Opinion ID: 900685
Heading Depth: 1
Heading Rank: 4

Heading: Policy CancellationParol Evidence

Text: [¶ 11.] Auto-Owners contends that Hansen Housing cancelled the Businessowners Policy on the afternoon before the loss: Because of the Cancellation, Hansen was without insurance coverage from 4:00 p.m. on November 4, 1991, to 12:01 a.m. on November 5, 1991. The trial court ruled that Hansen's cancellation of November 4 was never accepted by the... company. Instead, they issued their written cancellation invoice which stated that the policy was canceled as of November 5, 1991. Auto-Owners directs our attention to its policy language: The ... Insured ... may cancel this policy by mailing or delivering to us advance written notice of cancellation. This provision allows unilateral cancellation of the policy. No action was required by Auto-Owners to accomplish the cancellation: the policy is effectively cancelled as of the date requested.... Coppola v. Ins. Placement Facility, 386 Pa.Super. 413, 563 A.2d 134, 138 (1989) (emphasis and citations omitted). [¶ 12.] By the terms of the policy language, the insurer's acceptance was not required. Nonetheless, a notice must be unconditional to effect cancellation. McQuarrie v. Waseca Mut. Ins. Co., 337 N.W.2d 685, 687 (Minn.1983). [A]n insurance contract can only be cancelled pursuant to its terms or by mutual consent or agreement accompanied by unequivocal notice of cancellation from the insured to the insurer. Milbank Mut. Ins. Co. v. State Farm Fire and Cas. Co., 294 N.W.2d 426, 430 (S.D.1980). A request for cancellation of a policy must be unequivocal and absolute. 6A Appleman, Insurance Law and Practice § 4226, at 652 (Rev ed 1972); see also 45 CJS Insurance § 513 (1993); 17 Couch on Insurance 2d § 67:144, at 603 (Rev ed 1983); Yant v. Bowker, 248 Ark. 826, 454 S.W.2d 84, 86 (1970). The question is, did Hansen Housing express a present intent to cancel the policy when the form was signed in Johnston's office? If the cancellation request was executed on the condition that the policy would remain in effect until Johnston was able to find a substitute policy, and the cancellation would be effective only if such a policy was found, then there was no present intent to cancel the Businessowners Policy. [¶ 13.] At this point, the parol evidence rule presents itself. Johnston's handwritten note to Mike Hansen was offered as proof that Johnston understood the cancellation request was conditioned on finding a substitute policy. The trial court relied on this note in making its decision. Was the note admissible to attack the clear import of the cancellation form? Ordinarily, when a document is unambiguous, its meaning must be found within its four corners. Spring Brook Acres Water Users Ass'n, Inc. v. George, 505 N.W.2d 778, 780 n.2 (SD 1993). A written contract supersedes preceding or accompanying oral negotiations. SDCL 53-8-5. [2] [¶ 14.] It must be understood that the parol evidence rule is in no sense a rule of evidence, but a rule of substantive law. 9 J. Wigmore, Evidence § 2400, at 4 (Chadbourn rev ed 1981); Farmers State Bank v. Keiser, 83 S.D. 354, 159 N.W.2d 388, 390 (S.D.1968) (citations omitted). Nor is the rule limited to parol, that is oral, negotiations. E. Allan Farnsworth, Contracts § 7.2, at 466 (2d ed 1990). It can apply to prior contracts, written or oral, as well as prior negotiations. Id. Because the rule presupposes a valid agreement, it will not prohibit evidence showing that there was no agreement or no enforceable agreement. Id. § 7.4, at 480. If the parol evidence rule rests on the rationale that a later written agreement has supplanted prior negotiations, it follows that the rule does not come into play until the existence of an enforceable written agreement has been shown. Id. [¶ 15.] Intrinsic to finding the existence of an agreement is finding the intention of the parties. Hisgen v. Hisgen, 1996 SD 122, ¶ 4, 554 N.W.2d 494, 496. Thus, we must ask, did the parties intend their written contract to be the final expression of their actual agreement? [A] writing cannot of itself prove its own completeness, and wide latitude must be allowed for inquiry into circumstances bearing on the intention of the parties. Restatement (Second) of Contracts § 210, cmt b (1981). A classic example of when the parol evidence rule will not prohibit an oral explanation for a writing is when a contract is conditionally delivered. Evidence may be offered, not to vary the terms of the contract, but to show that it was never delivered or was delivered to take effect only on the occurrence of some condition. Saltzman v. Barson, 239 N.Y. 332, 146 N.E. 618, 619 (1925); 3 Corbin on Contracts § 589, at 530 et seq. (1960); 4 Williston on Contracts § 634, at 1021 (3d ed 1961); Branstetter v. Cox, 209 Kan. 332, 496 P.2d 1345, 1347 (1972) (oral understanding that house sale contract was to be effective only on buyer's husband's approval). [¶ 16.] Johnston's note was admissible to show that the parties had no intent to cancel coverage immediately. Cancellation was to take effect only on the occurrence of another condition. Hansen Housing delivered the cancellation form conditioned on the timely substitution of a new policy. We think it significant, also, that Auto-Owners' Cancellation Invoice appears to confirm the understanding in Johnston's note to hold the Businessowners Policy in effect until a new policy could take its place. The invoice declared that the policy was cancelled as of 11-05-91, the day after the cancellation notice, the day the new policy took effect. [¶ 17.] As cancellation is an affirmative defense, Auto-Owners had the burden of proving it. American States Ins. Co. v. Southern Guar. Ins. Co., 53 Ark. App. 84, 919 S.W.2d 221, 222-23 (1996). We conclude that there was no unequivocal notice of immediate cancellation. Therefore, the trial court correctly decided that the Businessowners Policy was in effect at the time of the loss.