Nationwide Mutual Insurance Company v. Cotten

LAKE, Justice. G.S. 20-309 (e), which is part of The Vehicle Financial Responsibility Act of 1957, prior to the amendment of 1971, which has no effect upon this action, provided: “(e) No insurance policy provided [sic] in subsection (d) [i.e., any policy providing liability insurance with regard to a motor vehicle] may be terminated by cancellation or otherwise by the insurer without having given the North Carolina Motor Vehicles Department notice of such cancellation fifteen (15) days prior to effective date of cancellation. Where the insurance policy is terminated by the insured the insurer shall immediately notify the Department of Motor Vehicles that such insurance policy has been terminated. The Department of Motor Vehicles upon receiving notice of cancellation or termination of an owner’s financial responsibility as required by this Article, shall notify such owner of such cancellation or termination, and such owner shall, to retain the registration plate for the *25 vehicle registered or required to be registered, within 15 days from date of notice given by the Department, certify to the Department that he has financial responsibility-effective on or prior to the date of such cancellation or termination. Failure by the owner to certify that he has financial responsibility as herein required shall be prima facie evidence that no financial responsibility exists with regard to the vehicle concerned and, unless the owner’s registration plate has been surrendered to the Department of Motor Vehicles by surrender to an agent or representative of the Department of Motor Vehicles and so designated by the Commissioner of Motor Vehicles or depositing the same in the United States mail, addressed to the Department of Motor Vehicles, Raleigh, North Carolina, the Department of Motor Vehicles shall revoke the owner’s registration plate for 60 days. * * * .” (Emphasis added.) Subsection (d) of G.S. 20-309 provides- that when liability insurance with regard to any motor vehicle is terminated by cancellation or failure to renew, the owner shall forthwith surrender to the Department of Motor Vehicles the registration certificate and the plates issued for the vehicle, unless financial responsibility is maintained in some other manner in compliance with The Vehicle Financial Responsibility Act of 1957. G.S. 20-310(a), prior to its amendment in 1971, which amendment has no effect upon this action, provided: “ (a) 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 by certificate of mailing to the named insured at the latest address filed with the insurer by or on behalf of the policyholder. The face of the envelope containing such notice shall be prominently marked with the words ‘Important Insurance Notice.’ 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 financial responsibility is required to be maintained continuously throughout the registration period and that operation of a motor vehicle without maintaining such financial responsi *26 bility is a misdemeanor, the penalties for which are loss of registration plate for sixty days; and a fine or imprisonment in the discretion of the court.” (Emphasis added.) Whether or not it was required by G.S. 20-310 under the circumstances of this case, the notice of termination mailed by Nationwide to Cotten, and received by him, was mailed prior to the date specified in G.S. 20-310 (a) and bore on its face the statement required by the statute. However, a notice of termination of the policy was not given by Nationwide to the Motor Vehicles Department prior to the date stated in the notice to Cotten as the date of termination. The determinative questions upon this appeal are, therefore: (1) Does G.S. 20-309(e), under the circumstances of this case, as a condition precedent to the termination of Nationwide’s risk under the policy, require Nationwide to give to the Department of Motor Vehicles notice of such termination 15 days prior to its effective date? (2) If so, did the notice given by Nationwide to the Department of Motor Vehicles, subsequent to the termination date stated in the notice to Cotten, terminate Nationwide’s risk under the policy 15 days after it so notified the Department? Apart from statute, the policy issued by Nationwide to Cotten would have terminated, by its own terms, at 12:01 a.m., on 8 March 1968. Forty-five days prior to that date, Nationwide mailed to Cotten, and he received, a notice of the premium necessary for renewal, showing the date by which such payment must be made by Cotten in order to renew the policy. By its express terms, this notice was an offer by Nationwide to renew the policy. Cotten made no response whatever to this offer. Though it was followed on 14 February by a notice of termination, showing that would occur at 12:01 a.m., on 8 March 1968, and bearing upon its face the statutory warning as to the consequence of operating a vehicle without the requisite financial responsibility, Cotten did not communicate with Nationwide prior to the accident on 26 May. G.S. 20-309 (e) expressly distinguishes between a policy terminated by the insurer and a policy terminated by the insured, with reference to when the insurer is required to notify the Department of Motor Vehicles that the policy has been terminated. It is only where the policy has been terminated by the insurer that the statute requires notice to the Department of Motor Vehicles prior to the effective date of cancellation. *27 In Faizan v. Insurance Company, 254 N.C. 47, 118 S.E. 2d 303, this Court concluded that the insured had rejected the insurer’s offer to renew his policy. Consequently, this Court held there was no failure by the insurer to renew and the insurer was under no obligation to give to the insured the notice of termination, required by G.S. 20-310 when termination is “by the insurer.” Thus, when a policy terminates in consequence of the policyholder’s rejection of the company’s offer to renew the policy, contained in a premium notice given, as in the present case, pursuant to the rules governing policies issued under the Assigned Risk Plan, such termination is deemed a termination “by the insured” and not a termination “by the insurer,” within the meaning of the above quoted statutes. Cotten’s certification to the Department of Motor Vehicles on 19 February 1968 that he had financial responsibility as required by The Vehicle Financial Responsibility Act and his giving Nationwide as the name of his insurer in that certification was for the purpose of getting a 1968 license plate for his automobile. That certification by him to the Motor Vehicles Department did not misstate any fact, for the policy was then still in effect, notwithstanding his having received the company’s notice that its termination would occur on 8 March. Thus, this certification by Cotten to the Department of Motor Vehicles does not show his intent to renew the policy so as to extend its coverage beyond 8 March. Furthermore, there is nothing in the record to indicate that his certification to the Motor Vehicles Department was brought to the attention of Nationwide. In Faizan v. Insurance Company, supra, the policyholder, having received the premium notice, instead of communicating with the company, applied to the Assigned Risk Plan for other insurance, but there is nothing in that case to indicate that such action by him was brought to the attention of the defendant company. These are the only differences in the facts of the two cases, relative to who terminated the policy, which we have discovered. Neither of these circumstances justifies a different conclusion upon the question of whether the policyholder rejected the company’s offer to renew the policy. Perkins v. Insurance Company, 274 N.C. 134, 161 S.E. 2d 536, distinguished Faizan v. Insurance Company, supra, on the ground that in the Perkins case there was no evidence or finding that the policyholder had rejected the company’s' offer to renew *28 the policy upon payment of the renewal premium. As the Court there noted, a substantial part of the renewal premium was sent by, or on behalf of, Perkins to the company, and there was uncertainty on the part of the insured as to whether the amount so sent was the full amount properly due the company for such renewal. This Court said these circumstances, known to the company, indicated a definite desire on the part of Perkins to renew the policy. Thus, we held that there had been no rejection of the offer by Perkins, so Faizan v. Insurance Company, supra, was not controlling, and the termination of the Perkins policy was “by the insurer,” necessitating the giving to Perkins by the company of the notice of termination required by G.S.' 20-310 (a). The notice sent by the company to Perkins not being in compliance with the statutory requirement, this Court held that the Perkins policy was' not terminated. In the present case, there was no such effort by Cotten to renew his policy. There was no communication whatever by him with the company concerning renewal. This case, therefore, falls within the rule of Faizan v. Insurance Company, supra, not within that of Perkins v. Insurance Company, supra. In Insurance Company v. Hale, 270 N.C. 195, 154 S.E. 2d 79, we said that the policyholder, prior to the alleged termination of the policy, had made full payment of the renewal premium to the agent of the company for its collection. For this reason we held that the company could not lawfully terminate the policy for nonpayment of the renewal premium and, consequently, the alleged termination was ineffective. We there observed that, subsequent to the decision in Faizan v. Insurance Company, supra, G.S. 20-309 (e) was amended so as to require the company to give to the Department of Motor Vehicles notice of a termination “by the insurer” prior to the effective date thereof, whereas, at the time of the Faizan decision, such notice to the Department was to be given after the termination became effective. This amendment of the statute has no bearing upon the authority of the Faizan case on the question of what constitutes a termination “by the insured.” Consequently, Insurance Company v. Hale, supra, is not determinative of the present case. In Harrelson v. Insurance Company, 272 N.C. 603, 158 S.E. 2d 812, also relied upon by the defendants in this case, we held that the defendant company did not have the right to terminate *29 the policy on account of the policyholder’s failure to pay its charge for malting a certification to the Motor Vehicles Department pursuant to The Financial Responsibility Act of 1957 and, consequently, its purported cancellation of the policy was not effective. The Harrelson case is, therefore, not controlling in the present case. We hold, therefore, that the policy issued by Nationwide to Cotten was' terminated “by the insured,” within the meaning of G.S. 20-309 (e), by his complete ignoring of the offer by the company to renew the policy contained in the notice of premium sent by it to Cotten and received by him. That being true, termination of the policy was not contingent upon the company’s giving notice thereof to the Department of Motor Vehicles prior to the effective date of the termination. Under these circumstances, G.S. 20-309 (e) required the company to notify the Department of Motor Vehicles of the termination of the policy “immediately.” This provision of the statute contemplates such notice to the Department after the termination. Thus, the requirement of notice to the Department of Motor Vehicles was the same, under the circumstances of the present case, as in Faizan v. Insurance Company, supra, except insofar as immediate notice may differ from a notice given within 15 days after the effective date of the termination. At the time of the decision in Nixon v. Insurance Company, 258 N.C. 41, 127 S.E. 2d 892, the statute, there applicable, required that notice of termination be given to the Department of Motor Vehicles not later than 15 days following the effective date of the termination. This Court said that, since the notice to the Department of Motor Vehicles was to be given after the effective date of the termination, neither a defective notice nor a failure to give notice to the Department would affect the validity or binding effect of the termination of the policy. It follows that where, as here, the statutory requirement is that notice be given to the Department of Motor Vehicles “immediately” after the termination of the policy becomes effective, a delay will not defeat the termination. The purpose of the notice to the Department of Motor Vehicles is not the same as the purpose of the notice of termination given to the policyholder. The purpose of the notice to the Department is to enable it to recall the registration and license *30 plate issued for the vehicle unless the owner makes other provision for compliance with The Vehicle Financial Responsibility-Act. See, Nixon v. Insurance Company, supra. We, therefore, hold that the first question, above stated, should be answered in the negative. That is, under the circumstances of this case, the giving by Nationwide to the Department of Motor Vehicles of notice of termination of Cotten’s policy 15 days prior to its effective date was not a condition precedent to the termination of the policy. This being true, an answer to the second question is not essential to the determination of this appeal. If it were, it should be answered affirmatively. The purpose sought to be accomplished by the Legislature in requiring notice to be given to the Department of Motor Vehicles is fully accomplished if the life of the policy be deemed extended 15 days after the giving to it by the company of the delayed notice. The purpose of the requirement of notice to the Department of Motor Vehicles is not to provide free insurance to the policyholder who has, by his disregard of the premium notice, demonstrated that he does not intend to pay the renewal premium. There is nothing which prevents the Department of Motor Vehicles, upon receipt of the delayed notice, from acting immediately as the statute contemplates it will act upon the receipt of timely notice. Therefore, the procedures followed by Nationwide would, in any event, be sufficient to effect a termination of this policy 15 days after it gave notice to the Department of Motor Vehicles, which was substantially prior to the collision between Cotten’s vehicle and that driven by Mr. Diggs. The decision of the Court of Appeals is, therefore, reversed and the matter is remanded to it for the entry of a judgment in accordance with this opinion. Reversed and remanded.