Case Title: Shunga Plaza, Inc. v. AMERICAN EMPLOYERS'INS. CO.

Citation: 206 Kan. 16, 476 P.2d 642

Docket Number: 

State: kansas

Court: Kansas Supreme Court

Date: 1970-11-07T00:00:00Z

Document:
206 Kan. 16 (1970)
476 P.2d 642
SHUNGA PLAZA, INC. and AMERICAN SAVINGS ASSOCIATION OF TOPEKA, KANSAS CORPORATIONS, Appellants,
v.
AMERICAN EMPLOYERS' INSURANCE COMPANY, Appellee.
No. 45,650

Supreme Court of Kansas.
Opinion on rehearing filed November 7, 1970.
Jerry W. Hannah, of Topeka, argued the cause, and John E. Davis, of Topeka, was with him on the brief for the appellants.
Herbert A. Marshall, of Topeka, argued the cause, and J. Roger Hendrix, of Topeka, was with him on the brief for the appellee.
OPINION ON REHEARING
SYLLABUS BY THE COURT
1. INSURANCE  Transmittal Letter  Endorsement Deleting Item  Return Premium. A covering or transmittal letter accompanying an endorsement to be attached to an insurance policy deleting one item of property will control as to time and conditions of payment of the "return premium," and the necessity for confirmation by the insuring company where the endorsement is silent on such matters.
2. SAME  Endorsement Deleting Item of Coverage  No New Agreement Until Confirmed by Company. An endorsement to be placed on an insurance policy deleting one item of coverage is examined in connection with the letter of transmittal and held not to constitute a new agreement until there is confirmation by the insuring company.
The opinion of the court was delivered by
HATCHER, C.:
This appeal involves the effectiveness of an endorsement to be attached to an insurance policy for the purpose of deleting an item of property from the insurance coverage.
The appeal was first heard in January, 1970, and on March 7, 1970, the opinion affirming the judgment in the lower court was filed. (Shunga Plaza, Inc. v. American Employers' Ins. Co., 204 Kan. 790, 465 P.2d 987.)
A rehearing was granted and the case was reargued at the October, 1970, session.
Upon further consideration of the case a majority of the court is now of the opinion that the former decision is incorrect and that the majority opinion, as filed, should be and is hereby withdrawn, vacated and set aside.
*17 The result is that the dissenting opinion of the minority now becomes the controlling opinion of the majority and is hereby adopted as such. We would, however, add a few additional remarks.
We find no fault with the law as expressed in the first four paragraphs of the syllabus but we are now of the opinion that the law as stated in paragraph three has no application to the facts and circumstances of this case.
Although we will look to the former opinion for the facts without repeating them herein, it will be necessary that we set out the endorsement and the letter of transmittal in support of our limited presentation. In the language of the former opinion, an endorsement, standard in form, was mailed by Robert Gucker on behalf of the appellee to Robert J. Bernica, secretary of the appellant, Shunga Plaza, Inc., to be attached to the policy of insurance. The endorsement is too cumbersome to be presented in full. It was headed:
The endorsement with copies were mailed to Robert J. Bernica with a letter of transmittal, which read:
In the former opinion we applied the rule that there is no basis for construction where the language of a contract is clear and unambiguous and where a contract is not ambiguous it is the function of a court to enforce it as made. This was the language contained in paragraph three of the syllabus in the former opinion which we now hold not to be applicable.
*18 Although the endorsement does not state when the "return premium" of $20.00 would be paid, it cannot be said that the endorsement is incomplete or ambiguous as the law will imply payment within a reasonable time. (Leis v. Sinclair, 67 Kan. 748, 74 Pac. 261; 17A C.J.S., Contracts, § 482, p. 682.) However, the endorsement being silent as to the method, time and terms the "consideration of a return premium of $20.00" was to be paid, the letter transmitting the endorsement having definitely fixed the method, time and terms of the payment, the necessity for an implication is eliminated. The time and condition of payment becomes definitely fixed by the letter of transmittal.
The letter of transmittal makes it quite clear that the agent did not have authority to approve the endorsement but the approval must come from his company.
The letter stated that "a check for the return premium will be sent to you when we receive confirmation from company." Confirmation of what? It had to mean either the confirmation of the endorsement or the "return premium" or both. If there was no confirmation by the company, the consideration mentioned in the endorsement failed. The check would not be mailed until there was confirmation by the company.
This court has never passed on the effect of a covering or transmittal letter. However, we see no reason why it should not have the same force and effect as any other annexed writing where it is bound to come to the attention of the party.
We find the following statement in Corpus Juris Secundum:
Again in 17A C.J.S., Contracts, § 299, p. 136, it is stated:
The effect of two contemporaneous writings was considered in Rodriguez v. Secretary of Treasury of Puerto Rico, 276 F.2d 344, where it was stated:
We find the rule stated where there are two contemporaneous writings but one is silent as to a particular provision:
A covering or transmittal letter may have the effect of delaying or staying the operation of a contract and knowledge of its contents cannot be disclaimed.
In Gateway Company, Inc. v. Charlotte Theatres, Inc., 297 F.2d 483, it was said:
We are inclined to believe that the "effective date" mentioned in the endorsement referred to the date as of which the endorsement would be effective after it was confirmed by the company. As there was no check received by the insured, and no notice of confirmation, the policy of insurance remained in full force and effect.
An insurance company cannot wait until a building is destroyed and then confirm an endorsement deleting the item of property from coverage under the policy.
The judgment of the district court is reversed with instructions to render judgment for the plaintiff in the amount due under the *20 original insurance policy covering the building at 1122 Van Buren, Topeka, Kansas.
APPROVED BY THE COURT.
PRICE, C.J., dissenting.
FROMME, J., dissenting:
I adhere to what was expressed and held in our former majority opinion (Shunga Plaza, Inc. v. American Employers' Ins. Co., 204 Kan. 790, 465 P.2d 987) and dissent from the present majority opinion.
It should be pointed out that the cancellation or deletion of insurance coverage in this case was initiated by a representative of the insurance company. In such case there is no reason to delay termination of the coverage until confirmation from the company. The advantages and reasons for agreeing in advance on an effective date for the cancellation are apparent. The company could then determine the total extent of its liability on that date. The agent could then figure the pro-rata amount of the premium to be refunded to the insured and the insured then knew when he must obtain insurance protection from other sources.
The endorsement form used by the agent and the insured to delete the coverage was a uniform standard insurance form. It was executed or signed by Bob Gucker, as agent for the company and by Robert J. Bernica as an officer of the insured corporation, Shunga Plaza, Inc. The effective date of the endorsement which reduced the coverage was stated in the endorsement to be February 23, 1966. Without that set date for the deletion of coverage the pro-rata amount of return premium to be paid ($20.00) could not be properly calculated.
The present holding of a majority of this court is that regardless of the effective date set in an endorsement the deletion of coverage does not become effective until there is a further confirmation of the endorsement by the company or an actual payment of the return premium due.
Such a holding results in a hiatus. The pro-rata return premium cannot be figured until the effective date of the cancellation is set and the date of cancellation cannot be set until the pro-rata return premium is calculated and paid.
The present majority of the court lay too much stress on the letter of transmittal. Such letter was not signed by either of the parties. *21 It was prepared and signed by Alice Doyle, who was designated in the letter of transmittal as a "secretary" in "Bob Gucker's office". It contained nothing to indicate the letter was dictated by Bob Gucker.
The effect of our present holding reaches far beyond the authorities cited by the majority in support thereof. As I interpret the opinion as now written it has the effect of holding that the terminology used by secretarial help in a letter of transmittal may change the clear and unambiguous terms of a separate written agreement signed by two contracting parties. This should not be the law and I respectfully dissent.
KAUL, J., joins in the foregoing dissent.