Opinion
No. CV 98-0416692
March 3, 2006
MEMORANDUM OF DECISION
Trial was held before the court involving a claim by Precision against the insurer Scottsdale on a claim that Scottsdale failed to honor a policy issued to Precision after a reported loss.
The plaintiff Precision Mechanical Services (Precision) is a company licensed to perform fire sprinkler, plumbing and heating services. Its president is Kevin Wypychoski. He wanted to procure a 15-month general liability policy for the period of September 1995 through January 1, 1997. Mr. Wypychoski asked Marianne Pfund of T.J. Pfund Associates, Inc. (Pfund) to obtain the quotation on such a policy. Pfund only could secure a 12-month policy from Scottsdale. Mr. Wypychoski testified that Ms. Pfund obtained a quotation on a fifteen-month policy from Scottsdale.
The financing of the premium was arranged by the Pfund Company through AFCO — a so called premium finance company. AFCO in effect pays the insurance company and Precision would have an obligation to repay AFCO for the monies advanced by AFCO and in effect, loaned to Precision. The Premium Finance Agreement will be discussed later in more detail but here it can be said that it provided for nine monthly installments with the first due on October 15, 1995. Apart from the finance agreement, Mr. Wypychoski understood there were to be nine monthly payments. Mr. Wypychoski actually received the policy sometime between September 1995 and the end of that year. He noted that the Scottsdale policy ran for only twelve months, September 1, 1995 to September 1, 1996. He contracted Ms. Pfund and testified that she "reassured us that a three month extension would be provided at a relatively soon date after that." He said he told Ms. Pfund that in addition to the policy being only for twelve months the premium was less than what was quoted — he was concerned because "AFCO had financed a 15 month period of premium." Despite these concerns, Mr. Wypychoski continued to make monthly payments thereby accepting the policy and its coverage, but did not make the nine payments to AFCO to reimburse it for the monies it forwarded to the insurer Scottsdale. He realized the amount financed was $3,793.08 which AFCO had paid to Scottsdale.
When Precision stopped making payments the premium finance company, AFCO pursuant to the agreement it claims to have had with him and state statute, § 38a-170, cancelled his policy on May 30, 1996.
Mr. Wypychoski said he stopped making payments after speaking with Ms. Pfund in the spring of 1996 because Pfund had not been able to secure a fifteen-month policy and as plaintiff's counsel notes in his brief at the time he did so "Precision had paid enough money to cover the existing twelve month policy period premium . . . In fact, in the summer of 1996, Precision was looking for money back from AFCO."
In any event, on August 9, 1996, a representative of Precision was performing work which resulted in a fire causing damage to condo units. Mr. Wypychoski contracted Pfund the same day but Pfund told him the next day that the Scottsdale policy had been cancelled on May 30, 1996 pursuant to the power of attorney given to AFCO in the premium finance agreement that he entered into with that company.
The foregoing is a general rendition of background facts. Further facts will have to be discussed as various legal claims are dealt with.
In any event Precision sued AFCO, Pfund, and the insurer Scottsdale. Another judge granted summary judgment in favor of AFCO and Pfund. This matter came before the court as a trial in which the plaintiff claims Scottsdale is liable on its policy to Precision and should honor that policy. Scottsdale claims the policy was cancelled by AFCO and thus it had no obligation to cover the loss under the policy.
I
Very generally, two issues presented by this case are whether (1) AFCO had a valid power of attorney which would allow it under the state statutes to cancel the Scottsdale policy and (2) assuming there was a valid power of attorney, were the statutory notice requirements in § 38a-170 complied with by AFCO so that it could properly cancel the policy as it is claimed to have done on May 30, 1996. This, of course, being a date prior to the August 1996 loss.
The court will first discuss the general statutory scheme regulating the operations of these premium insurance finance companies. Key statutes are § 38a-167 and § 38a-170. The latter statute gives premium insurance finance companies the right to cancel an insured's policy. As noted, premium insurance finance companies in effect "loan" money to a party wanting insurance by paying an insurance premium to an insurance company such as Scottsdale. An insurance premium finance agreement is entered into between the parties whose requirements are set forth in § 38a-167, and the notice requirements that must be met as a predicate to these premium finance companies exercise of their power to cancel the insurance are set forth in § 38a-170. The court will first set forth the relevant portions of the latter statute as it defines the authority to cancel and the exercise of that power.
§ 38a-170. Cancellation of insurance contract on default of insured.
(a) When an insurance premium finance agreement contains a power of attorney enabling the insurance premium finance company to cancel any insurance contract or contracts listed in the agreement on account of any default on the part of the insured, the insurance contract or contracts shall not be cancelled by the insurance premium finance company unless such cancellation is effectuated in accordance with the provisions of this section.
(b) Not less than ten days' written notice shall be mailed by first class mail to the insured, at its last known address, of the intent of the insurance premium finance company to cancel the insurance contract unless the default is cured within such ten-day period.
(c) After expiration of such ten-day period, the insurance premium finance company may request, in the name of the insured, cancellation of such insurance contract or contracts by mailing to the insurer a notice of cancellation, and the insurance contract may be cancelled as if such notice of cancellation had been submitted by the insured himself, but without requiring the return of the insurance contract or contracts. The insurance premium finance company shall also mail, by first class mail, a notice of cancellation to the insured at his last-known address.
The legislation regulating these finance companies is interesting in that it does not have a solely ameliorative aim to protect the insurance consumer although that is an important part of it. It is also important to protect the interests of these finance companies if easy access to insurance and thus business viability is considered to be a value. In other words, start up and small businesses especially in high risk of damage or injury lines of work would have difficulty in getting insurance and thus operating at all unless they could get "loans" from these finance companies to cover their insurance costs which they could then pay over a comfortable time period and not on an upfront basis. But the nature of these businesses is such that the only "collateral" the finance company has for the money it paid to the insurance company is the power to have that company cancel the insurance of the finance agreement is breached by the insured. In fact, an AFCO witness testified that the power to cancel is the company's collateral.
On the other hand, since the consequences of insurance cancellation can be dire, it is important that certain statutory language be spelled out protecting the insurance consumer. Thus, § 38a-167 imposes detailed requirements on the contents and even the print size of "insurance premium finance agreements." That statute reads in as follows:
§ 38a-167 Insurance premium finance agreement.
(a) Every insurance premium financial agreement shall (1) be dated, signed by or on behalf of the insured, and the printed portion thereof shall be in at least eight-point type; (2) contain the name and place of business of the insurance agent negotiating the related insurance contract, the name and address or the place of business of the insurance premium finance company to which payments are to be made, a description of the insurance contracts involved and the amount of the premium therefor; and (3) set forth the following information when applicable: (A) The total amount of the premiums, (B) the amount of the down payment, (C) the principal balance (being the difference between the total amount of the premiums and the amount of the down payment), (D) the amount of the service charge, (E) the balance payable by the insured (being the sum of the principal balance and the amount of the service charge), and (F) the number of installments required, the amount of each such installment expressed in dollars and the due date or period thereof.
Two interesting observations can be made by reading §§ 38a-167 and 38a-170 together: (1) Subsection (a) of § 38a-170 seems to contemplate that the cancellation authority given to these premium finance companies requires that the power of attorney be actually contained in the finance agreement; it reads "(a) when an insurance premium finance agreement contains a power of attorney enabling the insurance premium finance company to cancel any insurance contract . . ." then certain steps must be taken to validate the cancellation under the statute (emphasis by court); (2) if we look at § 38a-167 it explicitly says any such "insurance premium finance agreement, shall (1) be dated, signed by or on behalf of the insured." (emphasis by court). This differs from the short form power of attorney set forth in § 1-43 of the general statutes which seems to require that the principal (person giving the power of attorney) must sign the power of attorney document. There is nothing to suggest that § 38a-170 requires the insured to sign premium finance agreement if, but only if, it contains a power of attorney. Interestingly, § 1-43 itself after setting forth the short form says: "No provision of this chapter shall be construed to bar the use of any other or different form of power of attorney desired by the parties concerned."
The "by or on behalf of" language in § 38a-167 is in all likelihood based on the fact that very often agencies like TJ Pfund represent people or companies seeking insurance and put them in contract with companies like AFCO and basically set up the premium finance arrangement.
(a)
The court will now discuss the first of the two issues raised — did AFCO have a valid power of attorney which would give it the statutory power to cancel this insurance.
It is of course true that under our statutes AFCO could only cancel the policy if it had a valid power of attorney to do so and this is an anterior requirement to the duty to give proper notice. The purported premium finance agreement in this case, in accordance with the statute, did create a "Limited Power of Attorney" which gave AFCO "full authority to cancel" the policy at issue. A power of attorney is a written instrument creating a formal contract of agency and a principal-agent relationship, Long v. Schull, 184 Conn. 252, 256 (1981). As such, it binds the principal (party giving the power of attorney — here the plaintiff, according to the scope of authority defined in the document, Bank of Montreal v. Gallo, 3 Conn.App. 268, 273 (1985).
The invalid power of attorney claim is based on the fact that Mr. Wypychoski testified "he did not sign or print his name on the October 15, 1995 power of attorney possessed by AFCO," which was part of the finance agreement. As to an exhibit that will be discussed later, which is also a premium finance agreement containing the referenced power of attorney language, Wypychoski did say the signature on that document (Ex. A of defendant) was his. Lay jurors from earliest times have been permitted to make handwriting comparisons, Todd v. Taylor, 36 Conn. 218, 222 (1869) and the court can conclude that the signature on Exhibit A does not appear to be signed by the same person who signed the exhibits in AFCO's possession. Also, no expert testimony was introduced to contradict Mr. Wypychoski's statement that he did not sign the agreement in AFCO's possession.
The claim by the plaintiff then is that the signature on the AFCO power of attorney is forged. Scilahshourian v. Ferrante 1992 ct sup 758S (Levine, J.) is cited for the incontestable proposition that, as with any other contract, a contract creating a power of agency is invalid if the signature of one of the parties, here the principal, is forged. In Ferrante the parents who allegedly signed the power of attorney giving the daughter certain rights with regard to their property denied ever signing the document and an expert supported the parent's position.
If the power of attorney is invalid based on the plaintiff's foregoing argument, the issue under § 38a-170 as to whether the notice of cancellation requirements by AFCO were met, is of course, not reached because AFCO would have had no power to cancel in the first place. The court will now address the argument raised by Precision.
(i)
Let us assume that Mr. Wypychoski did not sign the power of attorney in AFCO's possession which was part of the premium finance agreement and was introduced into trial as Exhibit 5. Who else would have signed his name and filled in the title of president? It could not have been AFCO itself — why on earth would they risk their "collateral" by creating a forged document when they knew Wypychoski wanted it to advance the loan for the premium and could have had no objection to signing the document. The only other entity who could have signed his name was Pfund acting through an agent, here Marianne Pfund. AFCO creates the agreement forms, but clearly the prospective insured's agent is responsible for having it completed and must represent they received the down payment which triggers operation of the agreement.
Let us look at Exhibit 5 more closely. On the bottom of the front page of that agreement, Marianne Pfund's signature appears as "agent or broker" which in effect, represents Pfund received the down payment.
It could be argued that Pfund should not have signed what was represented to be Mr. Wypychoski's signature. But interestingly the signature block to the left bottom has a line under which the printed words "insured's name" appears. The middle signature line has underneath it "signature of insured or authorized representative." The word "insured" is not crossed out. (Emphasis by court).
It cannot seriously be argued that Wypychoski did not desire or would have opposed Pfund signing the agreement which included a power of attorney. And § 38a-167 as noted, contemplates that these agreements can be signed "on behalf of" the prospective insured and § 38a-170 contemplates such agreements can contain a power of attorney. AFCO churns out it is assumed, scores of these agreements in blank, and must be aware of our statutory scheme, since as noted its form permits the agreement (which includes the power of attorney) to be signed not only by the individual seeking the premium loan, but by his or her "authorized representative." Wypychoski testified he knew how premium financing works, clearly Pfund was his agent to procure financing, he said at one point that Marianne Pfund arranged for his company to finance "The premium of the fifteen-month policy through a financing agent called AFCO." He was also aware of the contents of this particular finance agreement and all its language — he referenced it in response to questions by his lawyer to the effect that it provided financing for a 15-month policy. He even admitted signing a premium finance agreement, Exhibit A, which contained his signature. Exhibit A was in plaintiff's counsel possession at the time of trial.
Wypychoski has to be held aware of the contents of any document in AFCO's possession purporting to be a premium finance agreement and as his agent to procure such financing. If Pfund sent the document to AFCO and Marianne Pfund signed it she was certainly authorized to act on Wyychoski's behalf.
Thus, even if Wypychoski did not sign the agreement giving AFCO a limited power of attorney to cancel the policy, his authorized agent to procure financing signed it on his behalf validating it under § 38a-167.
(ii)
But even if the foregoing discussion is found wanting, there is additional reason to find that the power of attorney is valid in this case. Certain testimony of Marianne Pfund was presented which was not addressed, let alone contradicted, although Mr. Wypychoski was recalled to testify after Ms. Pfund. Marianne Pfund testified that she sent out one premium finance agreement document to the insured. She admitted she signed the document as agent. She was also shown plaintiff's exhibit 5 which is a copy of the premium finance agreement.
In addition to sending a premium finance agreement to Mr. Wypychoski she sent a letter indicating he needed to sign the document and return it with the down payment so it could be submitted to AFCO.
It becomes somewhat confusing because a letter to AFCO from Pfund dated October 27, 1995 (Ex 17) says please process the attached AFCO agreement (meaning the premium finance agreement) and attached a check for the down payment. Although a copy of the check is attached to Ex 17, no copy of the agreement is so attached. At trial, Ms. Pfund was adamant that in fact she neither got the check or down payment from Wypychoski. She testified that she "corresponded via fax and phone messaging that (she) needed those back." When asked what then happened she said Wypychoski "responded by fax indicating that he had sent the down payment and the agreement to AFCO directly." The down payment check was apparently not received by AFCO. A finance agreement was at first also not received by AFCO. Ms. Pfund had to send in a second down payment check but said she did not send in any finance agreement to AFCO. Mr. Wypychoski told her he sent it to New Jersey or Boston and she "assured it would match up." A court exhibit, 10, does list a New Jersey address for AFCO, Exhibit 5 lists what is apparently a Boston address for the company crossing out a Windsor, Connecticut address. Lo and behold, AFCO at some point received a copy of the premium finance agreement (exhibit 5) with the presumably forged signature of Wypychoski.
It seems to the court that Mr. Wypychoski is the only person that could have sent the copy of the finance agreement to AFCO which AFCO had in its possession at trial and was introduced as Exhibit 5. Ms. Pfund's story has the ring of truth to it and it is the only version of events that would explain the fact that AFCO only received a copy of the agreement. Why would Pfund forge Wypychoski's name to a finance agreement or even have a need to since Precision itself wanted financing? The court concludes that having received the agreement from Pfund, Wypychoski is the one who sent a premium finance agreement to AFCO. If he did send the agreement to AFCO with its limited power of attorney language, he would be estopped from arguing that the power of attorney is invalid — by his act of sending in the agreement he secured advantages under that very agreement which only became effectuated with the return of the agreement and the down payment to AFCO. It just will not do to come into court and to testify in a limited manner that as to Exhibit 5, which purports to be the finance agreement, that one's signature on it was forged when you, the witness are the very person who sent the document to AFCO and can best tell how the allegedly "forged" signature came to be there.
For either of the two positions just discussed, the court does not accept the plaintiff's position that the power of attorney is invalid. The court will now address the second issue. Assuming there was a valid power of attorney were the statutory notice requirements of § 38a-170 met so that the policy was in fact cancelled on May 30, 1996, before the August date of loss.
(b)
Even if the power of attorney held by AFCO was valid under § 38a-170 AFCO had no power to cancel the policy if pursuant to subsection (b) AFCO did not mail to Wypychoski by first class mail at his last known address of its intent to cancel the policy unless the default — here failure to pay loan installment for premium is "cured" within ten days. Subsection (c) then provides that the premium finance company can request cancellation of the policy "in the name of the insured" after the ten-day period by mailing to the insured notice of the cancellation. The policy can be cancelled "as if such notice of cancellation had been submitted by the insured "itself." And the insurance premium finance company "shall also mail, by first class mail, a notice of cancellation to the insured at his (or its) last-known address."
Mr. Wypychoski denies receiving these letters.
But in Connecticut the law is that if a letter is mailed to the right address with the correct postage, it is presumed it was received. Pitt v. Hartford Life Annuity Ins., Co., 60 Conn. 376, 384 (1895). The plaintiff argues, however, that the factual predicates for operation of the presumption have not been established and since Wypychoski denies receiving the notices any cancellation was improper.
The court will first set forth the defendant's factual representations as established at trial to prove mailing this allowing the presumption to operate. Then it will discuss the factual allegations the plaintiff relies on to show that mailing cannot be found.
The defendant's brief states the following:
Martin Quish, a senior account execute for AFCO Credit Corporation was the branch operations manager who oversaw the employees who processed this cancellation. Mr. Quish testified that the notice of intent to cancel was mailed to the plaintiff when the April 1996 payment was not received. The notice advised the plaintiff that the policy would be cancelled if payment was not paid within ten days (as required by statue). Mr. Quish provided a copy of the computer printout dated May 6, 1996 titled "List of Notice of Intent to Cancel" which contained a certification stating that the notices listed were mailed with postage fully prepaid to the listed insureds and agents listed (Defendant's exhibit B). Mr. Quish testified that the notice of intent to cancel was sent to the plaintiff at P.O. Box 79, Guilford, Connecticut, the address provided to AFCO by the plaintiff as shown on both premium finance agreements which are in evidence. The copy of the notice of intent to cancel dated May 6, 1996, which was sent to the plaintiff's agent T.J. Pfund Associates, Inc., was found in Pfund's file and was entered into evidence (Defendant's exhibit F). AFCO's file also contained a copy of the notice of cancellation mailed to the plaintiff on May 23, 1996 again at P.O. Box 79, Guilford, Connecticut (Defendant's exhibit C). A copy of the notice of cancellation, which was mailed to Pfund on May 23, 1996 was found in Pfund's file and was entered into evidence (Defendant's exhibit J). Marianne Pfund testified that the Notice of Cancellation was received on 5/29/96. (T. 12/15/04 p. 102, 1. 12-13.) Mr. Quish testified that the signature on defendant's exhibit C was put there by AFCO's cancellation clerk who signs as confirmation that she has mailed the notices of cancellation. The records kept by AFCO prove that both notices were mailed in full compliance with Connecticut General Statute § 38a-170. The fact that Pfund, the plaintiff's agent, received its copies of both the notice of intent to cancel and the notice of cancellation prove that the documents were mailed as required by statute and, in fact were received.
Roylin Johnson testified that Scottsdale also received the notice of Cancellation from AFCO and cancelled the policy effective May 30, 1996 (T. 12/14/04, p. 81).
On the mailing issue, the plaintiff separates its brief into two sections providing the factual portions of the record it wishes to emphasize. As to the notice of intent to cancel the plaintiff says the following:
"Martin Quish a Senior Account Executive for AFCO, testified that AFCO's business mailing custom was to use a mailing list to keep track of notice of intent to cancel mailings" (T. 12/15/05 p. 10).
Later the following references to the record are made:
AFCO's representative, Martin Quish, testified that AFCO utilized a list to keep track of notice of intent to cancel mailings. (T. 12/15/04 p. 2-11.) The mailing lists, however, did not list the individuals' addresses. (T. 12/15/05 p. 11.) Therefore anyone reading the mailing list would be unable to know where the mailing was sent (1. 12/15/04 p. 11.) Mr. Quish's testimony also failed to establish how AFCO employees check to ensure that the proper address is on the mailing. (T. 12/15/04 p. 2-80.) . . .
In the present case, Mr. Quish failed to even testify that AFCO in fact checks to ensure that the proper addresses are on its mailings. (T. 12/15/04 p. 2-80.) While Exhibit E certified that the mailing was sent to the proper address, there is no evidence in the record establishing how the proper addresses were confirmed. (T. 12/15/04 p. 36.) Since the individual making the certification did not testify, the record fails to establish how the addresses were checked and whether or not it was done in conformity with a business custom. Such testimony is necessary considering AFCO did not keep a copy of the notice of intent to cancel in their file and therefore relied solely on the mailing list to verify a mailing. (T. 12/15/04 p. 36.)
On the actual notice of cancellation the plaintiff makes the following references to the record:
Mr. Quish testified that when a policy is to be cancelled by AFCO, a computer generates several notices. (T. 12/15/04 p. 21-25.) AFCO's computer generates a cancellation reinstatement form for the insurance agent; a notice of cancellation for the insured and insurer; and a pink copy of the notice of cancellation for AFCO's records. (T. 12/15/04 p. 21-25) . . . Mr. Quish had no personal knowledge or recollection of the cancellation notice being sent to Precision . . . Instead, Mr. Quish testified that a cancellation clerk takes all the cancellation notices, signs the notices, and goes to the mailroom and mails the envelopes. (T. 12/15/04 p. 21-25.) Although a pink copy of the cancellation notice is placed in AFCO's file to establish proof of mailing, Mr. Quish testified that the pink copy is segregated and doesn't go to the mailroom with the other notices. (T. 12/15/04 p. 22-23.) Therefore, this document, standing alone, cannot be used to establish when a cancellation notice was sent to Precision.
In addition, Mr. Quish testified that AFCO keeps a list of the notice of cancellations sent each day but that he failed to bring such list to court. (T. 12/15/04 p. 34.) Moreover, Mr. Quish testified that he did not look at the cancellation list prior to trial. (T. 12/15/04 p. 34.) Without this mailing list Scottsdale cannot establish that AFCO sent a notice of cancellation to Precision on May 23, 1996. (T. 12/15/04, p. 35-36.)
(i)
The court will first discuss whether the defendant has met its burden of showing the notice of intent to cancel was established. The plaintiff relies heavily on a New York case, Anzalone v. State Farm Mutual Ins., Co., 92 AD.2d 238 (1938) (see 459 NYS2d 850). In that case, proof of the mailing of a cancellation notice had to be shown. A mailing list was introduced into evidence and testimony was received from an insurance company supervisor that it was the office custom to mail the notices to people whose names and addresses appeared on a mailing list with the mailing list being retained. The Appellate Division held that it was not sufficient and said that: "When reliance is placed on a mailing sheet, there must be testimony that an employee normally checks the names and addresses on the envelopes (containing the notices to be sent out) with those on the mailing sheet," id., page 240. There was no such "testimony" in Anzalone and the plaintiff argues there is none here so proof of mailing of the notice of intent to cancel cannot be established by the defendant under § 38a-170, which would be sufficient grounds to find that the Scottsdale policy cannot have been cancelled before the date of loss.
But the Anzalone case involved a situation where what purported to be a mailing list was simply that — a list of names and in that case also addresses. In this case Exhibit E presented by the defendant had a list of names, personal and company designations, to which notices of intent to cancel were sent. Precision is on this list as is TJ Pfund Associates, Inc. At the bottom of the list the following appeared:
I certify that notices of intent to cancel (AFCO Form 18-3000 (10-85) containing information shown above were placed in envelopes with the postage fully prepared, sealed and deposited in the mail addressed to the insured and insurance agent at the proper address on the date shown above.
The list is signed by a Ruth Fraser and dated May 6, 1996. The court can draw a reasonable inference that Ms. Fraser was an AFCO employee charged with the task of making the foregoing certification.
Exhibit E containing the foregoing certification was introduced as a business record and the whole point of § 8-4 of the Code of Evidence is to provide that the witness making the record need not be produced to testify for the contents of such a writing to be admissible.
Also Ms. Fraser would have access to the appropriate address to send the notice for Precision. AFCO had one operative address for Precision although it apparently also had Mr. Wypychoski's home address from a premium finance agreement (Ex A) that he signed. No copy of the notice sent to Precision was retained, but a copy of the one sent to Pfund was retained in AFCO files. The Pfund notice is labeled Form 19-3000 (1/93) not the label in the certification, but the certification explicitly said "notices of intent to cancel" (emphasis by court) were sent to insured and the insured's agent. There is no mystery in this industry as to what notices to intent to cancel mean.
As its authority in reaching its decision Anzalone, an Appellate Division case, relied on language from the Court of Appeals case Nassau Ins. Co. v. Murray, 386 NE.2d 1085, 1086 (1978) which said for the presumption that notices mailed to the insured "to arise, office practice must be, geared so as to ensure the likelihood that a notice of cancellation is always properly addressed and mailed." The same reasoning would apply to notices of intent to cancel. The office practice here requiring personal certification that the notice was sent with proper postage and address would seem to meet the requirement underlined in Nassau, Ins.
It should also be noted that the cases relied upon by Anzalone for the proposition which the plaintiff relies upon here are not analogous to this case. In Ackler v. Nationwide Mutual Ins., Co., 87 AD.2d 730 (NY.App.Div, 2982) the court upheld the trial court which found that "there is no proof that the envelopes which were ostensibly mailed or perhaps were in fact mailed were sent to the same addresses whose names appeared on the . . . computer print out list . . . The witness himself acknowledged that he was more concerned with numbers than the identity of the persons to whom the claimed notices . . . might have been . . . sent."
In Manning v. Boston Old Colony, Ins., Co. 48 AD.2d 238, 839 (NY.App.Div 1975) a woman in charge of mailing out notices of cancellation operated from a list and her testimony was that she mailed such a notice to each name on the list "inasmuch as a computer printed out a notice of cancellation for each name on the mailing list. Neither she, nor anyone else checks the total number of window face envelops into which an inserter machine places the notices of cancellation which the machine does by opening the flap of an envelope, inserting the cancellation notice, sealing and stamping the envelope. Neither she, nor anyone else checks the names appearing in the envelopes with the names in a mailing list." In Caprino v. Nationwide Mutual Ins., Co., 34 AD.2d 522 (NY.App.Div 1970), the court noted that the messenger who brought the letters notifying of cancellation to the post office was not called as a witness and there was no testimony as to his usual practice and procedure. The court further noted that "there was a failing here by the post office employee to check or compare the addresses on the envelopes presented with the addresses in the mailing list stamped by the employee," id., page 523.
An examination of the certification on the mailing list in this case allays these concerns expressed in Manning and Caprino by its very content.
In fact, two post- Anzalone Appellate Division cases, citing that case, seem to support the court's view that the certification on Exhibit E would satisfy the requirement set forth in Nassau Ins. Co., that the office procedure here requiring such a certification was geared to ensure notices like this were properly addressed and mailed. In the matter of Allstate Ins., Co. v. Ramirez, 208 AD.2d 8282 (NY.App.Div, 1994) (see 618 NYS.2d 396) the court found the company had not carried its burden; the witness it presented "failed to establish an office practice and procedure of duly addressing and mailing the notices which is carefully followed by (the insurance company) in the regular course of business and which is designed to insure that the notices are always properly addressed and mailed," id., p. 830. In Sea Insurance Co. v. Kopsky, 137 AD.2d 804 (NY.App.Div, 1988) the court found inadequate proof regarding the mailing of the notice of intent to cancel and notice of cancellation. The insurance company "did not establish that an employee normally checks the names and addresses on the mailing envelopes against those either on the notices or on the computer print out listing the names of the insureds who have defaulted in payment," id., p. 804.
Finally, it should be noted that in deciding whether notice was in fact sent to an insured or other party as required by statute or law, the courts have considered, when there is a denial of receipt, whether or not another entity to whom the notice was mailed received that notice. This is some evidence that mailing procedures especially when they involve use of a mailing list were geared to sending appropriate notice and that they were followed, see Pence Mortgage Co. v. Stokes, 559 SW.2d 500, 507 (KY, Ct of App. 1977), cf Hartman v. Helsmoortel-Thornton Agency, Inc., 224 A.D.2d 752 (NY.App.Div, 1996) (see 636 NYS2d 934, Auto-Owners Ins v. State Farm Mutual, 434 NW2d 348, 350 (N.D., 1989); also see Fort Nat'l Bank of Independence v. Mid-Century, Ins., Co., 559 SW2d 50, 52 (MO, Ct of App, 1977), but see South Car., Nat'l Bank v. Lumberman's Mutual Ins., Co., 526 F.Sup 94 (D.C., SC). Here the Pfund Agency did receive a copy of the notice of intent to cancel.
The court concludes that the defendant has met its burden of proving the notice of intent to cancel was mailed to Precision which raises the presumption that the notice was received by the plaintiff.
(ii)
The court will now discuss the issue of whether the defendant has established that AFCO mailed the notice of cancellation which like receipt of the notice of intent is a prerequisite to the common-law presumption that if mailing is shown, a rebuttable presumption is established that the notice was received. As to the notice of cancellation, there is no reliance on a mailing list but the applicable law on the issue presented as to this notice is similar to that discussed in the previous section involving the notice of intent to cancel.
The plaintiff introduces its argument regarding the notice of cancellation by saying that when proof of mailing is based upon the business custom of a corporation, testimony must be received from an employee who has direct and personal knowledge that the particular mailing in question was handled in the usual course of business. The person testifying as to office mailing practices must have direct knowledge of the mailing being contested. What must be presented is "the actual testimony of the person or persons who allegedly complied with the (mailing custom) in the instant case" argues the plaintiff with citation to the following authority, United Bank of Denver v. Don, 527 P2d 1184 (Colo, Ct of App 1974) (not selected for official publication), Allied American Mutual Fire Ins., Co. v. Paige, 143 A.2d 508 (Muncip. Ct of Appeals, Dist of Col., 1958); Gardain Son v. Batterson, 198 N.Y. 175 (1910).
But our state seems to take a liberal view of the method by which a business entity and presumably any large organization may establish a certain item has been mailed. In our state, mailing may be proven direct or circumstantial evidence. Central National Bank v. Stoddard, 83 Conn. 332, 339 (1910). And perhaps more to the point for the issue just raised by the plaintiff the Stoddard court said that whether a letter was mailed by being deposited in the post office or a letter box may be "proved by the testimony of the person who deposited it or by proof of acts from which it may be reasonably inferred that it was so deposited," id.
In Stoddard, the bank president Mr. Markham said, on the day notes became due, he mailed to Stoddard, an endorser notice that the notes were dishonored. Stoddard's name was on the letter and when asked how the notice was addressed he said "To the City of Middletown," id., p. 337. Markham then testified as to the procedure as to how letters such as this were actually mailed. He testified it would be mailed by a clerk named Slavin who was not called with no reason given for the failure to call the clerk. The court said that from the evidence the trial court could properly conclude that Markham "enclosed the notices to the defendant in properly addressed and stamped envelopes, and deposited them, in the usual place in the bank for letters to be mailed, and they were taken from that place by one whose duty it was to post them," id., pp. 339-40. Stoddard was cited as precedent in Kerin v. Udorf, 165 Conn. 264, 268 (1973). The secretary in Kerin presented no testimony that she remembered mailing the particular letter in question, receipt of which was central to the resolution of the case. The court never suggested that the only acceptable circumstantial evidence to show mailing was testimony in court by a mail clerk. The Kerin court simply noted that "In this case, the defendant and Mrs. Bean (the secretary) both testified that it was customary for him to give her letters to be mailed so that she would stamp them and deposit them in the mail box," id. Stoddard explicitly did not require testimony from a mailing clerk or someone performing a similar function and Kerin says nothing to the contrary.
As to cases from other states, see cases like Mohr v. Universal C.I.T. Corp., 140 A.2d 49 (MD Ct of App, 1958) where the court said: "Testimony of the employee whose duty it was to collect outgoing letters in the office of the sender and deposit them in the mail is no longer necessary. The testimony of any employee or officer, who has personal knowledge of the custom or practice used in the office to effect the addressing and mailing is all that is required to raise a presumption of the receipt of a particular letter by the addressee," id., p. 52. Also, see SSI Medical Serv. v. State Dept. of Human Serv., 685 A.2d 1 (NJ, 1996), "We recognize decisional authority that mailing based in part on evidence of business custom or practice also requires proof that the custom or practice was actually followed on the specific . . . occasion in order to establish the fact of mailing. Those cases express a sound rule, particularly when the issue of mailing arises in a context where it would be expected that those charged with the duty of mailing would be capable of testifying that the documents at issue were actually mailed or that the custom or practice was actually followed. However, in a case such as this, where the business organization is large, the nature of the business operations is complex, and the items mailed on a daily basis are voluminous, it may not be possible for individuals engaged in mailing activities to recall actual mailing of a document or whether the custom or practice of mailing was followed on a given day." In such cases, other corroborating proof creating the reasonable inference that the custom was followed on the given occasion may suffice to establish proof of mailing," id., p. 6.
The foregoing is the general law now, let us turn to the facts of this case to determine if Scottsdale has proven the notice of cancellation was mailed to Precision. It is true, as the plaintiff points out that Mr. Quish, a senior account executive for AFCO keeps a list of notices of cancellations sent each day, the list was not brought to court and Quish did not examine it before coming to court. But does this mean a reasonable inference cannot be established mailed a notice of cancellation to Precision at its correct address?
Mr. Quish testified that notices of cancellation are generated by computer. One notice goes to the insurance carrier, here Scottsdale, one to the insured. AFCO business practice is to put a copy of the notices in the file the day the notices are mailed if the notice is not mailed it does not go into the AFCO file. A copy of a notice purportedly sent to Precision with its correct address appears in the AFCO file (Ex G) as does a copy of the notice sent to Pfund (Ex H). A cancellation clerk signs the notices to indicate they were mailed. Both copies here are signed and the one sent to Pfund has a box indicating the mailing date and a check off indicating that notices were sent to the insured, its agent and the insurer with a signature line for the AFCO clerk. All this happened May 23, 1996 according to the copies of the notice forms. AFCO has the exact same interest in mailing these items to all three parties the same procedure was used, and lo and behold copies of the notice of cancellation were found in the Pfund file or records and in those of Scottsdale. The court has previously discussed the significance of this last mentioned factor, see cases like Pence Mortgage Co. v. Stokes, supra.
Why on earth would a mailing list be necessary here to prove anything? What was produced here appears better than a mailing list — actual copies of the notices sent are automatically put in the AFCO files but only when they have been mailed and Exhibit H contains a signed statement by the AFCO cancellation clerk that these particular notices were mailed — what else does the phase "The following notices were sent . . ." A small box says "mailing date," 5/23/96. Exhibit C, also signed has a small box labeled "mailing date" which is dated "5/23/96" and the cancellation clerk signs below that after admonishing the insured that its insurance is about to be cancelled. A mailing list would merely recapitulate what is already in the file as it relates to the insured which as indicated is circumstantial evidence of mailing. There is nothing to indicate any notice to Precision could have been sent to the wrong address. The notices are computer generated and the AFCO notice to Pfund found in the latter's file has Precision as the insured with Precision's correct address. How and why could the computer churn out a notice to Precision with an incorrect address?
The court finds that Scottsdale has met its burden that a copy of the notice of intent to cancel and notice to cancel was sent to Precision by AFCO.
(iii)
As a result of the foregoing discussion, the court concludes that Scottsdale can rely on the common-law rule of evidence to the effect that "proof of mailing a letter to a person at the correct address with the correct postage creates a presumption that such letter or other item was received by the addressee," Connecticut Evidence, Tait, § 3.17.6, page 184.
However, that does not mean that the court is obligated to find that a letter, here the notices were received by Mr. Wypychoski on behalf of Precision. The question is how and under what circumstances the presumption can be overcome. As in every other issue involved in this case the various states take a variety of views.
A Fourth Circuit case held that where there is "convincing evidence of mailing" the finding of receipt "is not rebutted merely by evidence that the notice was not actually received," Wright v. Grain Dealers Nat Mutual Fire Ins., Co. 186 F.2d 956, 960 (CA 4, 1950). The Court of Appeals for the District of Columbia disagrees and is of the view that "evidence of non-receipt is sufficient to rebut a prima facie case of mailing and create a true issue of fact to be resolved by the trier of fact," Allied American v. Paige, 143 A2d 508, 510 (1958).
In a case where the purported recipients of a cancellation notice on an auto policy denied receiving it, the North Dakota Supreme Court said: "We believe that evidence that a letter was not received, is probative of whether it was mailed" Auto-Owner Ins. v. State Farm Mut., 434 NW.2d 348, 350 (1989). In that case the court also had concerns with the mailing procedures, id., p. 350.
New York law is to the effect that "Denial of the receipt (of notices of cancellation) by the insureds, standing alone, is insufficient to rebut the presumption (that duly stamped and addressed letters have been received). In addition to a claim of no receipt, there must be a showing that routine office practice was not followed or was so careless that it would be unreasonable to assume that the notice was mailed," Nassau Ins. Co. v. Murray, 46 NY.2d 828, 829-30 (Ct of App, N.Y., 1978) ( 386 NE.2d 1085). Citing Nassau Insurance, the court in Morales v. Yaghoobian, 786 NYS2d 562, 563 (NY, 2004) held the insured's "mere denial" of receipt of a notice as to coverage from the insurer was insufficient to rebut the presumption of receipt of the notice where the insurance company "submitted sufficient evidence of its mailing polices and procedures to create (this) rebuttable presumption that it mailed (to the insured) the notice" also see AB Service Station v. State of New York, 376 NY.2d 656 (1975). In AB Service Station mailing procedures were held sufficient to give rise to the rebuttable presumption and "the mere denial of receipt was not sufficient evidence alone to rebut this presumption." The court then went on to volunteer that even if the presumption were rebutted the "question of whether the letter was properly mailed would become, at most, an evidentiary question" which the court "could have decided as it did based on the circumstantial evidence" (Trial court's finding of proper mailing upheld), id., page 659.
Our Appellate Courts have not gone into similar detail in dealing with this issue. However, the presumption that a letter, mailed with the proper postage to the correct address, was received is a type of presumption based on "common experience and inherent probabilities," Tait goes on to note "such presumptions can be rebutted by substantial countervailing evidence, namely that the letter was not received," id., § 184 see O'Dea v. Amodeo, 188 Conn. 58, 61 (1934).
How should the question be approached here in light of the foregoing? In the last analysis "substantial evidence" should be taken to mean what it says and ordinarily implies. But it is also true as the court said in dicta in Central National Bank v. Stoddard, supra that where an alleged recipient of a letter or notice denies having gotten it, such evidence would be admissible on the question of whether or not the letter has been mailed, 83 Conn. 332, 339, 340.
This court agrees with the approach of the New York courts which does not conflict with our law especially in light of the "substantial certainty" requirement to overcome common-law presumptions, such as the one involved here. If the mailing procedure was adequate to prove actual mailing and no serious flaws were found in it, as the court concludes here, then mere denial of receipt of the mail in question should not be sufficient to rebut the presumption that the letter was received. How can a mere denial of receipt without more be considered to be "substantial evidence?" Governmental and nongovermnental agencies would presumably have to rely on personal service, maybe abode service, to insure the integrity of their notice systems, otherwise someone could come to court and defeat notice by just denying that he or she got it.
The court finds that the presumption of receipt has not been rebutted as to either the notice of intent to cancel or the notice of cancellation.
II
Another argument made by the plaintiff is that "Scottsdale's outward representations to Pfund regarding its attempt to extend Precision's policy and unreasonable retention of AFCO's premiums operates as an election not to terminate the policy." In effect Precision argues that: "The insurer's acceptance or retention of a premium after knowledge of a breach operates as an election not to terminate the policy on account of the failure of the condition and stops the insurer from claiming a forfeiture." Here the unearned premium was not returned for months despite the fact that the policy was cancelled before its 12-month term.
The plaintiff's waiver argument or "election not to terminate the policy" position relies on several cases Bobo v. Farm Bureau, 119 F Sup. 239 (ED S.Car, 1954). McCullough v. State Farm, 80 F.3d 269 (CA 8, 1996); Bittinger v. New York Life, 17 Cal.2d 834, 112 P.2d 621 (1941); Mishiloff v. American Central Ins., Co., 102 Conn. 370 (1925). These cases all stand for the well recognized proposition accepted by some courts "that an insurer is precluded from asserting a forfeiture where, after acquiring knowledge of the facts constituting a breach of condition, it has retained the unearned portion of the premium or has failed to return or tender it back with reasonable promptness, especially where the nature of the breach or ground of forfeiture is of such character as to render the policy void from its inception," 44 Am.Jur.2d "Insurance," § 1610, pp 90-91, see also Dairyland Ins., Co. v. Kammnerer, 327 NW.2d 618, 620 (Neb, 1982). The plaintiff discusses Mishiloff in particular where the insured bought a car on a conditional bill of sale but his policy explicitly said it would be void if his interest in the car was anything else but unconditional. The car was stolen, the insured put in a claim. The company said the policy was void but failed to return or offer to return the premium. The court recognized the applicability of the just discussed case law although in the particular case before it the court found for the insurer on independent grounds — the insured had not demanded return of the premium and there was nothing to indicate "when the insurer had knowledge of the breach and whether it retained the premium thereafter," 102 Conn. at page 382.
But the just mentioned case law supporting an estoppel or waiver theory is not applicable to the matter now before the court. The plaintiff's position, at least in the court's opinion fails to appreciate the nature and effect of a cancellation under § 38a-170 by a premium finance company. When such a company cancels a policy because of the power of attorney it is as if the insured itself was informing the insurer that the policy should be cancelled. This is not a situation, like the just discussed cases where there is an otherwise operative policy that a company would have had the right to declare void because of a violation of a term of the policy but loses that right because of a failure to return the premium.
Under § 38a-170 a cancellation is not voided on some post facto ground that after cancellation premiums were not returned, resulting in the policy arising out of the ashes like Phoenix.
The relevant statutory subsection reads as follows: "(e) Whenever an insurance contract is cancelled in accordance with the provision of this section, the insurer shall return whatever gross unearned premiums are due under the insurance contract to the insurance premium finance company effecting the cancellation for crediting to the account of the insured." (Emphasis added.)
Compliance with subsection (e) by its very terms is not a prerequisite to the fact of cancellation as the above emphasized language makes clear. In any event unearned premiums are returned to the Premium Finance Company not the insured.
If the insurer does not return the unearned premiums to the finance company and the insured does not receive the unearned premiums it is entitled to, the finance company may have a right of action against the insurer and can rely perhaps on the statutory language of subsection (e), but the statutory language itself does not explicitly create a right of action in the insured against the insurer.
True, if the insurer does not return the premiums the insured is entitled to after cancellation, the insured may have a cause of action for the return of unearned premiums. But that right is not created by the terms of § 38a-170(e), it exists apart from it.
A cursory reading of subsection (e) indicates that given the cancellation mechanism initiated by a premium finance company, such as AFCO, cancellation would occur before any premiums could be returned. The statute contemplates that return of unearned premiums is a post-cancellation event. Subsection (e) does not even set a time limit within which unearned premiums have to be returned.
Finally, the plaintiff argues "Scottsdale's agent, NIF, conducted business with Pfund as if Precision's insurance policy was in place. Ms. Pfund testified she talked to Mr. Peligan, an NIF representative, "who stated that he was sorry for the delay but he could not extend the Scottsdale policy past January 1, 1997." (T. 12/15/04 p. 109.) Mrs. Pfund also testified that she had conversations with NIF prior to July 23, 1996 to try to extend the policy and at no time did NIF tell her that the policy had been cancelled. (T. 12/15/04 p. 121-22.) At that point in time, Ms. Pfund was under the impression that Precision's policy with Scottsdale was in effect. (T. 12/15/04 p. 110.) It should also be noted that Mr. Peligan testified that he does not have a present memory of receiving a notice of cancellation from AFCO. (T. 12/15/04 p. 139.)" The plaintiff also argues that in light of NIF's actions "it appears more than suspicious that Endorsement #7 was prepared on August 9, 1996, the day of the condominium fire."
It is difficult to follow where this argument of the plaintiff goes. Scottsdale received a copy of the notice of cancellation. Exhibit 9. Mr. Quish, a Scottsdale underwriter, brought the company's underwriting file with him and the Exhibit was produced from the file.
Mr. Peligan testified and he was a general agent for Scottsdale with authority to issue policies. He had no file on this case because after seven years it can be destroyed by law according to his testimony which was not contested in this regard. He had no recollection of receiving a notice of cancellation of the policy.
When shown Exhibit 10, a plaintiff's exhibit dated July 25, 1996, Peligan's memory was not refreshed but that document from AFCO to NIF references the fact that a notice of cancellation was sent to NIF and that a return of premiums was requested. A policy is cancelled the date the finance company indicates it should be cancelled and Exhibit 10 references the effective date of cancellation as May 30, 1996. As Peligan pointed out and § 38a-170 seems to make clear the general agent or the insurer do not cancel the policy, AFCO, as the finance company does.
On cross examination Peligan admitted Endorsement 7, Exhibit 8, was not issued until August 9, but denied that the policy is not cancelled until the endorsement is issued. The endorsement reads "In consideration of a return premium of $1,163.00. It is hereby understood and agreed that this policy is cancelled pro-rata." The term pro-rata means proportionately (Webster's Third International Dictionary) seemingly referencing any unearned premium. But in an upper box it says the endorsement was effective May 30, 1996, the date of cancellation.
Frankly, the court has some difficulty crediting Ms. Pfund's testimony that she was left with the impression by NIF that the policy was in effect as late as July 1996. Her company issued certificates of insurance to Precision although it apparently had no authority to do so. She claims she had no knowledge of the policy being cancelled from her conversations with Mr. Peligan but in the Pfund file there was a notice of intent to cancel and a notice to cancel which somehow she was not aware of herself. Peligan supposedly led her to believe the policy was not cancelled but NIF was perfectly willing to let this representation lie in place (made before July 23, 1996) despite receiving somewhere near July 25, 1996 a document referencing a May 30, 1996 cancellation date.
It is true that Ms. Pfund wrote to Wypychoski (Ex 18) on July 23, 1996 enclosing a check representing a return of premium for an extension of the policy Scottsdale was not willing to agree to because of a change in Precision's method of operation — subbing out work. On the letter there's a handwritten note indicating "Dave," apparently Mr. Peligan, in a conversation occurring on July 17, 1996 said "Scottsdale will not extend period (i.e. coverage) to January 1, 1997." Suggesting Ms. Pfund thought the policy was in effect until September 1996 with Peligan leading her to believe that. But the note is somewhat odd because Precision changed its mode of operation in February 1996 and NIF responded if that were the case Precision would not be eligible for a three-month extension of the policy and Exhibit 18 itself indicates Pfund told Wypychoski that "earlier this year."
So we have at best the odd situation where the agent of Precision and the agent of Scottsdale perhaps not aware when they talked that the policy in question had been cancelled, although notices of cancellation were in the Pfund file and the Scottsdale file.
But where does that lead us? No reliance argument has been explicitly advanced or can be advanced especially in light of the court's decision on receipt of the controlling notices by Precision. The insured cannot really argue that his agent's conversations were an attempt to reinstate a policy that had been cancelled, the agent denies knowing it was cancelled. In any event why would any impression NIF might have given to Pfund preclude Scottsdale from taking the position the policy was cancelled, AFCO in fact had cancelled the policy. A further unexplained mystery at least to the court, remains. If Precision had no idea the policy was cancelled why were certificates of insurance requested and issued a bare two months before the end of the policy? Finally the court would note that it is a settled principle of insurance law that "An insured who has abandoned (its) policy and discontinued the payment of premiums cannot subsequently be heard to complain of the alleged wrongful cancellation of the policy by the insurer, regardless of the insured's motives in abandoning the policy," 44 Am.Jur.2d supra, § 464 at pp. 512-13. Thus, even if Ms. Pfund's testimony as to the impressions she received from NIF is in fact believed it would likewise seem inequitable to hold that where an insured stopped making payment to a finance company which then cancelled the policy, the policy could somehow be resuscitated against the insurer despite the fact that payments were not resumed — all because of a purported mistake as to continued coverage by the insured's agent and the insurer's general agent.
The insured should not be allowed to take advantage of such a scenario as against the insurer, especially since his own agent arguably created or could have avoided the difficulties the insured finds itself in because of the August 9th loss.
In any event for the foregoing reasons judgment should enter in favor of the defendant Scottsdale Insurance Company.