Opinion
No. 332.
Argued May 6, 1974. —
Decided June 4, 1974.
Appeal from a judgment of the circuit court for St. Croix county: JOHN G. BARTHOLOMEW, Circuit Judge. Affirmed.
For the appellant there were briefs by Gwin Fetzner, attorneys, and Helen H. Madsen and John W. Fetzner of counsel, all of Hudson, and oral argument by John W. Fetzner.
For the respondent there was a brief by C. M. Bye and Gaylord Bye, all of River Falls, and oral argument by C. M. Bye.
Facts.
This is an appeal from a judgment of the circuit court for St. Croix county, dated November 30, 1972, wherein the court held that an automobile insurance policy issued by defendant-appellant, Mid-Century Insurance Company, to plaintiff-respondent, John R. Erickson, was in effect on February 22, 1970, the date on which Erickson was involved in an automobile accident. The case was submitted on a stipulated set of facts. The sequence of events begins on December 8, 1969, when Erickson was insured by Farmers Insurance Exchange, Inc., under policy No. 8659-06-71, the policy providing liability coverage. On December 8, 1969, Erickson received a letter from Farmers Insurance Group informing him that, effective December 19, 1969, his policy with Exchange would be canceled and coverage continued via a policy with Mid-Century Insurance Company, a corporation separate from Exchange but both companies being "a part" of Farmers Insurance Group.
On January 2, 1970, Erickson traded in his 1957 Chevrolet automobile for a 1965 Chevrolet car. On the same date Erickson contacted Charles B. Cashman, local agent for both Exchange and Mid-Century, to procure insurance on the 1965 Chevrolet, the policy to include collision coverage required by the lienholder. On January 14, 1970, a policy numbered 8659-06-71 and a declaration sheet were mailed by Mid-Century to Erickson, stating the premium to be $88 and listing an effective date as to beginning of coverage of December 19, 1969, and an expiration date of June 19, 1970. However, in this policy and first declaration sheet the automobile covered was stated to be a 1957 Chevrolet, not a 1965 Chevrolet. Also, the policy provided only for liability coverage and did not provide for the collision coverage requested.
On January 21, 1970, Mid-Century sent Erickson a second declaration sheet. This second declaration sheet provided coverage for the 1965 Chevrolet, not the 1957 Chevrolet that Erickson had earlier disposed of. The second declaration sheet also provided the collision coverage requested by Erickson and required by the lienholder on the car. This second declaration sheet set the following charges for the liability and collision coverage: Previous balance — $88; Premium — $38.28; Fees — $10. The policy number remained the same: 8659-06-71. Under the category, "Type of Transaction, " boxes indicating "coverage change" and "car change" were checked. This second declaration sheet listed the effective date for beginning of coverage under the policy as January 1, 1970, with June 19, 1970, as the expiration date.
On January 25, 1970, Erickson sent Mid-Century a $44 check which was deposited February 2, 1970. On February 9, 1970, Mid-Century mailed Erickson a notice that the policy would be canceled effective February 19, 1970, unless the $92.28 premium balance were paid by that date. On March 24, 1970, Erickson paid the $92.28. On that same date Erickson was notified by Mid-Century that his policy was being reinstated as of March 24, 1970, for a six-month period and that the $92.28 would be applied to the $135.43 premium for this six-month period.
When Erickson made a claim to Mid-Century for the February 22, 1970, accident, the company investigated the claim and wrote Erickson: "Call the writer when you and Mrs. have been released from the Dr. We will conclude your injury claims at this time." The letter was signed: "Tom McLaughlin, for Farmers Ins. Group." On July 31, 1970, Erickson's attorney received a letter from Farmers Insurance Group stating that his client was insured with Group for $100 deductible collision coverage, and that Group was awaiting Erickson's request for collection. Subsequently, Group issued a check to Erickson for $320.75 on his claim. Payment was thereafter stopped by Group on this check issued by it. Shortly thereafter Group telephoned Erickson's attorney informing him that the letter it had sent and the check it had sent were mistakenly sent.
It is conceded that Mid-Century never notified the lienholder of a lapse in the policy as it was required to do by the terms of the policy. In its memorandum opinion, the trial court held that whether the company notified the lienholder or whether the insured complied with the cancellation notice was irrelevant. It held that the key question was whether coverage under the policy began on December 19, 1969, or on January 1, 1970. If coverage began on December 19, 1969, $44 worth of protection would, on a pro rata basis, lapse prior to February 22, 1970, the date of the accident. If coverage began on January 1, 1970, $44 worth of protection would not, on a pro rata basis, have expired or lapsed prior to February 22, 1970. The trial court concluded that the only policy which Erickson accepted or assented to was the policy beginning on January 1, 1970, which was in effect on the date of the accident. From a judgment in favor of the plaintiff for specific performance, the defendant appeals.
The plaintiff, John R. Erickson, was involved in an automobile accident on February 22, 1970, and the sole issue here is whether the insurance policy issued by defendant, Mid-Century Insurance Company, was legally in existence and provided coverage on that date.
One way, and we think the best way, to deal with this sole issue is to take up the holdings of the trial court as they follow, chronologically, the various actions of the parties involved.
The trial court held that the December 8, 1969, letter from Farmers Insurance Group to Erickson constituted merely an offer of insurance by Mid-Century to Erickson which he did not accept. This holding is not contested by Mid-Century. The holding is correct because Erickson took no action whatsoever in response to the letter. Whether the letter related to a contract renewal or a new policy of insurance, all of the essentials of contract must have been present to effect coverage, including acceptance by Erickson.
See: Stueck v. Le Due (1973), 57 Wis.2d 735, 740, 205 N.W.2d 139, this court stating: "Since the renewal of a policy is the effecting of insurance for a term not already covered, it follows that all elements necessary for the formation of a contract of insurance must likewise be satisfied in order to have a binding contract to renew.
"The notices sent by respondent to Wisconsin Asphalt constitute offers to renew that contract and do not effect a contract unless accepted by the insured. . . ." See also: Weed v. Lepianka (1966), 30 Wis.2d 198, 205, 140 N.W.2d 305.
The trial court apparently viewed Erickson's request, made on January 2, 1970, as an offer to Mid-Century to insure his 1965 Chevrolet automobile with both liability and collision coverage. This offer was not accepted by Mid-Century when it sent, on January 14, 1970, a policy and first declaration sheet, giving December 19, 1969, as the effective date. This policy did not cover the 1965 Chevrolet, as was requested, and did not provide collision coverage, as was also requested by Erickson. The delivery of such policy and declaration sheet which did not accord with the application for insurance was no more than ". . . a counteroffer which must be accepted by the applicant in order to constitute a binding contract." In the case before us, it was not so accepted.
1 Couch 2d, Insurance, p. 507, sec. 12:2.
The trial court held or apparently viewed the January 21st second declaration sheet as an acceptance by Mid-Century of Erickson's offer of January 2, 1970, to purchase liability and collision insurance on his 1965 Chevrolet. With the first declaration sheet of January 14, 1970, held to be a rejected counteroffer by the company, we would hold the second declaration sheet to be a second counteroffer by Mid-Century to provide liability and collision insurance on the 1965 Chevrolet. Such second counteroffer was accepted by Erickson when he made the $44 premium payment on January 25, 1970. Under either the trial court view or our holding, the January 21st second declaration sheet constitutes and embodies the agreement of the parties as to when the insurance provided was to become effective.
See: 1 Couch 2d, Insurance, p. 513, sec. 12:8, stating: "The receipt and retention by the applicant of a policy tendered or sent to him by the insurer, without notice of objection to the policy, is binding as an `acceptance,' especially where accompanied by payment of the initial premium subsequent to the delivery of the policy. . . ."
The trial court held that ". . . The policy on the car involved in the accident was issued for the period of January 1, 1970, to June 19, 1970, for a premium of $136.28. . . ." Whether the second declaration sheet constituted, as the trial court viewed it, an acceptance of the offer made by Erickson, and, as we hold it to be, an offer to provide insurance which Erickson accepted when he paid the $44 premium on January 25, 1970, the question of when coverage began is to be answered by what was stated in the second declaration sheet. Prominently displayed on the second declaration sheet, in a box labeled "Effective Date," was the date January 1, 1970, as the effective date of the insurance being offered. The appellant company would have us look elsewhere in the second declaration sheet to support its contention that "Effective Date: 01-01-70" should be construed to refer, not to the effective date of the policy, but the date on which a change in a continuing coverage was to be effective, the change being the car insured and the addition of collision coverage. This would be going beyond the clear and usual meaning of "Effective Date" as referring to the effective date of the policy, not to resolve an ambiguity but to create one. We affirm the finding of fact of the trial court that the second declaration sheet established January 1, 1970, as the effective date of coverage, collision and liability, of Erickson's 1965 Chevrolet.
The trial court held that if the policy between the parties had January 1, 1970, as its effective date, ". . . the defendant cannot be relieved of liability by notice of cancellation and failure of the plaintiff to act within the period described by said cancellation notice." We agree that events occurring subsequent to the payment of the $44 by Erickson on January 25, 1970, do not change the outcome of the case. Respondent concedes that Mid-Century's procedural handling of the cancellation was correct. But the precise question is, with the effective date of the policy being determined to be January 1, 1970, what period of coverage was assured Erickson by reason of the $44 payment he made on January 25, 1970?
The trial court held that ". . . the $44 payment extended defendant's liability through February 22, 1970." As the trial court viewed it, under the policy, if coverage had commenced on December 19, 1969, the $44 worth of protection purchased by Erickson would, on a pro rata basis, have expired prior to February 22, 1970, the date of the accident. Since the effective date of the policy as to coverage was January 1, 1970, the $44 worth of protection would not, on a pro rata basis, have expired or lapsed prior to February 22, 1970. Given this contract of insurance, effective January 1, 1970, we find reasonable the trial court's construction of it, as entitling the policyholder to the period of protection paid for by the $44 premium payment.
The trial court held that ". . . it is clear, giving the plaintiff the benefit of construction in favor of the assured, Ryan v. Friede, 18 Wis.2d 138 [ 118 N.W.2d 208 (1962)], that the $44 payment extended defendant's liability through February 22, 1970." It is certainly true that this state follows a policy of strict construction of insurance policies, resolving ambiguities against the insurer. In the event of ambiguity or obscurity, the language is to be construed against the insurance company and in favor of the insured. However, we do not see that general rule as needed here. In the words of the case cited by the trial court, the trial court's ". . . construction and interpretation of the policy provisions does not require any finding of ambiguity and is entirely reasonable, gives the words their ordinary meaning, carries out the reasonable intentions of the parties, and gives effect to all parts of the insurance agreement." By the Court. — Judgment affirmed.
Leatherman v. American Family Mut. Ins. Co. (1971), 52 Wis.2d 644, 649, 190 N.W.2d 904, citing Kopp v. Home Mut. Ins. Co. (1959), 6 Wis.2d 53, 94 N.W.2d 224.
Inter-Insurance Exchange v. Westchester Fire Ins. Co. (1964), 25 Wis.2d 100, 104, 130 N.W.2d 185, citing Lontkowski v. Ignarski (1959), 6 Wis.2d 561, 95 N.W.2d 230. See also: Merritt v. Great Northern Life Ins. Co. (1940), 236 Wis. 1, 5, 294 N.W. 26, stating: ". . . in case of reasonable uncertainty, doubt, or ambiguity, courts should construe policies of insurance which are not standard policies, i.e., prescribed by statute, `strictly,' or `most strongly' against the insurer. . . ."
Ryan v. Friede (1962), 18 Wis.2d 138, 142, 118 N.W.2d 208.