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SLAUGHTER v. SMITH
Slaughter v Smith, Docket No. 96483 — Michigan Court of Appeals (Mar. 22, 1988)
Factual and Procedural Background
On April 29, 1983, Richard J. Smith purchased a six-month automobile insurance policy from Cadillac (through its agent All Drivers Insurance Center) covering a 1966 GMC pickup, with an expiration date of October 29, 1983. In September 1983 the Smiths sought new coverage from Auto-Owners and asked Cadillac on September 8, 1983 to cancel their Cadillac policy. Auto-Owners later notified the Smiths on September 20 that their application was rejected and that any Auto-Owners coverage would end October 12, 1983. On September 29, 1983 Cadillac mailed the Smiths a notice of cancellation effective October 11, 1983 for nonpayment of premium. On October 4, 1983 Cadillac sent a notice of reinstatement of the original six-month policy stating that a prior cancellation (August 2, 1983) was reinstated as of August 10, 1983. On November 1, 1983, three days after the six-month policy had expired on October 29, 1983, Richard Smith struck William L. Slaughter. Cadillac refused to defend the ensuing suit against the Smiths, asserting the Smiths were uninsured at the time of the accident. The Smiths filed a third-party complaint against Cadillac. The trial court granted the Smiths' motion for summary disposition under MCR 2.116(C)(10) and denied Cadillac's motion; Cadillac appealed as of right. The Court of Appeals affirmed.
Legal Issues Presented
- Whether the trial court erred in granting summary disposition to the third-party plaintiffs (the Smiths) under MCR 2.116(C)(10) by finding no genuine issue of material fact.
- Whether, after Cadillac reinstated the policy following a prior cancellation or notice of nonrenewal, Cadillac was obligated by the policy to send another written notice of nonrenewal at least 20 days prior to the expiration date.
- Whether the failure by Cadillac to send the required notice (if required by the policy) resulted in renewal of the policy beyond its stated expiration date, such that Cadillac remained obligated (e.g., to defend) with respect to the November 1, 1983 accident.
- Whether statutory provisions (specifically MCL 500.3204(2) and the scope of Chapter 32 via MCL 500.3208) impose a notice requirement for nonrenewal at the end of a policy period, or whether the insurer's contractual provisions govern in the absence of a statutory rule.
Arguments of the Parties
Third-Party Plaintiffs (the Smiths)
- The reinstatement by Cadillac after issuing a cancellation or notice of nonrenewal obligated Cadillac under the policy to again send notice of its intent either to cancel or not to renew; because Cadillac did not send such a subsequent notice, the policy was effectively renewed past its stated expiration date.
Third-Party Defendants (Cadillac)
- Cadillac argued that the insurance policy clearly indicated an expiration date of October 29, 1983 and that Michigan law does not mandate a notice by an insurer of intent not to renew an insurance contract.
- Cadillac contended that failure to give a policy-mandated notice should not have the same effect as failure to give a statutorily mandated notice (i.e., should not result in renewal), citing Ray v Associated Indemnity Corp and Shore v Coronet Ins Co.
- Cadillac further asserted that it was willing to renew the policy, as evidenced by issuance of a new policy to the Smiths on November 2, 1983, and implied that that after-the-fact action showed there was no problem with nonrenewal.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Fulton v Pontiac General Hospital, 160 Mich. App. 728, 735; 408 N.W.2d 536 (1987) | Standard for summary disposition under MCR 2.116(C)(10): consider pleadings, affidavits, depositions, admissions and other documentary evidence; give benefit of reasonable doubt to opposing party. | Used to describe the summary disposition standard and to support the conclusion that the court must ask whether the record that might be developed would leave open an issue upon which reasonable minds might differ. |
| Pauley v Hall, 124 Mich. App. 255, 262; 335 N.W.2d 197 (1983), lv den 418 Mich. 870 (1983) | Principles governing summary disposition analysis. | Reinforced the summary disposition standard applied by the court in determining no genuine issue of material fact existed. |
| Goldman v Loubella Extendables, 91 Mich. App. 212, 217; 283 N.W.2d 695 (1979), lv den 407 Mich. 901 (1979) | Requirement that the moving party identify by supporting affidavits the facts it believes cannot be genuinely disputed. | Quoted to explain the burden on the moving party in a MCR 2.116(C)(10) motion and the need for supporting evidence. |
| Radford v National Indemnity Co, 50 Mich. App. 698, 701; 213 N.W.2d 843 (1973) | When no statute governs nonrenewal, the court looks to the provisions of the insurance policy itself. | The court applied this principle to examine the Cadillac policy's non-renewal clause because Michigan law provided no statute directly governing nonrenewal at the end of a policy period. |
| Ray v Associated Indemnity Corp, 373 So.2d 166 (La, 1979) | Authority cited for the proposition that failure to give a statutorily mandated notice results in renewal of the policy. | Cadillac cited this case to argue that statutory-notice failure leads to renewal but contended that the same should not follow for failure to give a policy-mandated notice; the court rejected Cadillac's distinction. |
| Shore v Coronet Ins Co, 7 Ill. App.3d 782; 288 N.E.2d 887 (1972) | Another authority cited regarding effect of failure to give mandated notice on renewal. | Cited by Cadillac in support of its argument; court found the distinction Cadillac attempted to draw between statutory and contractual notice to be unpersuasive. |
| Zeman v Zack Agency, Inc, 75 A.D.2d 261; 429 N.Y.S.2d 444 (1980) | Additional authority on the effect of failure to give notice and renewal issues (cited as "See also"). | Noted by the court as additional related authority; used to illustrate other courts' treatment of notice-and-renewal matters. |
| State Farm Mutual Automobile Ins Co v Kurylowicz, 67 Mich. App. 568, 574; 242 N.W.2d 530 (1976) | Statement of policy that persons who suffer loss due to automobile accidents should have a source and means of recovery. | Cited to support the court's view favoring a construction that preserves recovery for accident victims. |
| Nickerson v Citizens Mutual Ins Co, 393 Mich. 324, 330; 224 N.W.2d 896 (1975) | Insurance policy provisions are to be strictly construed against the insurer. | Applied to justify construing the Cadillac policy against the insurer where ambiguity or self-imposed notice requirements existed. |
| Celina Mutual Ins Co v Citizens Ins Co, 136 Mich. App. 315, 320-321; 355 N.W.2d 916 (1984) | Reinforces the rule that policy provisions are construed strictly against the insurer. | Used to support the court's approach of construing Cadillac's policy provisions against Cadillac. |
Court's Reasoning and Analysis
The court first summarized the summary disposition standard under MCR 2.116(C)(10), citing Fulton, Pauley and Goldman, and emphasized that the question was whether a record could be developed that would leave open an issue on which reasonable minds might differ. The court distinguished between cancellation during a policy term and nonrenewal at the end of a policy period and noted that Michigan has no statute specifically governing nonrenewal procedures. The court examined MCL 500.3204(2) (requiring 20 days' prior mailing of notice to constitute a cancellation) but observed that Chapter 32's §3208 makes that chapter not applicable to termination of coverage at the end of a policy period, leaving no statutory rule on nonrenewal.
Because of the absence of a controlling statute, the court looked to the insurance policy itself, citing Radford. The policy's non-renewal clause required the company to mail written notice of non-renewal not less than 20 days prior to the expiration date. The facts showed Cadillac had sent a notice of cancellation on September 29 that also included a notice of intent not to renew, but then on October 4 Cadillac sent a notice of reinstatement. The court accepted the trial judge's reasoning that the reinstatement after cancellation or a notice of nonrenewal meant Cadillac was obligated under its own policy to send another notice of its intent either to cancel or not to renew. Because Cadillac did not send any subsequent notice, the court concluded the failure to give the notice required by the policy resulted in renewal of the policy beyond its stated expiration date.
The court rejected Cadillac's arguments: (1) that Michigan law does not mandate notice of nonrenewal (the court acknowledged that but observed the policy itself did impose such a notice requirement), (2) that a failure to give a policy-mandated notice should not have the same effect as failure to give a statutorily mandated notice (the court found the distinction unpersuasive, citing authorities such as Ray, Shore and Zeman), and (3) that Cadillac's issuance of a new policy on November 2 demonstrated willingness to renew (the court held this after-the-fact expression of intent was insufficient).
The court also relied on the policy preference favoring recovery by automobile accident victims (State Farm v Kurylowicz) and the principle that policy provisions are construed strictly against insurers (Nickerson and Celina) to support a construction that a self-imposed notice requirement by the insurer, if not honored, results in renewal of coverage.
Holding and Implications
Holding: The Court of Appeals affirmed the trial court's judgment granting third-party plaintiffs' (the Smiths') motion for summary disposition under MCR 2.116(C)(10) and denying third-party defendants' (Cadillac's) motion. The court held that Cadillac's reinstatement obligated it under its policy to send another notice of nonrenewal and that Cadillac's failure to send such notice resulted in renewal of the policy past its stated expiration date.
Implications:
- Direct effect: The judgment in favor of the Smiths was affirmed and costs were awarded to the third-party plaintiffs-appellees.
- The court's ruling applies the policy language and contractual notice requirement against the insurer where the insurer reinstated the policy after cancellation and failed to provide a subsequent notice of nonrenewal; the court relied on construing policy terms against the insurer and on the state's policy favoring recovery by accident victims. The opinion does not state that it establishes a broader statutory rule beyond its application to the facts here.
PER CURIAM.
Third-party defendants appeals as of right from a judgment granting third-party plaintiffs' motion for summary disposition under MCR 2.116(C)(10), and denying third-party defendants' motion for summary disposition under the same rule. For purposes of clarity we shall refer to third-party plaintiffs as the Smiths and third-party defendants as Cadillac.
On April 29, 1983, Richard J. Smith purchased a six-month policy of insurance from Cadillac, through its agent, All Drivers Insurance Center, covering a 1966 GMC pickup truck owned by Richard J. Smith. This policy was to expire on October 29, 1983. In September of 1983, Richard J. and Constance S. Smith decided to change their insurance protection from Cadillac to Auto-Owners Insurance Company, and after receiving an insurance binder from Auto-Owners they asked Cadillac, on September 8, 1983, to cancel their policy with Cadillac.
On September 20, 1983, Auto-Owners notified the Smiths that their application for insurance had been rejected and that Auto-Owners coverage would end on October 12, 1983.
On September 29, 1983, Cadillac sent the Smiths a notice of cancellation effective October 11, 1983, for nonpayment of premium.
On October 4, 1983, Cadillac sent the Smiths a notice of reinstatement of the original six-month policy. This notice indicated that the Smiths' policy, which had been cancelled on August 2, 1983, was reinstated as of August 10, 1983.
On November 1, 1983, three days after the six-month policy expired, Richard Smith, while operating the GMC pickup, struck William L. Slaughter, son of plaintiffs herein.
Cadillac refused to defend the subsequent suit brought by plaintiffs against the Smiths, asserting that the Smiths were not, at the time of the accident, insured by Cadillac. This triggered the third-party complaint against Cadillac.
The first question to be answered is whether the trial judge erred in granting summary disposition to the Smiths on the ground that there was no genuine issue as to any material fact. We find no error.
A motion for summary disposition pursuant to MCR 2.116(C)(10) tests whether there is factual support for a claim. The court must consider the pleadings, affidavits, depositions, admissions, and other documentary evidence available to it. Giving the benefit of any reasonable doubt to the opposing party, the court must determine whether the kind of record which might be developed would leave open an issue upon which reasonable minds might differ. Fulton v Pontiac General Hospital, 160 Mich. App. 728, 735; 408 N.W.2d 536 (1987); Pauley v Hall, 124 Mich. App. 255, 262; 335 N.W.2d 197 (1983), lv den 418 Mich. 870 (1983); MCR 2.116(G)(4). The moving party must identify by supporting affidavits the facts it believes cannot be genuinely disputed. Goldman v Loubella Extendables, 91 Mich. App. 212, 217; 283 N.W.2d 695 (1979), lv den 407 Mich. 901 (1979). The opposing party must show the existence of a factual dispute by submitting opposing affidavits, testimony, depositions, admissions or other documentary evidence. Fulton, supra at 735.
We are not talking here about cancellation of the insurance policy before its expiration date, but rather about a nonrenewal of the policy upon its expiration at the end of its term.
Michigan has no statute governing the procedures which must be followed by an insurer which elects not to renew its insured's auto policy.
MCL 500.3204(2); MSA 24.13204(2) provides:
Refusal to renew any policy of automobile liability insurance shall not constitute a cancellation unless the insurer fails to mail, 20 days prior to the termination date of the policy, by first class mail, a notice to the insured that the policy will not be renewed.
It could be argued that the Legislature, by this language, is attempting to impose a notice requirement prior to nonrenewal at the expiration date of the policy. We note, however, that this provision appears in that portion of the statute dealing with cancellation of automobile liability policies (Chapter 32 of the Insurance Code), § 3208 of which specifically makes the chapter not applicable to termination of coverage at the end of any policy period. MCL 500.3208; MSA 24.13208.
In the absence of a statute governing nonrenewal, we look to the provisions of the policy itself. Radford v National Indemnity Co, 50 Mich. App. 698, 701; 213 N.W.2d 843 (1973).
The policy provides as follows:
Non-Renewal. If the Company elects not to renew this policy, it shall mail to the insured named in item 1 of the declarations at the address shown in this policy, by first class mail, a written notice of non-renewal not less than 20 days prior to the expiration date.
In this case, Cadillac, on September 29, 1983, sent the Smiths a notice of cancellation which included a notice of intent not to renew the insurance policy. Before the notice of cancellation became effective on October 11, Cadillac on October 4 reinstated the policy. Did this reinstatement obligate Cadillac to send another notice of nonrenewal in order to bring the policy to an end on its expiration date? The trial judge thought so, and so do we.
There is no genuine issue here as to any material fact, only as to the consequences of those facts. Cadillac correctly argues that the insurance policy clearly indicates that it was to expire on October 29, 1983. It is also correct in its view that Michigan law does not mandate a notice by an insurer of intent not to renew an insurance contract. It is not correct, however, in its apparent claim that the policy itself did not require Cadillac to notify the Smiths of its intent not to renew the policy. The trial judge reasoned, and we agree, that when Cadillac reinstated the policy after cancelling it (or sending notice of nonrenewal) it became obligated by its own agreement to again send notice of its intent either to cancel or not to renew.
No such notice having been sent, we now reach the question as to the status of the policy after October 29, 1983. Cadillac, while recognizing that failure to give a statutorily mandated notice results in a renewal of the policy, citing Ray v Associated Indemnity Corp, 373 So.2d 166 (La, 1979), and Shore v Coronet Ins Co, 7 Ill. App.3d 782; 288 N.E.2d 887 (1972), argues that the same result does not follow failure to give a policy mandated notice. This distinction escapes us.
See also Zeman v Zack Agency, Inc, 75 A.D. 2d 261; 429 N.Y.S.2d 444 (1980).
Although neither the Michigan courts nor courts elsewhere, so far as we can determine, have addressed this question, it is the policy of this state that persons who suffer loss due to automobile accidents have a source and means of recovery. State Farm Mutual Automobile Ins Co v Kurylowicz, 67 Mich. App. 568, 574; 242 N.W.2d 530 (1976).
We note also that provisions of an insurance policy are to be strictly construed against the insurer. Nickerson v Citizens Mutual Ins Co, 393 Mich. 324, 330; 224 N.W.2d 896 (1975); Celina Mutual Ins Co v Citizens Ins Co, 136 Mich. App. 315, 320-321; 355 N.W.2d 916 (1984).
If the courts have no trouble finding that failure to observe a notice requirement imposed by the state results in renewal of a policy, it is surely easier to find that a similar requirement self-imposed by Cadillac likewise results in a renewal, and we so hold.
Citing Ray v Associated Indemnity Corp, supra, Cadillac asserts that no notice of nonrenewal was required because it was willing to renew the policy, as evidenced by its issuance of a new policy to the Smiths on November 2, 1983. If there is any merit to this argument, Cadillac's after-the-fact expression of its intent is insufficient to support it.
Judgment affirmed with costs to third-party plaintiffs-appellees.
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