Employers Mutual Casualty Co. v. Pigeon Creek Corp.

Tom Glaze, Judge. This appeal involves a law suit filed by Pigeon Creek Corporation (Pigeon Creek) for a loss to a houseboat it owned. Pigeon Creek alleged that it was entitled to damages for the loss pursuant to the terms of a policy issued by Employers Mutual Casualty Company (Employers). Pigeon Creek was awarded judgment for $10,750.50 and Employers brings this appeal from that adverse ruling. The relevant facts are not in dispute. The policy in question was first issued by Employers to George and Mary Goetz on their 1969 Stardust Cruiser houseboat. Munsey Insurance Agency (Munsey) was the agent which handled the policy issuance and the term of the policy was December 23, 1975, to December 23, 1976. On April 20, 1976, Pigeon Creek, through its president and principal shareholder, Kenneth Fagan, purchased the houseboat from the Goetzes. On the same date, Fagan requested Munsey to transfer the existing insurance policy into the name of Pigeon Creek. At this same time, Fagan discussed the possibility of renting the houseboat to others in the course of his business; however, Munsey advised Fagan that there was a private pleasure warranty contained in the policy, and the policy would be null and void if the boat was used commercially. There were no further discussions between Munsey and Fagan until January 12, 1977. On November 30, 1976, and prior to the policy expiration date of December 23, 1976, Munsey billed Pigeon Creek for the policy period of December 23, 1976, to December 23, 1977. Another request for payment was mailed at the end of December, 1976. When payment was not received by January 12, 1977, Munsey telephoned Fagan to find out why. Munsey testified that Fagan stated that the boat had been used commercially and the policy was no good. Upon hearing of the commercial use of the boat, Munsey agreed that the policy was no good and requested the return of the renewal certificate so that Employers could give Munsey credit on the charges. Fagan agreed to return the certificate. Also on January 12, 1977, Munsey called Employers and informed it of his conversation with Fagan. On January 14, 1977, the houseboat sank in the cove where it was moored. The sinking was due to a heavy accumulation of snow on the boat, causing the boat to sink lower in the water than normal and allowing water to flood the hull through a drive transom at the rear of the boat. Fagan testified that sixteen inches of ice surrounded the boat from the date of loss until the ice broke around March 10, 1977. Fagan further testified that extremes of temperature were responsible for the ice on the lake and that he had not attempted to remove the boat for some fifty days because of the ice in the cove where the boat was moored. On the night of January 14, Fagan discovered that the boat had sunk, and the next day he called Munsey, who informed him that he had no coverage. On this same day, January 15, 1977, Fagan mailed the renewal premium in the amount of #230 to Munsey, who promptly rejected and returned the payment to Fagan. After attempts to resolve the controversy between Employers, Munsey and Pigeon Creek failed, Pigeon Creek filed suit against Employers which led to this appeal. Appellant raises six points on appeal. Our decision, however, turns on one issue, viz., whether or not the insurance policy was in effect at the time of appellee’s loss in view of the fact that the policy term had expired, and appellee had failed to pay the premium for its renewal. Although this issue was mentioned by the trial judge, it was not decided below. Evidence was introduced and fully developed without objection on the issue at trial and is also argued here. Therefore, this point for reversal is before us and is binding on the parties on the merits of this controversy. Moorehead v. Universal C.I.T. Credit Corporation, 230 Ark. 896, 327 S.W. 2d 385 (1959). The controlling law on this issue is found in the case of Preferred Risk Insurance Company v. Central Surety & Insurance Corporation, 191 F. Supp. 797 (W.D. Ark. 1961). See also, Roberts v. Buske, 12 Ill. App. 3d 630, 298 N.E. 2d 795 (1973) and St. Paul Fire & Marine Insurance Company v. Bierwerth, 285 Minn. 310, 175 N.W. 2d 136 (1969). In Preferred, the insured owned an automobile which was first insured on May 20, 1958, until November 20, 1958, by Central Surety & Insurance Corporation through its agent, Greening Insurance Agency. Prior to the expiration of the automobile policy on November 20, 1958, the Greening Agency had prepared and forwarded to the insured a new six month policy which would expire on May 20, 1959- The insured paid the premiums timely and the new policy was in effect for the full six month period. However, on May 8, 1959, and prior to the expiration of the second six month policy, the Greening Agency forwarded to the insured a third policy to cover her automobile from May 20, 1959, to November 20, 1959. A bill for the due premium payment was mailed to the insured on two occasions, May 18 and June 1, 1959. The insured never paid the premium and no cancellation notice and agreement were performed between the parties. On June 7, 1959, the insured was killed in an accident which involved her automobile. A law suit was filed against Central Surety & Insurance Corporation wherein it was contended the renewal policy for the May 20, 1959, to November 20, 1959, term was in force and effect. The court found that the insured had received the renewal policy; she did not pay the premium; she had purchased a new policy with the same coverage through another insurance company and its agent on May 20, 1959. The court held that the policy issued by Central was not in effect at the time of the accident and stated the rule of law that we believe is also controlling of the facts and issues at bar. The court said: Normally, in insurance cases the offer is made by application on the insured and acceptance is manifested by delivery of the policy by the insurer. The unsolicited delivery of a renewal policy prior to the expiration of the original policy, as in this case, is not an acceptance, but an offer, and no contract of renewal is created unless acceptance by the insured is expressly made or necessarily inferred. [Emphasis supplied.] In the instant case, Pigeon Creek did not request Employers or Munsey to renew the yacht insurance policy. Munsey sent Pigeon Creek unsolicited both the renewal certificate and the statement for premiums. In fact, since the premiums had not been paid by Pigeon Creek by January 12, 1977, or about three weeks after the policy date had expired, Munsey called Pigeon Creek’s president, Fagan, and asked why the premiums had not been paid. Fagan admitted this conversation with Munsey regarding the overdue premium payment, and also said that Munsey wanted to know when he was going to send in the payment. However, there is no evidence in the record that reflects that Fagan expressly accepted the renewal certificate when he discussed the matter with Munsey, nor is there evidence from which it can be inferred. Fagan did not mail the overdue payment on January 12, 13 or 14. He mailed the payment on January 15, the day after Fagan discovered the loss of the boat, and twenty-three days after the policy had expired. Considering the rule enunciated in Preferred as applied to the facts before tis, we are of the clear opinion that Pigeon Creek did not accept the renewal certificate offered by Employers, and therefore, there was no insurance policy in effect between "Pigeon Creek and Employers on January 14, 1977. Pigeon Creek relies on the case of American Employers’ Liability Insurance Company v. Fordyce, 62 Ark. 562, 36 S.W. 1051 (1896) and contends that we should find the policy in effect because there was a legal presumption that a short credit had been extended to Pigeon Creek for the premium payment. The Fordyce case did not involve a policy renewal but rather a new policy and the initial premium, two legally different and distinguishable factual situations as was noted in Preferred. Even if initial and renewal policy issuances evoked the same legal principle, the presumption of short credit found by the court in Fordyce involved a new liability policy issuance and the liability which accrued under the policy was before the insurer demanded payment of the premium from the insured. As we have already discussed above, Munsey had made demand for payment in this cause in advance of the loss. In accordance with the above, we reverse the judgment of the trial court with directions to enter judgment in favor of Employers. Reversed, and remanded. Mayfield, C.J., and Cooper, J., dissent.