778, 784, 324 N.Y.S.2d 345, 353 (N.Y. Sup. Ct. 1971), the
 insurer neglected to send each of two insureds one of two cancellation
 notices, and the court concluded therefore that the notice procedure failed
 to meet state statutory standards.
      In sum, Carter received a cancellation notice that followed a series of
 communications from Maine Bonding, each one of which was proper and correct.
 Carter knew that she had not paid an increased premium for her new car
 despite two notices declaring increases, and she did not inquire about a
 notice of cancellation.  She had an opportunity to avoid the negative con-
 sequences of confusion inherent in the subject transactions and did not
 act.  Therefore, the policy was not in effect at the time of the accident.
                             III. Waiver and Estoppel
      Green Mountain argues that when Maine Bonding credited $3 to the
 payment of Carter's renewal premium, it retained an unearned premium for an
 unreasonable length of time and this waived Maine Bonding's right to cancel
 the policy, or that Maine Bonding was estopped from cancelling it.  We do
 not agree.  Here, the notice of cancellation itself was definite and
 unequivocal -- it was without facial ambiguities that rendered its message
 unclear.  Because a waiver is the voluntary relinquishment of a known right,
 Segalla v. United States Fire Ins. Co., 135 Vt. 185, 189, 373 A.2d 535, 538
 (1977), Green Mountain is arguing in effect that by failing to return the
 unearned premium payment promptly, Maine Bonding expressed its intention to
 revoke the cancellation notice and to reinstate Carter's lapsed policy.  But
 Green Mountain offers no theory, based either on the policy or Vermont law,
 from which such a waiver could be inferred.  Green Mountain concedes that
 the refund of an unearned premium is not specified in the policy as an
 explicit condition for cancellation, but relies on the holdings of some
 courts that retention of a premium may be evidence of waiver where an
 insurer specifically undertakes to effect return and does not do so within a
 reasonable time.  See, e.g., Riverside Ins. Co. v. Parker, 237 Ark. 594,
 597-98, 375 S.W.2d 225, 227-28 (1964).  In Riverside, a divided court held
 that the failure of an insurer's undertaking to return an unearned premium
 "as soon as practicable" nullified a prior policy cancellation.  Id. at 598,
 375 S.W.2d  at 228.  Green Mountain argues that Maine Bonding's policy
 contained language similar to that in Riverside, specifically a statement in
 an amendment to Part F of defendant's policy reciting "Other Termination
 Provisions":
                2.  If this policy is cancelled, you may be
                entitled to a premium refund.  If so, we will
                send you the refund.  The premium refund, if
                any, will be computed according to our
                manuals.  However, making or offering to make
                the refund is not a condition of cancellation.
                (Emphasis added.)

 In addition, the actual cancellation notice contained the language "Premium
 adjustment, if any, will be made after cancellation is effective."  Neither
 of these excerpts provides a basis for concluding that failure to repay the
 $3 should result in voiding the cancellation notice.  The Maine Bonding
 insurance contract explicitly stated that the offer to make the refund was
 not a condition of cancellation.
      In response, Green Mountain points out that the Riverside majority held
 that failure to return the unearned premium in accordance with the policy in
 that case nullified the cancellation notice, despite language in the policy
 that "payment or tender of unearned premium is not a condition of
 cancellation."  Riverside is, nevertheless, unpersuasive here.  First, the
 language in Maine Bonding's policy stating that unearned premiums shall be
 returned does not contain language promising a prompt return and is
 distinguishable from that in Riverside.  But more importantly, where the
 insured does not raise the issue of reliance on return of the unearned
 premium, and no statutory or regulatory command requires prompt return in
 order to maintain a cancellation, there is no reason not to honor the clear
 language of the policy warning policyholders that cancellation is not
 conditioned on return of unearned premiums.  As the court stated in
 Marchessault v. National Grange Mut. Liab. Co., 229 F.2d 698, 701 (2d Cir.
 1956):
                In the absence of a statute on the subject,
                and no such Vermont statute has been called to
                our attention, the parties were at liberty to
                determine by contract the conditions upon
                which cancellation might be had.  Cases
                involving cancellation provisions identical
                or similar to those of the policy here in suit
                are almost unanimous in holding that return
                of the unearned premium is neither a condition
                precedent or a condition subsequent to
                effective cancellation, and that the
                insurer's obligation to return the premium is
                only a contractual duty arising in
                consequence of the cancellation.

 See also Riverside, 232 Ark. at 599, 375 S.W.2d  at 229 (Ward, J.,
 dissenting)(policy cancelled when notice received and insurance company's
 failure to return premium only created a debtor/creditor relationship
 between parties); Osborne v. Atlas Assurance Co., 61 Tenn. App. 618, ___,
 457 S.W.2d 364, 370 (1969)(insurance company's failure to return premium
 within reasonable time did not negate cancellation).  Although a contractual
 undertaking by an insurer or a Vermont statute could condition cancellation
 on its timely return of unearned premiums, neither condition applies in this
 case, and no case for waiver has been made.
      Green Mountain's estoppel argument with respect to the retention of the
 unearned premium also fails, since there is no genuine issue of fact
 concerning Carter's reliance on the failure to return the $3 following
 cancellation of the policy.  Green Mountain's argument is that return of the
 unearned premium might have given Carter another chance to consider that the
 policy had been truly cancelled.  This argument is not based on estoppel,
 but rather public policy -- that it would be salutary for insurers to be
 required to return unearned premiums promptly as conditions subsequent to
 the issuance of cancellation notices.  In the absence of language in the
 insurance contract that invites reliance, we leave such concerns to the
 Legislature.
                     IV. Suitability for Summary Judgment
      Green Mountain contends that Maine Bonding's summary judgment motion
 should not have been granted because genuine issues of fact remained that
 were unsuitable for disposition under V.R.C.P. 56.  Although some factual
 issues may have been presented, none was material.  For example, Green
 Mountain cites uncertainty over receipt of certain bills from Maine Bonding,
 most notably the bill for the $24 due on the renewal premium, after Carter
 made her $27 payment, $24 of which was credited to her increased premium for
 the initial period.  But Carter did receive declarations clearly indicating
 the sums that would be due on both the initial and renewal periods, and she
 never denied that she was notified that $24 was due prior to termination.
 Her claim was that the $24 amount was similar to the $27 that she recalled
 paying.  But if Maine Bonding's declarations and bills were clear and
 accurate as to amounts due for the initial and renewal periods, appropriate
 adjustments for Carter's new automobile, and credits for amounts that she
 paid, as we have held they were, Carter's mistaken recollection could not
 give rise to a genuine issue of material fact.  The question whether Maine
 Bonding's retention of the $3 unearned premium was waiver of the earlier
 cancellation was similarly an issue of law.  The matter was ripe for summary
 judgment.
      Affirmed.



                                    FOR THE COURT



                                    _________________________________
                                    Associate Justice
 

FN1.        The trial court's decision is unclear on whether Maine Bonding ever
 sent a separate bill for the extra $24 due for the initial coverage period.
 In her direct deposition testimony, Carter stated that she had received and
 had disregarded a $24 bill, since she believed she had paid it.  On cross-
 examination, she was equivocal as to whether the document she remembered was
 a bill or a declaration of coverage.  On appeal, Green Mountain concedes
 that she received either a bill or a declaration stating that $24 was due on
 account of the initial period, and the declaration in evidence makes clear
 that the $24 was an additional premium due because of the substitution of 
 vehicles.

------------------------------------------------------------------------------

                                 Concurring


 NOTICE:  This opinion is subject to motions for reargument under V.R.A.P.
 40 as well as formal revision before publication in the Vermont Reports.
 Readers are requested to notify the Reporter of Decisions, Vermont Supreme
 Court, 111 State Street, Montpelier, Vermont 05602 of any errors in order
 that corrections may be made before this opinion goes to press.


                                 No. 91-113


 Green Mountain Insurance Company             Supreme Court

      v.                                      On Appeal from
                                              Orleans Superior Court
 Maine Bonding & Casualty Co.,
 Carol Carter, Alan Buck, Judye               June Term, 1991
 Cheney, Individually and as Next
 Best Friend of Sheena Cheney Buck
 and Gregory Hammond.


 John P. Meaker, J.

 Bruce C. Palmer of Downs Rachlin & Martin, St. Johnsbury, for plaintiff-
   appellant

 Allan R. Keyes and John A. Serafino of Ryan Smith & Carbine, Ltd., Rutland,
   for defendant-appellee


 PRESENT:  Allen, C.J., Gibson, Dooley, Morse and Johnson, JJ.


      ALLEN, C.J., concurring.   I concur in the result but decline to join
 the majority in Part I of the opinion as I do not believe it addresses the
 arguments raised by the defendant.





                                         Chief Justice