JENSEN v. TRADERS GEN. INS. CO

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Docket Number

Docket No. 16530.

Attorney(S)

Partridge, O'Connell Whitney and Wallace O'Connell for Appellant. Nichols, Richard, Allard Williams, Jesse Nichols, Edward M. Digardi, Anthony R. Brookman and Sheridan, Hoffman Mendel for Respondents.

Judges

WOOD (Fred B.), J.

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Smart Summary

Factual and Procedural Background

Plaintiffs Raymond Jensen, Dorothy Jensen and Marian Morrow had previously recovered a judgment against Vincent (Jim) Di Matteo for injuries from an automobile accident. The plaintiffs then joined with Di Matteo in an action against Di Matteo's insurer, Traders and General Insurance Company, with Di Matteo claiming a right to be reimbursed for the cost of defending the first action. At trial plaintiffs recovered judgment against the insurer. The insurer appealed from the judgment and from an order denying its motion for judgment notwithstanding the verdict. The Court of Appeal, First District, Division One, issued this opinion on April 26, 1956. The court reversed the judgment and affirmed the order denying judgment notwithstanding the verdict.

Legal Issues Presented

Whether the trial court erred in denying defendant's motions for a directed verdict and for judgment notwithstanding the verdict (i.e., whether the evidence regarding mailing of cancellation notices compelled judgment for the insurer).
Whether an instruction given at plaintiffs' request — stating that failure to refund unearned premium would invalidate an attempted cancellation where the premium had been paid to the insurer's agent — was legally correct.

Arguments of the Parties

Appellant's (Traders and General Insurance Company) Arguments

The insurer claimed it canceled the policy prior to the accident and produced evidence tending to show that notices of cancellation were mailed to the named insureds (John Di Matteo and his son Jim) on August 10, 1951.
Evidence offered by the insurer included carbon copies of cancellation notices bearing the cancellation-department supervisor's initials and two post office receipts in the insurer's possession; the insurer relied on its office system and practice to prove mailing.
The insurer requested an instruction that cancellation effectiveness did not depend upon return of the unearned portion of any premium paid.

Respondents' (Plaintiffs and Di Matteo) Arguments

Plaintiffs (and the Di Matteos) testified that no cancellation notice was received and that they had no knowledge of cancellation until after the accident; plaintiffs urged that nonreceipt supported an inference that notices were not mailed.
Plaintiffs obtained an instruction stating that if the premium had been paid to the insurer's agent, then failure by the insurer to refund the premium "at the time cancellation is effected" (or as soon as practicable thereafter) would invalidate the attempted cancellation; plaintiffs relied on authority supporting their interpretation (the opinion states that those cases differ significantly from the clause here and need not be listed).

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Loper v. Morrison, 23 Cal.2d 600, 145 P.2d 1	Purpose and application of the Uniform Business Records as Evidence Act (Code Civ. Proc. §§ 1953e-1953h).	Used to show that business records admitted under the statute are for the trier of fact to weigh and that self-serving nature does not make them inadmissible.
Gallup v. Sparks-Mundo Engineering Co., 43 Cal.2d 1, 271 P.2d 34	That business records' self-serving character is a matter for the jury to consider in weighing their effect.	Cited to support that evidence proffered by the insurer (business records, receipts) was competent but its weight was for the jury.
Wilson v. Frankfort Marine, Acc. Plate Glass Ins. Co. (1914), 77 N.H. 344, 91 A. 913, 914	Authority for the proposition that proof of nonreceipt may warrant a finding that a mailed letter was not posted.	Applied as a leading authority supporting the inference that testimony denying receipt can support a finding that a cancellation letter was not mailed.
Calkins v. Vaughan (1927), 217 Ala. 56, 114 So. 570, 574	Support for the proposition that denial of receipt can justify finding a letter was not mailed.	Cited as additional authority in support of the rule that nonreceipt evidence creates a jury question on mailing.
Matlock v. Citizens' Nat. Bank (1926), 43 Idaho 214, 250 P. 648, 649	Similar authority regarding inference from nonreceipt to nonmailing.	Included among authorities supporting the stated evidentiary principle; cited for weight in the same context.
Hobson v. Security State Bank (1936), 56 Idaho 601, 57 P.2d 685, 688	Similar rule on nonreceipt/mailing inferences.	Used as corroborative authority that nonreceipt may support finding no mailing.
Meyers v. Brown-Forman Distillery Co. (1942), 289 Ky. 185, 158 S.W.2d 407, 412	Authority supporting the inference that denial of receipt can warrant a finding that a letter was not mailed.	Cited among cases upholding the same evidentiary principle.
Keeling v. Travelers Ins. Co., Hartford, Conn. (1937), 180 Okla. 99, 67 P.2d 944, 945	Support for the mailing/nonreceipt evidentiary rule.	Listed as additional authority for the same principle addressing receipt in due course versus proof of nonreceipt.
Keller v. Provident Life Acc. Ins. Co. (1948), 213 S.C. 339, 49 S.E.2d 577, 581	Another supporting case on the inference from nonreceipt to nonmailing.	Cited with other cases to show a consistent line of authority on the evidentiary point.
Cisco Mut. Life Ins. Assn. v. Ferguson (Tex.Civ.App., 1928), 8 S.W.2d 546, 547-548	Supportive authority on the mailing/nonreceipt issue.	Included among the authorities the court relied on to conclude the jury could resolve the conflict in evidence.
Texas Mut. Life Ins. Assn. v. Burns (Tex.Civ. App., 1936), 92 S.W.2d 469, 470	Support for the principle that denial of receipt can justify finding no mailing.	Cited as additional corroborative authority.
Border State Life Ins. Co. v. Noble (Tex.Civ.App., 1940), 138 S.W.2d 119, 122	Authority on the nonreceipt-to-nonmailing inference.	Used as further support for the evidentiary rule applied to the facts here.
Kingsland Land Co. v. Newman (1896), 1 App. Div. 1, 36 N.Y.S. 960	Applied New York example where testimony of mailing from an interested witness supported the presumption of mailing/receipt.	Cited to show a New York case adopting the principle when evidence of mailing came from an interested witness.
Trust Guarantee Co. v. Barnhardt (1936), 270 N.Y. 350, 1 N.E.2d 459, 461-462	New York case that rejected the rule where mailing evidence came from a disinterested witness and was controverted only by denial of receipt.	Cited to note that some jurisdictions limit the rule; the opinion distinguishes and states the evidence in the present case meets the requirements of the rule.
Mangrum Otter v. Law Union Rock Ins. Co., 172 Cal. 497, 157 P. 239	California Supreme Court interpretation of a similar return-of-unearned-premium clause.	Invoked to support the court's interpretation that delay or failure to refund does not render a cancellation ineffective.
Genone v. Citizens Ins. Co. of New Jersey (1950), 207 Ga. 83, 60 S.E.2d 125, 128-129	Interpreted a clause similar to the return-of-unearned-premium clause to mean refund is not a condition precedent to cancellation.	Cited as one of several decisions construing substantially identical clauses in the insurer's favor.
Parks v. Lumbermens Mut. Cas. Co. (1945), 327 Ill. App. 356, 64 N.E.2d 210, 212	Similar interpretation: refund clause does not condition cancellation.	Quoted among cases supporting the court's interpretation of the premium-refund clause.
Leslie v. Standard Acc. Ins. Co. (1945), 327 Ill. App. 343, 64 N.E.2d 391, 393	Same interpretive rule on return-of-unearned-premium clauses.	Cited as additional authority reaching the same conclusion.
American Fire Casualty Co. v. Combs (1954), ___ Ky. ___, 273 S.W.2d 37, 38-39	Interpretation supporting that refund is not a condition to cancellation.	Cited among other out-of-state decisions consistent with the court's reading of the clause.
Gibbons v. Kelly (1951), 156 Ohio 163, 101 N.E.2d 497, 498-499	Another case interpreting a like clause to mean refund delay does not invalidate cancellation.	Included as supporting precedent for the court's interpretation.
Medford v. Pacific Nat. Fire Ins. Co. (1950), 189 Ore. 617, 219 P.2d 142, 144, 151	Interpreted substantially similar clauses; collected in A.L.R.2d annotations.	Cited as an additional decision aligning with the court's interpretation that refund is not a condition of cancellation.
Turney v. Allstate Ins. Co. (1950), 167 Pa. Super. 175, 74 A.2d 730	Consonant authority construing premium-refund clauses in favor of cancellation effectiveness despite refund timing.	Listed among cases reaching the same result as the court's chosen interpretation.
Wallace v. State Farm Mut. Automobile Ins. Co. (1949), 187 Tenn. 692, 216 S.W.2d 697	Another supporting case on the interpretation of return-of-premium clauses.	Used to bolster the court's conclusion that the premium-refund provision does not condition cancellation.
Putman v. Deinhamer (1955), 270 Wis. 157, 70 N.W.2d 652, 655	Supportive case construing similar policy language.	Cited among the authorities that interpret the refund clause as not making cancellation dependent on immediate refund.

Court's Reasoning and Analysis

On the first issue (denial of directed verdict and JNOV): the court held the insurer had produced competent evidence of mailing (carbon copies of notices bearing the cancellation supervisor's initials and post office receipts), and an employee testified as to the insurer's office practice supporting mailing. However, the insurer's proof was not conclusive: the postal receipts were indistinct as to year and did not describe envelope contents; the cancellation-department witness did not specifically recall handling the papers; and the Di Matteos testified they never received any cancellation notice and continued to rely on coverage (including continuing payments through the dealer). These factual conflicts permitted the jury to infer nonmailing from the testimony of nonreceipt and the surrounding circumstances. The court cited authorities establishing that proof of nonreceipt can warrant a finding that a purportedly mailed letter was not posted and emphasized that business records are for the jury to weigh. Because the evidence presented a conflict for the jury, the trial court did not err in denying the insurer's motions for directed verdict and JNOV. The court expressly declined to decide whether, under the contract, proof of proper mailing would or would not effect cancellation if nonreceipt were also proven.

On the second issue (instruction regarding refund of premium): the court concluded the instruction given at plaintiffs' request was erroneous. The policy's cancellation provision (section 23) authorized cancellation by the company by mailing written notice stating when not less than five days thereafter cancellation would be effective, and declared that "the mailing of notice as aforesaid shall be sufficient proof of notice and the effective date and hour of cancelation stated in the notice shall become the end of the policy period." The immediately following paragraph addressed premium adjustment, stating that earned premiums would be computed pro rata if the company cancels, that premium adjustment "may be made at the time cancellation is effected and, if not then made, shall be made as soon as practicable after cancellation becomes effective," and that the company's check mailed or delivered as aforesaid is sufficient tender of any refund due.

From the plain language of these provisions the court deduced that refund of unearned premium is an obligation arising when the company cancels the policy, but that timing of refund ("may be made ... and, if not then made, shall be made as soon as practicable") demonstrates refund is not a condition precedent to the effectiveness of cancellation. The court relied on Mangrum Otter v. Law Union Rock Ins. Co. (172 Cal. 497) as controlling California precedent interpreting a similar clause, and cited a number of out-of-state decisions that reached the same construction. Because the instruction given made cancellation contingent on refund, it was incorrect as a matter of contract interpretation.

The court further held that the erroneous instruction was prejudicial to the insurer (i.e., it could not have failed to be prejudicial), requiring reversal of the judgment. Because the judgment was reversed on that ground, the court did not consider other points raised on appeal.

Holding and Implications

Holding: The Court of Appeal reversed the judgment in favor of the plaintiffs and affirmed the trial court's order denying the insurer's motion for judgment notwithstanding the verdict.

Implications:

Direct effect: The judgment recovered by the plaintiffs against the insurer was reversed; the order denying JNOV remains in place. The case will proceed consistent with this disposition (reversal of judgment) as directed by the appellate court.
The court found (1) that factual conflicts about mailing and receipt of cancellation notices presented jury questions and (2) that the trial court's instruction making refund of unearned premium a condition to cancellation was legally erroneous and prejudicial. The court did not announce or purport to establish a new rule of law beyond applying precedent and contract interpretation to the policy language.

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RAYMOND H. JENSEN et al., Respondents, v. TRADERS AND GENERAL INSURANCE COMPANY (a Corporation), Appellant.

WOOD (Fred B.), J.

Plaintiffs Raymond Jensen, Dorothy Jensen and Marian Morrow recovered judgment against plaintiff Vincent (Jim) Di Matteo for injuries sustained in an automobile accident and then joined with Di Matteo in bringing the present action against his insurance carrier, Traders and General Insurance Company, Di Matteo claiming a right to be reimbursed for the cost to him of defending the first action. Plaintiffs recovered and the insurance company has appealed.

(1) Did the trial court err in denying defendant's motions for a directed verdict and for judgment notwithstanding the verdict? No.

Defendant claims it canceled the policy prior to the accident. It adduced evidence tending to show that it mailed notices of cancellation to the policyholders (John Di Matteo and his son Jim) on August 10, 1951. The person in charge of its cancellation department did not specifically recall the handling of the papers in question. Based upon defendant's office system and practice, she deduced from carbon copies of cancellation notices to the Di Matteos (which bore her initials) and from two post office receipts in the defendant's possession, that the originals of these two notices were mailed in sealed envelopes properly addressed, with sufficient postage affixed. The dates stamped on the postal receipts were indistinct as to the year. She admitted "it isn't very clear" from the postal receipts whether the notices were sent out in 1950, 1951, 1952, or 1953. As to one of them, she said "You can see a faint part of the `1.' I hardly think that would be a 2 or 3," but added that what she thought might be a part of a "1" was no bigger in size than a period. As to the date on the other postal receipt, she said "this one you can't read at all." These postal receipts did not indicate the nature of the contents of the envelopes. A postal official who described the use and purpose of such a receipt explained it is not a receipt for registered mail; it serves solely as an acknowledgment of the receipt into the United States mail of a piece of ordinary mail addressed to a person named on the receipt.

The cancellation clause, in section 23 of the "Conditions" expressed in the policy, read as follows:
"This policy may be canceled by the named insured by surrender thereof or by mailing to the company written notice stating when thereafter such cancelation shall be effective. This policy may be canceled by the company by mailing to the named insured at the address shown in this policy written notice stating when not less than five days thereafter such cancelation shall be effective. The mailing of notice as aforesaid shall be sufficient proof of notice and the effective date and hour of cancelation stated in the notice shall become the end of the policy period. Delivery of such written notice either by the named insured or by the company shall be equivalent to mailing."

[1] This was competent evidence of mailing but not the only evidence on that subject. Plaintiffs John and Jim Di Matteo testified positively that no cancellation notice was received and that they had no inkling of any cancellation until three months later, when the accident occurred and they reported it to the insurance company. A circumstance tending inferentially to support their testimony is the fact that the Di Matteos sought no new insurance and continued to make the monthly payments on their car to the auto dealer who sold it to them on a conditional sales contract which included an item by way of premium upon the policy in each monthly installment. There was the added circumstance that the father, who made the down payment on the car, signed the sales contract and joined in the application for the policy, would not allow the son, who was under 21, to drive without insurance coverage.

See §§ 1953e-1953h, particularly § 1953f, Code of Civil Procedure. As to the purpose of these sections, known as the Uniform Business Records as Evidence Act, see Loper v. Morrison, 23 Cal.2d 600, 607-609 [ 145 P.2d 1]. Evidence thus produced is for the trier of the facts to weigh; e.g., the fact that a business record may be self-serving does not make it inadmissible. As said in Gallup v. Sparks-Mundo Engineering Co., 43 Cal.2d 1 [ 271 P.2d 34], "[t]his fact was one for the jury to consider in weighing its effect." (P. 8.)

This furnishes a substantial basis for an inference that notices of cancellation were not mailed, and thus presented a conflict in the evidence to be weighed and resolved by the jury. "If proof that a properly addressed and stamped letter was posted gives rise to a presumption that it was received in due course (1 Wig. Ev. § 95), so proof that no letter was received warrants a finding that it was never posted. If this plaintiff's testimony denying the receipt of the letter was believed, the jury would be warranted in going further and finding that the letter was not posted." ( Wilson v. Frankfort Marine, Acc. Plate Glass Ins. Co. (1914), 77 N.H. 344 [ 91 A. 913, 914].) See also Calkins v. Vaughan (1927), 217 Ala. 56 [ 114 So. 570, 574]; Matlock v. Citizens' Nat. Bank (1926), 43 Idaho 214 [ 250 P. 648, 649, 50 A.L.R. 1418]; Hobson v. Security State Bank (1936), 56 Idaho 601 [ 57 P.2d 685, 688]; Meyers v. Brown-Forman Distillery Co. (1942), 289 Ky. 185 [ 158 S.W.2d 407, 412]; Keeling v. Travelers Ins. Co., Hartford, Conn. (1937), 180 Okla. 99 [ 67 P.2d 944, 945]; Keller v. Provident Life Acc. Ins. Co. (1948), 213 S.C. 339 [ 49 S.E.2d 577, 581]; Cisco Mut. Life Ins. Assn. v. Ferguson (Tex.Civ.App., 1928), 8 S.W.2d 546, 547-548; Texas Mut. Life Ins. Assn. v. Burns (Tex.Civ. App., 1936), 92 S.W.2d 469, 470; Border State Life Ins. Co. v. Noble (Tex.Civ.App., 1940), 138 S.W.2d 119, 122; IX Wigmore on Evidence, 3d ed., pp. 432-433, § 2519.) In New York this principle has been applied in a case in which the testimony of mailing came from an interested witness ( Kingsland Land Co. v. Newman (1896), 1 App. Div. 1 [36 N.Y.S. 960]); rejected in a case in which the evidence of mailing came from a disinterested witness (a notary's certificate of protest) and was controverted merely by the addressee's denial of receipt ( Trust Guarantee Co. v. Barnhardt (1936), 270 N.Y. 350 [ 1 N.E.2d 459, 461-462], criticised in IX Wigmore on Evidence, supra, at pp. 433-434, note 4). The evidence in our case meets all of the requirements of the rule, even as limited in New York.

This is a sufficient answer to defendant's claim that the trial court erred in denying the motions for a directed verdict and for judgment notwithstanding the verdict. In arriving at this conclusion we have not had occasion to decide the question whether, under the contract here involved, a proper mailing, if proven, would or would not effect a cancellation if nonreceipt of the notice were also proven. Upon that question we express no opinion.

(2) Defendant questions the following instruction, given at plaintiff's request: "If you find from the evidence that the policy of insurance issued to Vincent James Di Matteo was paid for by a payment made to defendant Traders and General Insurance Company's agent Joseph P. Lotz, then, in order to effect a cancellation of said policy, pursuant to its terms, it was necessary that defendant Traders and General Insurance Company refund the premium, `at the time cancellation is effected and, if not then made, shall be made as soon as practicable after cancellation becomes effective.' A failure under such circumstances to refund the premium would invalidate the attempted cancellation." (Emphasis added.)

There was substantial evidence that the full amount of the premium on this policy for the year for which issued (April 19, 1951, to April 19, 1952) had been paid to defendant's agent Lotz by Moschetti Vader, the firm that sold the car to the Di Matteos and obtained the policy for them.

Defendant requested but the court refused an instruction to the effect that cancellation was not dependent, for its effectiveness, upon the return to the policyholder of the amount of the unearned portion, if any, of the premium, if any, that had been paid.

This instruction was erroneous, the policy did not predicate the effectiveness of a cancellation upon any such condition. The provision in respect to payment by the insured to the insurer of the unearned portion of the premium the latter had paid, immediately followed the cancellation clause (quoted in the footnote on page 163 of this opinion) and read as follows:

"If the named insured cancels, earned premiums shall be computed in accordance with the customary short rate table and procedure. If the company cancels, earned premiums shall be computed pro rata. Premium adjustment may be made at the time cancellation is effected and, if not then made, shall be made as soon as practicable after cancellation becomes effective. The company's check or the check of its representative mailed or delivered as aforesaid shall be a sufficient tender of any refund of premium due to the named insured." (Second paragraph of section 23 of "Conditions" of the policy.)

A mere reading of this provision (premium adjustment "may be made at the time cancellation is effected" and "if not then made" it shall be made "as soon as practicable after cancellation becomes effective") demonstrates that cancellation is not dependent for its effectiveness upon payment of the refund. Also, it follows a cancellation clause which is complete in itself, one which declares that the notice of cancellation shall state "when not less than five days thereafter [after mailing] such cancellation shall be effective" and that [if actually and properly mailed] "the effective date and hour of cancellation stated in the notice shall become the end of the policy period." [2] The duty to refund is an obligation that springs into being when the company cancels the policy. Delay in performing, or failure to perform, this duty does not of itself render cancellation ineffective.

A somewhat similar return of unearned premium clause was similarly interpreted by our Supreme Court in Mangrum Otter v. Law Union Rock Ins. Co., 172 Cal. 497 [ 157 P. 239, Ann.Cas. 1917B 907, L.R.A. 1916F 440]. The rationale of that decision applies here.

Clauses practically identical to the return of unearned premium clause here involved were similarly interpreted in the following cases: Genone v. Citizens Ins. Co. of New Jersey (1950), 207 Ga. 83 [ 60 S.E.2d 125, 128-129]; Parks v. Lumbermens Mut. Cas. Co. (1945), 327 Ill. App. 356 [ 64 N.E.2d 210, 212]; Leslie v. Standard Acc. Ins. Co. (1945), 327 Ill. App. 343 [ 64 N.E.2d 391, 393]; American Fire Casualty Co. v. Combs (1954), ___ Ky. ___ [ 273 S.W.2d 37, 38-39]; Gibbons v. Kelly (1951), 156 Ohio 163 [ 101 N.E.2d 497, 498-499]; Medford v. Pacific Nat. Fire Ins. Co. (1950), 189 Ore. 617 [ 219 P.2d 142, 144, 151, 16 A.L.R.2d 1181]; Turney v. Allstate Ins. Co. (1950), 167 Pa. Super. 175 [ 74 A.2d 730]; Wallace v. State Farm Mut. Automobile Ins. Co. (1949), 187 Tenn. 692 [ 216 S.W.2d 697]; Putman v. Deinhamer (1955), 270 Wis. 157 [ 70 N.W.2d 652, 655].

The cases upon which plaintiffs rely for their interpretation involve, principally, clauses that differ significantly from those here involved; a few are out of state cases that represent the minority view. There is no need to list them here. Most of the cases, pro and con, which interpret policy provisions that are the same as or that closely resemble those here involved, are collected in 16 A.L.R.2d 1200, section 5, at 1204, and in A.L.R.2d Supplement Service for 1948-1956, page 900.

[3] The erroneous instruction under discussion cannot have failed to be prejudicial. Accordingly, the judgment must be reversed. This conclusion renders it unnecessary to consider other points discussed by the parties upon this appeal.

The order denying the motion for judgment notwithstanding the verdict is affirmed. The judgment is reversed.

Peters, P.J., and Bray, J., concurred.

A petition for a rehearing was denied May 25, 1956, and respondents' petition for a hearing by the Supreme Court was denied June 20, 1956. Carter, J., and Schauer, J., were of the opinion that the petition should be granted.