Court Opinion

ID: 9653339
Source: CourtListenerOpinion
Date Created: 2023-08-23 17:44:37.73486+00
Date Added: 2024-06-11T18:12:50.142425
License: Public Domain

RENDLEN, Judge,
dissenting.
I respectfully dissent. I would hold the contract of insurance between Horack and Allstate Insurance Company was in effect May 11, 1974, the date of James Horack, Jr.’s accident with plaintiff Robert Schroeder because neither Schroeder nor Allstate had effectively terminated the contract pri- or to the time of the casualty.
The controlling fact is the language of paragraph 20 of the liability policy issued by Allstate which provides:
CONDITIONS APPLICABLE TO ALL COVERAGE
20. CANCELLATION
[1] This policy may be cancelled by the named insured by mailing to the company written notice stating when thereafter the cancellation shall be effective. [2] This policy may be cancelled by the company by mailing to the named insured at the address shown in this policy written notice stating when not less than 10 days thereafter such cancellation shall be effective. The mailing of notice as aforesaid shall be sufficient proof of notice. The effective date and hour of cancellation stated in the notice shall become the end of the policy period. Delivery of such written notice either by the named insured or by the company shall be equivalent to mailing. (Emphasis added.)
Appellant Allstate Insurance Company contends that the policy was cancelled by the insured on a written request pursuant to the terms of paragraph 20. In this regard it has been stated that effecting a unilateral cancellation of an insurance policy requires “strict compliance with the conditions provided in the policy for cancellation.” MFA Mut. Ins. Co. v. Southwest Baptist College, Inc., 381 S.W.2d 797, 801 (Mo.1964). Paragraph 20 of the policy provides for unilateral cancellation by the insured only on mailed written notice stating when thereafter the cancellation shall be effective. It should be emphasized that paragraph 20 makes no provision for unilateral oral cancellation, therefore Horack’s telephone call to the agent of May 8 is not relevant to this point. If a phone call could accomplish cancellation, Horack could have called the company directly and instructed *749them to cancel. This however would not suffice, for if such were permitted, contrary to the contract language, the company could (following such oral communication) sit and do nothing and the policy would remain in force and Horack would remain liable for payment of premiums. On the other hand if the company decided to accept the oral offer to cancel and had communicated by word or deed the fact of its acceptance to the offeror (Horack), the parties could be said to have “bilaterally” modified the contract and to have cancelled under the “new” agreement. No such bilateral agreement occurred in this case because there was no communication of the fact of acceptance of the offer. The Allstate Company failed to make any response to Horack until long after the casualty.
In this connection the following statement is pertinent:
As the mutual agreement by which the policy is cancelled or rescinded is in its nature a contract, it follows that the elements of a contract must be present in order to give rise to a termination • by mutual agreement. Thus there must be a mutual consent as found in the offer of terms and their acceptance by the other party, and each party must act with knowledge of the material facts.
17 G. Couch, Cyclopedia of Insurance Law, § 67.205 (2d ed. 1967). Because each party to a mutual rescission surrenders his rights under the contract of insurance, the surrender of the one is consideration for the surrender of the other and no special consideration is necessary. Id., § 67.208. The agreement to cancel the policy is a bilateral contract wherein the insured promises to give up his rights to coverage in the event of an accident in return for the insurer’s promise not to enforce its right to payment of premiums. Thus, when an insured requests cancellation of the policy of insurance he is asking for a return promise and not the performance of a particular act as in this case the act of setting the computer into operation. By definition the exchange of a promise for a promise is a bilateral contract.
An insurer may accept the offer of cancellation by his conduct and the agreement to rescind need not be in writing. No set or precise form is required. Id., § 67.209. It is essential, however, to distinguish conduct which manifests a non-communicated acceptance from conduct constituting a communication to the offeror of the acceptance. The insurer Allstate was not required to recite a litany or speak special words such as “I agree to cancel the policy,” as the computer program is run. However, the company was required to communicate the fact of its acceptance to the insured. Hence, while many cases indicate that assent to an offer of rescission may be implied from the acts and conduct of the parties with respect to the subject matter of the contract and need not be established by proof of express agreement to rescind, In re Estate of Reed, 414 S.W.2d 283 (Mo.1967); Henges Co. v. May, 223 S.W.2d 110 (Mo.App.1949), these cases do not stand for the principle that communication of that assent to the offeror may be dispensed with as an essential element of a contract of rescission.
It is well established that insurance is a matter of contract and is governed by the rules applicable to contracts. Hartford Acci. Indem. Co. v. Farmington Auction, Inc., 356 S.W.2d 512, 518-519 (Mo.App.1962); Hall v. Missouri Ins. Co., 208 S.W.2d 830, 832 (Mo.App.1948). If an offer to rescind an insurance contract is a bilateral contract (exchange of a promise for a promise), then the rules governing formation of bilateral contracts apply. Application of these basic contract principles required appellant to communicate its acceptance of the policyholder’s offer to rescind the contract before a completed contract of cancellation could be formed. No communication of that acceptance was sent to the policyholder. Appellant received the “Customer Service Request” form on May 9,1974, from its agent and processed it without ever indicating to the policyholder it had accepted his offer. Appellant’s conduct manifesting its acceptance took place at its Kansas City office and appellant introduced no evidence indicating that the policyholder had any knowledge of its acts or any means of dis*750covering that cancellation had indeed occurred.
Returning to the language of the contract, it is not immediately apparent from the language in paragraph 20 whether the parties intended the mailed notice to be effective on the date of mailing or on the date of its receipt by Allstate. Though the cases on point are few, they indicate a general rule that unilateral notice by the insured will not be effective until it is received by the insurer, e. g., Dupeck v. Union Ins. Co. of America, 329 F.2d 548, 557 (8th Cir. 1964); Mann v. Charter Oak Fire Ins. Co., 196 F.Supp. 604, 610 (E.D.Ark.1961), aff’d. 304 F.2d 166 (8th Cir. 1962), and the commentators agree. 6A J. Applebaum, Insurance Law and Practice § 4226, at 660 (rev. ed. 1972); 17 G. Couch, Cyclopedia of Insurance Law § 67.103 (2d ed. 1967). See also 45 C.J.S. Insurance § 458, at 117 (1946); 43 Am.Jur.2d Insurance § 426 (1969). It was stipulated that the writing by which Allstate seeks to prove written unilateral cancellation of the policy by the insured was not received by Allstate until May 28, 1974, 17 days after the casualty occurred. Under the authorities cited above, the written notice could not effect cancellation of the policy prior to that date.
Furthermore, paragraph 20 requires the written notice must specify “when thereafter the cancellation shall be effective.” In this context the term “thereafter” refers to an event that will occur after the mailing of notice, thus it is required that the notice specify a future date, i. e. some time after the mailing and in no event before the notice is received by the company as the effective moment for cancellation. The writing of James Horack, Sr., names not a future date but a past date by stating the policy “was cancelled” May 8. Without strict compliance with the policy restrictions on unilateral cancellations — that is, without naming a future date on which the cancellation would be effective — the written statement of James Horack, Sr., could not operate as a cancellation effective earlier than the company’s receipt of the notice on May 28. See Dyche v. Bostian, 361 Mo. 122, 233 S.W.2d 721, 724 (Mo.banc 1950); Annot., 8 A.L.R.2d 203 (1950). Further, § 379.195, RSMo 1969, prohibits cancellation of an insurance policy providing coverage for “bodily injury ... by accident” occurring prior to the attempted cancellation so as to impair any claim of the injured party against the insurer. See Dyche, 233 S.W.2d at 724. Accordingly, as the cancellation could not have been effective prior to May 28, the cancellation on that date could not alter appellant’s responsibility under the policy for the casualty of May 11.
The majority glosses over the referenced language of the insurance contract which provides, “This policy may be cancelled by the named insured by mailing to the company written notice stating when thereafter the cancellation shall be effective.” They suggest the defendant company’s agent performed the acts specified in the policy to be performed by the insured. In other words the majority would make a construction of the policy most favorable to Allstate (the insurer) and construe the requirement as permitting the insured’s agent to perform the condition devolved on the insured by the contract’s special language. In so doing the majority contravenes a cardinal principle of insurance law that unambiguous language of a policy of insurance must be given its plain meaning, but insofar as it is open to different constructions, that construction most favorable to the insured must be adopted. Packard Mfg. Co. v. Indiana Lumberman’s Mutual Ins. Co., 356 Mo. 687, 203 S.W.2d 415, 416 (Mo.banc 1947).
To accomplish this result the majority goes de hors the record and states:
The average American citizen who has an automobile liability policy [the terms of which are not shown] which he wants to cancel does so by calling the insurance agent and telling him to cancel the policy.
The principal opinion concludes from this unsupported statement of so-called fact, that because the “average” citizen leaves it to the agent as to the manner cancellation will be handled, the parties here, notwithstanding their written contract, are bound by what the majority perceives the public *751might do. This statement seems flawed for several reasons:
First: Without record evidence the majority, unsupported by any suggestion of authority for so doing, takes judicial notice of what it believes that the average American citizen would do under general circumstances. The majority in so doing ignores the fact that Horack certainly must be considered an “average American citizen” and that he recognized under his contract some form of written cancellation was required from him. In that awareness of the contract requirement he as an average American policyholder mailed his written memorandum of cancellation to Allstate and it was received by that company May 28,1974.
Second: What the “average citizen” might generally do is quite irrelevant because the named insured in this case, to accomplish unilateral cancellation, is required to “mail a written notice.” The majority either considered this provision unimportant or would construe it to the pronounced disadvantage of the insured by holding that a phone call to an agent is equivalent to “mailing to the company written notice ” stating the fact of cancellation. If we are going to decide insurance claims on the basis of what the ordinary man on the street feels he would do in the circumstance of various cases, we perhaps could dispense with the necessity of written contracts and their precise provisions as well as the body of interpretive cases developed through years of experience in the field of insurance law.
Third: The notice sent by the Allstate agent to the Allstate office suffered the same infirmity and lack of conformance to the policy requirements as the later notice sent by Horack and received May 28, 1974. That is, it did not “[state] when thereafter the cancellation shall be effective.” But by giving a construction favorable to the insurance company, the majority permits an in-tracompany memo from the insured’s agent to the insurance company, not in conformance with the express language of the policy to accomplish the cancellation.
The rule of construction contravened by the majority is that if a policy or contract of insurance is to be construed, it should be construed in favor of the insured and strictly against the insurer. State ex rel. Mut. Ben. Health & A. Assn. v. Trimble, 334 Mo. 920, 68 S.W.2d 685, 687 (Mo.1934). The reason for the rule is that the insured has no voice in the selection or arrangement of words employed and that the language of the contract is selected with great care and deliberation by experts and legal advisors employed by and acting exclusively in the interest of the insurance company, which therefore is at fault for any ambiguity or uncertainty therein. Soukop v. Employers Liability Assurer Corp. Lim. of London, 341 Mo. 614, 108 S.W.2d 86 (Mo.banc 1937). The rule is applied to the language of insurance policies, where it is fairly susceptible to such favorable interpretation, so as to afford protection to the insured and sustain rather than defeat his claim for indemnity under the policy. Accordingly, in keeping with what I believe to be the established law I would hold the attempted oral cancellation ineffective and that the policy remained in force until May 28.
The cases relied upon by the majority do not dictate a contrary result to that which I suggest. None of the cases cited involve an oral request by an insured to his agent or the insurer amounting ipso facto to a cancellation of insurance coverage. For example, in Mouchon v. Palmer, 265 So.2d 429, 430 (Fla.App.1972), the insured cancelled his policy by sending the insurer written notice, a policy receipt card. Another cited case, Hardware Mut. Casualty Co. v. Beals, 21 Ill.App.2d 477, 158 N.E.2d 778, 780-781 (1959), (Emphasis supplied) involved the efficacy of a written cancellation by the insurer in response to an unauthorized written notice of cancellation by the insured. Finally, two of the North Carolina cases cited, Griffin v. Hartford Acci. & Indem. Co., 264 N.C. 212, 141 S.E.2d 300, 302 (1965) and Hayes v. Hartford Acci. & Indem. Co., 274 N.C. 73, 161 S.E.2d 552, 554 (1968) involve a factual situation not relevant here. Cancellation was accomplished by a finance company through written notification pur*752suant to its power of attorney after nonpayment of premiums by the named insured.
Though the majority opinion claims a contrary result would be unnecessarily restrictive of the insured I believe the rationale of this policy statement ignores the likely harsh and potentially tragic result of an insured standing as a defendant in a negligence action stripped of insurance protection and a plaintiff left holding an unsatisfied judgment. A more reasonable policy consideration would lead us to follow the existing law and require compliance with the express termination provisions of the contract. Upholding the agreement between the parties is the best way to protect each party’s reasonable expectations as well as the rights of those injured. Additionally, requiring written notice by the insured eliminates the vagaries of proof as to whether vel non an oral request for termination occurred. It seems. apparent this vital consideration requiring evidence in writing led to the careful language of paragraph 20.
Moreover, the majority opinion introduces another vagary into the law respecting termination of insurance policies. The majority does not tell with certainty what act revoked the policy or at what time the policy terminated. We are told only that it terminated before May 11, i. e. on May 8 or May 9, 1974. This breaking away from the contract’s language leaves open these questions: When is the policy effectively terminated? Does it occur when the insured makes an oral request to his agent, or when the agent tenders a written notification to the carrier, or when the carrier receives that request, or when the carrier processes that request and sends written confirmation? Or is it necessary under this ad hoc arrangement that anything be put in writing? Keep in mind that Horack said nothing to the Allstate agent about any writing of any kind. Nothing was said or suggested about any writing from Horack to the agent or Horack to the company.
Superficially it might seem that to hold the cancellation was not effective because Allstate failed to notify the policyholder it had accepted his offer and would cancel on his oral request to the agent rests on an unduly strict application of contract law. But — what if Allstate had rejected the offer to cancel? What if the policyholder had awaited Allstate’s response to his request before reinsuring? The act demanded of Allstate is not complex, expensive or time-consuming. A letter, a postal card or even a telephone call to the policyholder from Allstate’s office or from the agent might have sufficed. Instead, Allstate failed to notify its acceptance of the offer and we must deal with the facts as they are, applying established legal principles to those facts.
I would hold, in accordance with existing precedent, that the policy terminates upon receipt by the insurer of the insured’s written notice of cancellation. Dupeck v. Union Insurance Co., 329 F.2d 548, 557 (8th Cir. 1964). As there was no compliance with the policy provisions respecting termination until May 28, the policy did not terminate until that date. MFA Mutual Ins. Co. v. Southwest Baptist College Inc., 381 S.W.2d 797, 801 (Mo.1964); Dyche v. Bostian, 229 S.W.2d 25, 28 (Mo.App.1950). Accordingly, I would affirm the judgment of the trial court.