Nationwide Mutual Insurance Company v. Davis

GRAHAM, J. The plaintiff insurer does not challenge the court’s findings of fact but contends that the findings do not support the conclusions of law and the judgment entered thereon. It is conceded, and the court so found, that no notice of cancellation was given by plaintiff insurer to the insured or to the State Motor Vehicles Department. If notice to either was required in order to terminate coverage under the policy, the judgment is supported. We therefore discuss the circumstances under which such *156 notice must be given by the insurer in order to effectively terminate coverage under an automobile liability insurance policy. G.S. 20-309(e) provides in pertinent part as follows: “No insurance policy provided in subsection (d) 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.” Plaintiff insurer insists that its failure to notify the Motor Vehicles Department that the policy in question had been cancelled is immaterial and cites in support of this contention the cases of Nixon v. Insurance Co., 258 N.C. 41, 127 S.E. 2d 892; and Levinson v. Indemnity Co., 258 N.C. 672, 129 S.E. 2d 297. Both of these cases held that the cancellation of a policy was not conditioned upon notice being given to the Commissioner of Motor Vehicles. “Neither defective notice, nor failure to give notice, to the Commissioner affects the validity or binding effect of the cancellation; . . . Hence, the policy is terminated before notice is sent to the Commissioner. Notice to the Commissioner follows cancellation.” Nixon v. Insurance Co., supra, at 43. However, at the time the two cases cited above were decided the statutory provision requiring that notice of cancellation be given the Commissioner of Motor Vehicles (then a part of G.S. 20-310) required that such notice be mailed by the insurer not later than fifteen days following the effective date of a cancellation. Hence, the policy necessarily terminated before notice was mailed. By amendment effective 1 October 1963, this provision became the portion of G.S. 20-309 (e) quoted above and it now provides that a liability insurance policy issued pursuant to The Vehicle Financial Responsibility Act of 1957 may not be cancelled or terminated by an insurer without the insurer having given the Motor Vehicles Department notice of the cancellation fifteen days prior to the effective date of cancellation. Consequently, notice to the Motor Vehicles Department under this amendment is now a condition precedent to cancellation by an insurer. If the insurer does not furnish the required notice, it may not cancel and the policy of insurance continues in effect. Insurance Co. v. Hale, 270 N.C. 195, 154 S.E. 2d 79. No change in G.S. 20-309 (e) has been made respecting the duties of an insurer where the insured terminates the policy. The *157 statute still provides that the insurer shall immediately notify the Motor Vehicles Department that such insurance policy has been terminated. Under such circumstances, notice to the Department still follows cancellation and the decisions of Nixon v. Insurance Co., supra, and Levinson v. Indemnity Co., supra, are, in our opinion, still controlling. Two statutory provisions relate to notice that must be given an insured before a policy is cancelled or terminated. The first, G.S. 20-279.22, relates to certified assigned risk policies issued under The Motor Vehicle Safety-Responsibility Act of 1953. Under the provisions of that statute it is incumbent upon the insurer to give the statutory notice of cancellation irrespective of whether the insurance coverage is terminated through acts of the insured or the insurer. The policy here in question was not a certified assigned risk policy and therefore the cancellation provisions of G.S. 20-279.22 are not here applicable. • The second provision is contained in G.S. 20-310 (a) and it provides as follows: “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 responsibility is a misdemeanor, the penalties for which are loss of registration plate for 60 days; and a fine or imprisonment in the discretion of the court.” The above provision relates to the notice and warning that must be given the insured by the insurer in the event his policy is terminated by insurer, whether the termination is by cancellation or by failure to renew. Perkins v. Insurance Co., 274 N.C. 134, 161 S.E. 2d 536. It does not, as does G.S. 20-279.22 with respect to certified assigned risk policies, require the insurer to notify the insured where the insured himself terminates the policy. Faizan v. Insurance Co., 254 N.C. 47, 118 S.E. 2d 303. *158 It follows, under the applicable statutes, that where the insurer terminates a policy, it must give fifteen days prior notice thereof to its insured and to the Motor Vehicles Department. Failure to give notice in proper form to either renders an attempted termination by the insurer ineffective. But where a policy (other than a certified assigned risk policy) is terminated or cancelled by an insured, notice thereof is not required to be given to the insured, and although notice must immediately be given to the Motor Vehicles Department, the failure to give such notice does not affect the termination of coverage. The question here involved is therefore: Was the termination of the policy or its attempted termination an act of the insurer requiring notice as provided by the applicable statutes or was it an act of the insured requiring no such notice? Plaintiff insurer contends that it was an act of the insured in rejecting an offer to renew the policy made by the insurer in mailing to the insured the premium due notice. Renewal of an insurance policy is a bilateral transaction involving both an offer and acceptance. Where no offer to renew is made by the insurer there can be no acceptance and a failure to renew under such circumstances is unilateral action on the part of the insurer. Connecticut Fire Insurance Company v. Williams, 194 N.Y.S. 2d 952 (1959). Plaintiff insurer insists that the premium notice in this case constituted an offer to renew the policy such as was given to the insured and rejected by him in the case of Faizan v. Insurance Co., supra. We do not agree. In the Faizan case the written notice sent to the insured advised him that the policy would expire on 22 February 1959; that in order to renew it he must pay the premium in advance by 5 February 1959; and that if the premium was not paid by that time, the insured would have to apply through the Assigned Risk Plan if he desired further coverage. In addition the notice contained the following language: “UNDER THE PROVISIONS OF THE VEHICLE RESPONSIBILITY ACT OF THE STATE OF NORTH CAROLINA 'PROOF OF FINANCIAL RESPONSIBILITY IS REQUIRED TO BE MAINTAINED CONTINUOUSLY THROUGHOUT THE REGISTRATION PERIOD AND OPERATION OF A MOTOR VEHICLE WITHOUT MAINTAINING SUCH PROOF OF FINANCIAL RESPONSIBILITY IS A MISDEMEANOR.’ ” In the case of Perkins v. Insurance Co., supra, it was held that *159 a notice containing the pertinent provisions of G.S. 20-310, including the warning respecting the consequences of failure to maintain insurance, was a prerequisite to termination for failure to renew a policy on account of non-payment of premium. In distinguishing the Faizan case, Bobbitt, J. (now C.J.), stated at page 143: “The ground of decision in Faizan was that the insured rejected the defendant’s offer to renew the policy. In Faizan, notices given by the defendant to the plaintiff, although not in full compliance with the provisions of the quoted statute, were sufficient to advise the insured plainly of the consequences of his failure to renew. The insured made no response to the insurer’s notices. Instead, he ‘applied through the Assigned Risk Plan for further insurance, but the policy thus obtained (from another insurer) was not in effect at the time of the accident in question.’ ” In the instant case the notice relied upon by plaintiff as its offer to renew is entitled “Premium Notice.” It states: “The semiannual premium on your auto policy No. 61 282-480 is due on June 21, 1967.” The amount due is specified as $30.60. In small print in the lower left-hand corner the following appears: “Your auto insurance is important security you can’t afford to be without. Prompt payment of the premium shown above will assure you the continued ■protection of this policy.” This premium notice makes no reference to the expiration date of the policy. It contains no warning regarding the consequences of a failure to pay the premium. The notice standing alone does not indicate that the policy is subject to renewal on 21 June 1967 but simply that a semi-annual premium payment is due on that date. An insurer may not cancel for non-payment of premiums without following the provisions of G.S. 20-309 (e) and G.S. 20-310. Perkins v. Insurance Co., supra; Insurance Co. v. Hale, supra; Crisp v. Insurance Co., 256 N.C. 408, 124 S.E. 2d 149. The small print appearing on the premium notice is at most a warning that unless payment is made the insured cannot be assured that coverage will continue. The inference from this language is that if the premium is not paid the insurer may terminate the coverage. If the policy is not renewed under such circumstances the failure to renew would be a unilateral act of insurer and would require strict compliance with the notice statutes. It is our opinion that a premium due notice such as mailed to the insured in this case does not constitute an offer to renew a policy of *160 insurance such as was made in the Faizan case. Such a notice, standing alone, is simply a statement of an account that will be due on the date indicated. If payment is not made the insurer has the option of renewing the policy and treating the unpaid premium as an account receivable, or of refusing to renew the policy. If the insured refuses to renew, termination of coverage results from its action and notice to insured and the Motor Vehicles Department must be given as provided by the applicable statutes. The court’s findings that such notice was not given in this case supports its conclusion that the insurance coverage was still in effect at the time of the collision on 13 July 1967 and the judgment is therefore affirmed. Affirmed. Campbell and PaeiceR, JJ., concur.