James H. Young, Jr.
Flesher & Young
Huntington, West Virginia
Michael A. Woelfel
Huntington, West Virginia
Attorneys for Plaintiffs
Charles F. Bagley, III
Campbell, Woods, Bagley, Emerson,
McNeer & Herndon
Huntington, West Virginia
Attorney for Defendant
JUSTICE MILLER delivered the Opinion of the Court.
1. W. Va. Code, 33-6A-3 (1967), states that if an
automobile liability insurance policy has been in effect sixty days
or if renewed, the insurer or its duly authorized agent shall in
the notice of cancellation specify the reason or reasons relied
upon by such insurer for such cancellation.
2. "A notice of cancellation of insurance must be
clear, definite and certain. While it is not necessary that the
notice be in any particular form, it must contain such a clear
expression of intent to cancel the policy that the intent to cancel
would be apparent to the ordinary person. All ambiguities in the
notice will be resolved in favor of the insured." Syllabus,
Staley v. Municipal Mutual Insurance Co. of West Virginia, 168
W. Va. 84, 282 S.E.2d 56 (1981).
The appellant and defendant below, Motorist Mutual
Insurance Company (Motorist Mutual) appeals a final order of the
Circuit Court of Wayne County, entered March 23, 1992. In a
declaratory judgment action to determine whether Motorist Mutual
had coverage under its automobile liability insurance policy, the
circuit court concluded that Motorist Mutual's automobile liability
insurance policy was in effect on February 5, 1989, the date of the
accident. Motorist Mutual contends that the circuit court erred in
not finding that the policy was validly canceled before the date of
The automobile liability insurance policy in question was issued to Arcie Conn through the Hensley Insurance Agency in Huntington, West Virginia, on September 19, 1988. The policy period was for six months, making the expiration date March 19, 1989. The insured, Mr. Conn, paid one half of the premium when he purchased the policy, with the other half to be billed to him. The policy provided for single limits of $50,000 for liability coverage. The plaintiffs were passengers in Mr. Conn's vehicle and were injured when he negligently drove his car off the highway. Mr. Conn was killed in the accident. Motorist Mutual denied coverage under its policy.
The facts surrounding the cancellation claim are as
follows. On November 29, 1988, Motorist Mutual mailed an
installment billing notice to Mr. Conn. It showed a balance of
$171.90 due by December 18, 1988, to keep the policy in effect
until March 19, 1989. It also contained language advising Mr. Conn
that if payment was not received by the due date, the policy would
be cancelled as of January 3, 1989. Mr. Conn's wife denied
receiving the billing notice. However, a copy of the billing
notice was sent to and received by the Hensley Insurance Agency.
Subsequently, when no payment was made on the installment
billing notice, Motorist Mutual on December 27, 1988, mailed to Mr.
Conn what it termed a "cancellation reminder notice." The notice
advised that if the premium payment was not made by January 3,
1989, the liability policy would be cancelled. Again, Mr. Conn's
widow claimed that the notice was never received. The Hensley
Insurance Agency did receive a copy of the notice.
Motorist Mutual provided the circuit court with a
deposition of Ruby Bailey, its data control supervisor, who
explained the process for mailing notices such as the ones involved
in this case. Ms. Bailey stated that she had conducted what is
termed as an "audit trail log" since Motorist Mutual does not keep
a copy of the actual notices sent out. According to Ms. Bailey,
the information for sending a notice is generated by a computer on
a daily basis and thereafter is stored on microfiche. The
microfiche revealed Mr. Conn's policy number, the due date of the
premium as December 18, 1988, and the date run as November 28,
1988. The notices are printed in a continuous form by the
computer. They are separated into their individual components by
another machine. The machine then checks the number of notices
that were individually separated against the computer log which
identifies the number printed by the computer. The notices are not
manually counted, but are consecutively numbered. This information
is logged on a mail control form.See footnote 1
In addition to this evidence, Motorist Mutual submitted
deposition testimony from Jim Hensley of the Hensley Insurance
Agency who testified that he received copies of both notices. The
plaintiffs introduced the deposition testimony of R.D. Street, a
credit representative of General Motors Acceptance Corporation
(GMAC), which held a first lien on Mr. Conn's car. Mr. Street
testified that no notices of cancellation were received by GMAC.
The circuit court apparently relied on the Syllabus of Smith v. Municipal Mutual Insurance Co., 169 W. Va. 296, 289 S.E.2d 669 (1982), to conclude that actual written notice was required to be shown by Motorist Mutual:
"In order for a farmers' mutual fire
insurance company to cancel a policy under
W. Va. Code, 33-22-14  and W. Va. Code,
33-22-15 , that company must provide
actual written notice to the policyholder in
question at least five days before the
cancellation is to become effective."
Motorist Mutual argues that Smith is distinguishable
because it dealt with the cancellation of a farmers' mutual fire
insurance policy which involved different statutesSee footnote 2 than those
contained in our statute relating to cancellation of an automobile
liability insurance policy contained in W. Va. Code, 33-6A-1. For
purposes of this case, we agree that Smith is not controlling.
When we turn to W. Va. Code, 33-6A-1 (1967),See footnote 3 it is clear
that this section does not deal with the mechanics of a notice of
cancellation of an automobile liability insurance policy. This
section provides certain specific grounds for cancellation "after
the policy has been in effect sixty days, or in case of renewal
effective immediately[.]" Although W. Va. Code, 33-6A-1, does not
describe the procedure for cancellation, there are procedural
requirements contained in W. Va. Code, 33-6A-3 (1967). That
statute states that if an automobile liability insurance policy has
been in effect sixty days or if renewed, the "insurer or its duly
authorized agent shall, in the notice of cancellation . . . specify
the reason or reasons relied upon by such insurer for such
cancellation."See footnote 4 There is no dispute that the policy in this case
was in effect for more than sixty days. The cancellation
provisions of the Motorist Mutual policy state as to the time in
which a notice of cancellation is to be sent: "Notice must be
received at least 10 days prior to the date cancellation is to take
effect[.]"See footnote 5
Although the parties focus on whether the foregoing language creates a mandatory requirement that the cancellation notice be actually "received" by the insured, we find this case can be disposed of on a more narrow basis.
When we examine the November 29, 1988, billing copy which
was sent to the Hensley Insurance Agency, we do not believe it
comports with the requirements of W. Va. Code, 33-6A-3, as a notice
of cancellation. It does not state that the policy is cancelled
for failure to pay the premium as required under W. Va. Code, 33-
6A-3. It implies that upon the happening of a future event, that
being the insured's failure to pay the premium by December 18,
1988, the policy will be cancelled on January 3, 1989.See footnote 6
More importantly, the next document sent by Motorist Mutual, which was mailed on December 29, 1988, indicated that the insured still had an opportunity to pay the premium.See footnote 7 This notice serves to negate the fact that the original document could be reasonably understood to be a cancellation notice. We spoke to the general requisites of an insurance cancellation notice in the Syllabus of Staley v. Municipal Mutual Insurance Co. of West Virginia, 168 W. Va. 84, 282 S.E.2d 56 (1981):
"A notice of cancellation of insurance must be clear, definite and certain. While it is not necessary that the notice be in any particular form, it must contain such a clear expression of intent to cancel the policy that the intent to cancel would be apparent to the ordinary person. All ambiguities in the notice will be resolved in favor of the insured."
Although Staley involved the cancellation of a fire
insurance policy, its principle with regard to the sufficiency of
the notice is applicable to other types of insurance policies. See
Keller v. First Nat'l Bank, 184 W. Va. 681, 403 S.E.2d 424 (1991)
(credit life insurance). See generally 14A J. Appleman & J.
Appleman, Insurance Law & Practice § 8181 (1985).
Several jurisdictions have dealt with the question of the sufficiency of a purported cancellation notice which also informs the insured that if premiums are promptly paid, coverage will continue. In Automobile Club Insurance Co. v. Donovan, 550 A.2d 622, 623 (R.I. 1988), the Supreme Court of Rhode Island began by noting:
"It is well settled in Rhode Island that the purpose of providing notice of cancellation of an insurance policy is to make the insured aware that the policy is being terminated and to afford the insured the time to obtain other insurance prior to termination of the existing policy." (Citations omitted).
In Donovan, the insured initially received a billing notice which
stated "that March 24, 1983, was both the 'due date' and the
'expiration date[.]'" 550 A.2d at 622-23. The court held that the
notice was insufficient, stating this general rule: "Several
courts have held that when an insurance company requests an
additional premium and states that prompt payment will keep the
policy in effect, this is an insufficient notice of cancellation
since it is ambiguous and not sufficiently unequivocal."
The Arkansas court in Hart v. MFA Insurance Co., 268 Ark. 857, 597 S.W.2d 105 (1980), dealt with a notice of cancellation that was included in a premium billing statement and contained language similar to that in the November 29, 1988, statement in this case.See footnote 8 The Arkansas court found the notice to be too contingent after adopting this language from Priest v. Bankers' Life Association, 99 Kan. 295, 301, 161 P. 631, 633-34 (1916):
"'. . . the notice required is not notice of a contingent intention to forfeit which may possibly be entertained in the future. It is notice of an actual intention to forfeit because premium has not been paid. Such an intention cannot exist until cause for forfeiture arises. Causes for forfeiture cannot arise during the time within which payment may rightfully be made. That time must expire and the premium be unpaid.'" 268 Ark. at 863, 597 S.W.2d at 108. (Emphasis in original).
The Arkansas court also pointed out that the insurance
policy provided for cancellation "at any time during the policy
period for failure to pay any premium when due . . . by mailing or
delivering to the insured written notice stating when not less than
ten days thereafter such cancellation shall be effective." 268
Ark. at 859, 597 S.W.2d at 106-07. (Some emphasis omitted). The
insurance carrier argued that if notice of cancellation was
required to be given only after the premium became due, then the
insured would in effect obtain at least ten days of free coverage,
which would be a strange result. The court answered: "Whether
that result is strange need not be debated, because it is enough to
say that if ten days of free insurance does result, as it well
could, it is because the policy is so drafted--and drafted by the
company." 268 Ark. at 863, 597 S.W.2d at 108-09.
The Georgia court in Pennsylvania National Mutual
Casualty Insurance Co. v. Person, 164 Ga. App. 488, 297 S.E.2d 80
(1982), cert. denied, ___ Ga. ___, ___ S.E.2d ___ (1983), dealt
with a billing notice with a cancellation clauseSee footnote 9 rather similar to
the notice in this case mailed November 29, 1988. The Georgia
court concluded that this was not a proper cancellation notice:
"In the instant case the notice of cancellation was not given to the insured upon her failure to pay the premium when due. Rather, notice of cancellation was given before the premium was due. There was no reason to cancel the policy until after the premium became due and payable. Thus, the insured is entitled under statute to notice of cancellation for failure to pay her premium when due and at least a ten day grace period prior to the effective date of the cancellation." 164 Ga. App. at 489, 297 S.E.2d at 82. (Citation omitted).
See also Mitchell v. Burnett, 1 Ill. App. 3d 24, 272 N.E.2d 393
(1971); Breland v. All Am. Assur. Co., 366 So. 2d 1051 (La. App.
1978); Dairyland Ins. Co. v. Neuman, 338 N.W.2d 37 (Minn. 1983).
Thus, we find that the initial notice of November 29,
1988, was insufficient to constitute a cancellation notice under
the foregoing law. Much like the policy language in Priest, supra,
Motorist Mutual's policy language on cancellation is "if
cancellation is for nonpayment of premium[.]" Obviously, the
cancellation cannot occur until there has been a nonpayment of the
premium. Moreover, the policy promises at least a ten-day notice
prior to the date of cancellation.See footnote 10
Much the same deficiency exists in the second notice
mailed December 29, 1988. That notice provided no direct and
unequivocal statement that the policy was cancelled because of the
failure to pay the premium when due on December 18, 1988. Rather,
the notice permitted the insured an opportunity to keep the policy
current by paying. Even if the language was adequate, the notice
would fail because it was not mailed at least ten days before the
cancellation date of January 3, 1989. This time restriction is a
requirement in the Motorist Mutual policy, as we have already
discussed. The North Carolina Supreme Court in construing a
fifteen-day provision for a cancellation notice in Pearson v.
Nationwide Mutual Insurance Co., 325 N.C. 246, 255, 382 S.E.2d 745,
749 (1989), stated "that such date must be at least fifteen days
from the date of mailing or delivery of notice to the insured."
See also Hart v. MFA Insurance Co., supra. See generally 14A J.
Appleman & J. Appleman, Insurance Law & Practice § 8185 (1985).
When construing the two notices sent by Motorist Mutual
in this case under Staley v. Municipal Mutual Insurance Co. of West
Virginia, supra, we find that the notices were sufficiently
ambiguous to not show a clear intent to terminate the policy within
the requisite ten-day period required by the policy language.
Where there has been an invalid cancellation, the automobile
liability insurance policy remains in effect until the end of its
term or until a valid cancellation notice is perfected, whichever
event first occurs. See Pearson v. Nationwide Mut. Ins. Co.,
supra. For the foregoing reasons, we affirm the judgment of the
Circuit Court of Wayne County.
Footnote: 1The mail control form for November 28, 1988, showed a total of 2,644 notices were processed with a notation that they were mailed November 29, 1988.
Footnote: 2In Smith, the following sections of the farmers' mutual fire insurance statute were cited:
"W. Va. Code, 33-22-14  states:
"'All notices of cancel
lation of policies or reduction
thereof and all other notices to
members required by this article
shall be delivered personally or
mailed in a sealed envelope
addressed to the last known address
of the member and when so given
they shall be deemed sufficient and
binding upon the member so noti
". . . W. Va. Code, 33-22-15  . . . states in pertinent part as follows: '(c) [t]he company may cancel any policy upon at least five days' written notice to the holder.'" 169 W. Va. at 298, 289 S.E.2d at 670.
Footnote: 3W. Va. Code, 33-6A-1, as it relates to cancellation for nonpayment of premiums, states:
"No insurer once having issued or
delivered a policy providing automobile
liability insurance in this State insuring a
private passenger automobile shall, after the
policy has been in effect for sixty days, or
in case of renewal effective immediately,
issue or cause to issue a notice of cancella
tion during the term of the policy except for
one or more of the following specified
"(a) The named insured fails to discharge when due any of his obligations in connection with the payment of premium for such policy or any installment thereof[.]"
Footnote: 4The complete text of W. Va. Code, 33-6A-3, is:
"In every instance in which a policy or contract of automobile liability insurance which has been in effect sixty days
or which has been renewed is cancelled by the insurer, such insurer or its duly authorized agent shall, in the notice of cancellation or at the written request of the named insured, specify the reason or reasons relied upon by such insurer for such cancellation. Such reasons shall be stated in a written notice and shall, if not provided in the notice of cancellation, be made within thirty days after such request: Provided, however, That there shall be no liability on the part of, and no cause of action shall arise against, any insurer or its agents or its authorized investigative sources for any statements made with probable cause by such insurer, agent or investigative source in such written notice required to be given pursuant to this sec tion."
Footnote: 5The applicable policy provisions regarding cancella tion are:
" A. Cancellation. This policy may be
cancelled during the policy period as fol
* * *
"2. If we decide to cancel this policy we
will mail notice to the named insured shown
in the Declarations at the address shown in
this policy. Notice must be received:
a. at least 10 days prior to the date cancellation is to take effect if cancella tion is for nonpayment of premium for the initial issuance of a policy; or
b. at least 30 days prior to the date cancellation is to take effect in all other cases.
* * *
" D. Other Termination Provisions.
"1. We may deliver any notice instead of mailing it. Proof of mailing of any notice shall be sufficient proof of notice."
Footnote: 6The relevant portion of the billing notice is:
"PLEASE AMOUNT DUE BY THIS DATE DUE
PAY: 173.90 DATE: 12/18/88
POLICY NUMBER AGENT COPY
3887-04-309895-00D DIRECTALK AUTO INSTALLMENT
Show Address Change On Back
ARCIE M CONN Enclosed $______
P O BOX 508
KENOVA WV 25530 CANCELLATION 01/03/89
THE AMOUNT SHOWN ABOVE MUST BE PAID BY
THE "DATE DUE". IF NO PAYMENT IS
RECEIVED BY THE DATE DUE, YOUR
INSURANCE COVERAGE WILL BE CANCELLED
BY THE COMPANY AS OF 12:01 A.M., S.T.
ON THE "CANCELLATION DATE" INDICATED
|INSURED/AUTO IDENTIFICATION||ATTENTION AGENT|
ARCIE M CONN
P O BOX 508
KENOVA WV 25530
IF NO PAYMENT IS RECEIVED BY THE
"CANCELLATION DATE" SHOWN ABOVE,
THE POLICY WILL BE CANCELLED.
* * *
PREMIUM FOR POLICY PERIOD
AMOUNT PAID TO DATE
Footnote: 7The relevant text of this notice states:
"This is a reminder notice to advise you that
we have not yet received your premium payment
for the above numbered policy.
"In order to maintain uninterrupted insurance
protection, your payment must be received on
or before the cancellation date. Our records
show that your cancellation date is 01/03/89.
"Our records indicate the vehicle(s) insured
by this policy are:
Veh 1: 85 Chev
"You may pay either the total due (or the
minimum due if one is shown). The minimum
due amount includes a $2.00 installment
charge, and you will be billed at a later
date for the remaining premium.
"Thank you for continuing your insurance protection with us."
Footnote: 8The billing statement in Hart contained the following language: "'If the premium due is an installment under Deferred Premium Payment Plan, and payment is not received by due date, notice is hereby given that such policy is cancelled on due date.'" 268 Ark. at 858, 597 S.W.2d at 106.
Footnote: 9The cancellation clause on the billing notice read: "PAY THE AMOUNT DUE BEFORE THE INSTALLMENT DUE DATE SHOWN OR THIS STATEMENT BECOMES A NOTICE OF CANCELLATION EFFECTIVE 11 07 80 12:01 A.M. STANDARD TIME. PROVIDING ALL PRIOR OUTSTANDING BILLINGS HAVE BEEN PAID BY THEIR DUE DATES. NO FURTHER NOTICE WILL BE GIVEN." 164 Ga. App. at 488, 297 S.E.2d at 81.
Footnote: 10For the applicable policy language, see note 5, supra.