Title: Tomeoka v. Mid-Century Ins. Co.

State: arizona

Issuer: Arizona Supreme Court

Document:

118 Ariz. 394 (1978) 577 P.2d 245 Iwao TOMEOKA, Conservator of the Estate of Hiroshi Yamaguchi, a protected person, Appellant, v. MID-CENTURY INSURANCE COMPANY, a corporation, Appellee. No. 13193. Supreme Court of Arizona, In Division. March 13, 1978. Rehearing Denied April 11, 1978. Jennings, Strouss & Salmon by Stephen A. Myers, Phoenix, for appellant. Jones, Teilborg, Sanders, Haga & Parks by James R. Broening, Phoenix, for appellee. GORDON, Justice: In 1972, Mid-Century Insurance Company issued a policy of automobile liability insurance to Maurice and Madaline Gilitiuk covering their 1967 Buick. The policy, number 88 1884 61 72, bore an effective date of February 29, 1972 and a stated expiration date of August 29, 1972. The Gilitiuks paid the premium for the entire six month term in February, 1972. It is undisputed that they did not pay any premiums on policy number 88 1884 61 72 or any other policy covering the Buick thereafter. *395 Although Mr. Gilitiuk testified at a deposition that he could not recall having received any notice of cancellation, there is evidence that, on October 19, 1972, Mid-Century mailed the Gilitiuks a notice informing them that their policy number 88 1884 61 72 had been cancelled on October 8, 1972, for nonpayment of premiums. The insurance company admits that this notice was not sent by certified mail. On March 17, 1974, Mr. Gilitiuk, while driving the 1967 Buick, was in an automobile accident with Hiroshi Yamaguchi. On October 8, 1974, Iwao Tomeoka, the duly appointed conservator of the estate of Hiroshi Yamaguchi, filed a lawsuit against the Gilitiuks in Maricopa County Superior Court for personal injuries sustained by Yamaguchi in that accident. Soon after filing an answer to that complaint, the Gilitiuks tendered their defense to Mid-Century and demanded that the company assume liability for any judgment that might be rendered against the Gilitiuks. On June 18, 1975, prior to the trial of the personal injury action, Mid-Century filed a declaratory judgment action against the Gilitiuks and Tomeoka praying that the court decree that Mid-Century had no duty to defend the Gilitiuks in the personal injury action and that Mid-Century was not obligated to pay for any judgment that might be rendered against the Gilitiuks in that action. The trial court made a specific finding that no insurance coverage was afforded the Gilitiuks by Mid-Century for the March 17, 1974 accident and entered a summary judgment in favor of Mid-Century. We have taken jurisdiction of Tomeoka's appeal pursuant to Rule 47(e)(5) A.R.S. Supreme Court Rules. Appellant's contention that policy number 88 1884 61 72 was still in full force and effect on the date of the accident in spite of the fact that the Gilitiuks had not paid any premiums since the expiration date of the policy, one and one-half years earlier, is grounded in the following provision of the insurance policy. Noting that the October 19, 1972 notice of cancellation mailed by Mid-Century to the Gilitiuks was neither mailed 10 days prior to the date of cancellation stated in the notice nor sent by certified mail, it is appellant's position that the insurance company's failure to strictly comply with the notice provision in the policy rendered the attempted cancellation nugatory. See State Farm Mutual Automobile Ins. Co. v. O'Brien, 24 Ariz. App. 18, 535 P.2d 46 (1975); Di Prospero v. Nationwide Mutual Fire Insurance Company, 30 Conn.Sup. 291, 311 A.2d 561 (1973); Northern Insurance Co. of New York v. Mabry, 4 Ariz. App. 217, 419 P.2d 347 (1966). Appellee concedes that notice by first class mail is inadequate when the insurance policy requires notice by certified mail. The insurance company contends however that the adequacy of the October 19, 1972 "notice of cancellation" is not a relevant issue in this case because policy number 88 1884 61 72 terminated prior to October 8, 1972, by a process other than cancellation. It is appellee's position that the Gilitiuks' failure to pay a renewal premium prior to August 29, 1972 caused the policy to automatically lapse on that date, in accordance with the following provision of the policy: To round out its position, Mid-Century contends that neither the policy nor court decisions *396 require that an insured be notified that a policy either will or has expired because of nonpayment of premiums. See Kapahua v. Hawaiian Insurance and Guaranty Co., 50 Haw. 644, 447 P.2d 669 (1968); Shepard v. United States Fidelity and Guaranty Co., 210 Kan. 652, 504 P.2d 228 (1972). In his attempt to undermine the suggestion that the policy lapsed automatically for failure to pay the renewal premium, appellant quotes extensively from the case State Farm Mutual Automobile Ins. Co. v. O'Brien, 24 Ariz. App. 18, 535 P.2d 46 (1975): The applicable section reads: Even if we were to approve of the court's reasoning on the merits, we could not cite it as authority for purposes of analyzing the policy currently under consideration, because as is often true in insurance cases, the reasoning in the passage revolves around a phrase in the policy that does not appear in policy number 88 1884 61 72. The corresponding provision in policy number 88 1884 61 72 states: It should be noted that this provision is identical to the provision analyzed in O'Brien with the exception that the phrase "whether payable directly or under any premium payment plan" has been excised. We find no ambiguity in this provision. As applied, it is clear that the phrase "payment of premium for this policy or any installment thereof" refers exclusively to payments for the six month term beginning February 29, 1972 and does not encompass renewal premium payments. *397 Since the failure to pay a renewal premium is not one of the conditions that activates the "right to cancel" provision of the policy, we agree with appellee that no "notice of cancellation" is required by that provision in order for the policy to be effectively terminated for failure to pay a renewal premium. Since the appellant has not demonstrated that some other provision of the policy required the insurance company to send a notice of cancellation in order to effectively terminate the policy, we agree with the appellee that the Gilitiuks' failure to pay the renewal premium prior to August 29, 1972 caused the policy to lapse automatically on that date under the expiration provision of the policy, and that the insurance company was not obligated to notify its insured of that fact. Kapahua v. Hawaiian Insurance and Guaranty Co., supra; Shepard v. United States Fidelity and Guaranty Co., supra. The judgment of the trial court is affirmed. STRUCKMEYER, V.C.J., and HOLOHAN, J., concur.