Court Opinion

ID: 9728424
Source: CourtListenerOpinion
Date Created: 2023-08-26 14:07:25.747135+00
Date Added: 2024-06-11T18:25:48.526904
License: Public Domain

“McCOMB, Justice
(dissenting).
“. . .In my opinion, there is some doubt that the language of the policy here involved should be interpreted to include an acknowledgment of the receipt of premium. In any event, however, it seems to me that defendant had a right, upon proper notice before a loss, to exercise the cancellation right reserved to it in the policy.
“Under section 484 of the Insurance Code, if a policy contains an acknowledgment of the receipt of premium, such acknowledgment cannot be contradicted to invalidate the contract; but this does not mean that either party is prohibited from exercising cancellation rights contained in the policy. To interpret section 484 to mean that a policy containing an acknowledgment of the receipt of premium cannot be cancelled, upon proper notice before a loss, is to read words into the statute that are not there, which, of course, is something this court should not do. [Citations omitted.]
“Under the majority’s interpretation, the clause ‘so far as to make the policy binding’ is expanded to mean ‘so far as to make the policy binding for the entire period covered by the premium acknowledged to have been received.’ In my view, it could not have been the intention of the Legislature to so provide. Rather, it appears to me, from the clear language of the statute, that the Legislature intended to provide that if the receipt of premium is acknowledged in the policy, a binding insurance contract has come into existence even though (1) the policy provides that it shall not be binding until the premium is actually paid, and (2) the premium has not been paid. The section does not in any way indicate that such binding contract of insurance is immune from cancellation, when the right of cancellation has been reserved to the insurer in the policy.”
The California Legislature, apparently as a reaction to the holding in the Sawyer opinion, amended § 484 of the California Insurance Code in 1969 to read as follows:
“§ 484. Policy as receipt; cancellation “An acknowledgment in a policy of the receipt of premium is conclusive evidence of its payment, so far as to make the policy binding. Notwithstanding such acknowledgment, a policy may be canceled effective at such times as otherwise permitted by law for nonpayment of all or any portion of the premium which is actually unpaid if such cancellation right is reserved to the insurer in the policy.”
An insurance contract is a contract of adhesion, and as such is to be construed against the insurer and in favor of the insured. Kasper v. Provident Life Ins. Co., 285 N.W.2d 548, 553 (N.D.1979). Where the insurance contract is unambiguous its meaning should not be strained to impose liability on the insurer. Kasper, supra 285 N.W.2d at 553. In the instant case, the company clearly reserved a right of cancellation in the policy. Rather than exercise its right of cancellation, American Standard modified the expiration date of the policy to conform to the amount of premium actually paid.
Payment of premiums in accordance with the conditions of an insurance policy is a condition precedent to the maintenance of insurance and an essential part of the insurance contract. See Sjoberg v. State Auto Ins. Ass’n of Des Moines, Iowa, 78 N.D. 179, 48 N.W.2d 452, 453 (1951); Bach v. North Dakota Mutual Fire Ins. Co., 56 N.D. 319, 217 N.W. 273, 276 (1928); Rumsey v. St. Paul Mercury Ins. Co., 242 N.W.2d 677 (S.D. 1976); and Presentation Sisters, Inc. v. Mutual Ben. Life Ins. Co., 85 S.D. 678, 189 N.W.2d 452 (1971).
Rumsey, supra 242 N.W.2d 677 is factually similar to the instant case. In Rumsey, *883plaintiff owed the insurer a balance of $10.20 on his automobile insurance premium. Plaintiff was sent a notice that his balance of $10.20 was due in ten days. When the insurer did not receive the balance-due payment, it canceled Rumsey’s policy and returned the unused portion of his premium. Rumsey was involved in an accident after the effective date of cancellation. The South Dakota Supreme Court, applying Oregon law to the ease because the contract of insurance was made in Oregon, determined that the cancellation was effective.
In the instant case, the question was one of modification of the insurance contract because the company never exercised its cancellation rights. The trial court instructed the jury as follows:
“MODIFICATION OF INSURANCE CONTRACT.
“An insurance contract may be modified by endorsement. The parties to the contract may make such modifications thereof as they may mutually agree upon. An endorsement proposed by one party only, and not consented to by the other, will not effect a modification of the insurance policy. It is essential for a valid modification of a contract of insurance that all elements of contract be present which were initially necessary to make a binding insurance contract.”
“Consent or acquiescence by the silence of an insured to a modification of an insurance policy will result only if the insurer was injured or influenced in its conduct by the silence of the insured. The burden of persuasion is upon American Standard to prove that it was so injured or that its actions were influenced by the silence, if such there was, of the insured which signified his consent to the proposed modification and resulted in a misleading of the insurer.”
We believe that the foregoing jury instruction was a correct statement of the law in North Dakota. An insurance contract is essentially the same as any other type of contract. It is composed of the same elements and can be modified by the same means.
We conclude that because Anderson received notice that there was a balance owing on the policy and because the company reserved broad cancellation rights under the policy, American Standard was within its rights to modify the policy by changing the expiration date to conform to the amount of premium actually paid. Anderson acquiesced in the modification of the expiration date by his silence because his silence influenced the conduct of American Standard in shortening the term of the policy. See 17 Couch on Insurance § 65.:23 (2d Ed.1967). His acquiescence in the modification of the policy is also illustrated by the fact that he attempted to renew his policy on June 5, 1976 (one day before it expired as modified) for a period of one month and attempted to tender a $15 payment. We note here that the policy did not include a grace period providing for renewal within a given time after its expiration.
We note the importance of the fact that Anderson received three different notices from American Standard relating to the fact that he still owed $6 on his premium. Any one of these notices, standing alone, may have been inadequate notice as a matter of law. However, the totality of the facts in this case indicate that Anderson should have been aware of some problem with his premium payment and the jury was justified in finding no coverage because of Anderson’s failure or refusal to take steps to alleviate the problem. We do not condone American Standard’s policy of informing an insured of the reasons for an inadequacy in premium paid by its utilization of a standardized form marked with cryptic notations. It would be much more effective and take only a little more time for the insurer or its agent to write a letter to the insured specifically explaining any defects in the agreement and how to correct *884them, especially in a case such as the instant case where the mistake on the application was caused by the insurance agent.
We also conclude that the trial court did not err in denying Anderson’s motion for a judgment notwithstanding the verdict or, in the alternative, for a new trial because the evidence supports the jury verdict of no coverage. Nokota Feeds, Inc. v. State Bank of Lakota, 210 N.W.2d 182 (N.D.1973) [judgment notwithstanding the verdict]; and Hoge v. Hoge, 281 N.W.2d 557 (N.D. 1979) [new trial].
Judgment affirmed.
ERICKSTAD, C. J., and PEDERSON, VANDE WALLE and SAND, JJ., concur.