Bek v. Zimmerman , 285 Mich. 224 ( 1938 )

The garnishee defendant appeals from a judgment in the sum of $2,994.73, entered upon a directed verdict for plaintiff. Plaintiff had previously obtained a judgment in the sum of $2,724.58 against the principal defendant, Elmer Zimmerman, for damages arising out of an automobile accident. Zimmerman was insured by the garnishee defendant on March 25, 1936. The insurance policy bore the expiration date of March 25, 1937, but this was amended by a "terms indorsement" containing the following agreement:

"Failure to make payments to the company or its authorized agents on the due date thereof shall automatically terminate any and all coverage after such due date. * * * Upon the payment of the full amount of any payment hereinafter provided after its due date, the policy shall again become effective but only from and after the time of such payment."

The total premium of $32 was required to be paid according to the "terms indorsement" as follows: $11 on April 25, 1936; $11 on May 25th; $10 on June 25th. The first premium was not paid on April 25th but was three or four days later. The second payment was not made on May 25th but was paid at the office of the company on June 16th, and the last payment, due on June 25th, was not made. Zimmerman had the accident on June 27th, for which plaintiff obtained the judgment stated.

Appellant seeks reversal of the garnishment judgment upon two grounds: first, that plaintiff's affidavit for the writ of garnishment was incurably defective in failing specifically to allege the nature of the claimed indebtedness from the garnishee defendant to the principal defendant; and second, that the "terms indorsement" provision above quoted was not void as held by the trial court, and that, applied to the instant case, this provision negatives liability. The first ground of appeal will not be considered because our conclusion as to the second disposes of the case.

We do not agree with appellee's contention that the language of the "terms indorsement" is ambiguous. If the "indorsement" is valid, there was no coverage under the policy on June 27th.

Appellee claims, however, that 3 Comp. Laws 1929, § 12461 (Stat. Ann. § 24.298), requiring the insurer to give a five days' written notice of cancellation, et cetera, is applicable and that the insurer failed to comply therewith; that if the "terms indorsement" be interpreted as attempting to evade the necessity of such notice, it is in conflict with the statute and therefore void. The statute reads:

"No policy of casualty insurance, excepting workmen's compensation, but including all classes of automobile coverage, shall be issued or delivered in this State by any corporation or other insurer authorized to do business in this State for which a premium or advance assessment is charged, unless there shall be contained within such policy a provision whereby the policy shall be cancelled at any time at the request of the insured, in which case the company shall, upon demand and surrender of the policy, refund the excess of paid premium or assessment above the customary short rates for the expired time, and whereby the policy may be cancelled at any time by the company by giving to the insured a five days' written notice of cancellation with or without tender of the excess of paid premium or assessment above the pro rata premium for the expired time, which excess, if not tendered, shall be refunded on demand and the notice of cancellation shall state that the said excess premium (if not tendered) will be refunded on demand, and furthermore that such cancellation shall be without prejudice to any claim originating prior thereto."

The quoted statute applies where either the insurer or the insured seeks to terminate the insurance by cancellation; it cannot be stretched to cover a situation where, as here, liability under the contract has become automatically suspended by reason of the precise terms of the insurance agreement.

The statute covers those situations where termination of the policy is not automatic but is optional with the insurer and, therefore, cannot be anticipated and provided against by the insured unless he is given ample notice of the intended exercise of that option.

Although the recent case of Hauser v. Michigan MutualLiability Co., 276 Mich. 624, only involved the personal accident portion of a combined liability, property loss and accident insurance policy, nevertheless the reasoning of that case is applicable here. In the Hauser Case the policy was issued on September 15, 1933, and the premiums were payable in five equal monthly instalments of $7.15 each. The first instalment was due on October 15th, but neither it nor any other was paid by the insured. The insured was injured on January 3, 1934, and died four days later. On January 5th a friend of the family paid defendant's agent $5, which was accepted. A directed verdict for the insurance company was affirmed on appeal. That policy contained the optional standard cancellation clause with respect to health and accident insurance policies as provided by 3 Comp. Laws 1929, § 12442 (Stat. Ann. § 24.278); and it also contained one of the alternative mandatory clauses required by section 12441 (Stat. Ann. § 24.277) with regard to default in such policies, reading as follows:

"If the default be made in the payment of the agreed premium for this policy, the subsequent acceptance of the premium by the insurer or by any of its duly authorized agents shall reinstate the policy, but only to cover loss resulting from accidental injury thereafter sustained."

Plaintiff, who was decedent's administrator, claimed on appeal that no proper notice of cancellation had been given and therefore the policy remained in force. The court said:

"Plaintiff's contention, if applicable, would be sufficient to carry the policy in force until the first payment was due. After a premium payment became due and was in default, however, a new situation arose which is covered by the provision above quoted. (The provision in the language of section 12441.) * * * When delivered, it (the policy) took effect according to its terms and became subject to subsequent conditions.

"As the contract provided for credit and instalment payments and expressly declared the effect of a payment after default, it appears plain that such provision must govern the case."

See, also, Schaefer v. Peninsular Casualty Ins. Co.,266 Mich. 386.

Nor is the suspension provision of the "terms indorsement" contrary to public policy. Williams v. Albany City Ins. Co.,19 Mich. 451 (2 Am. Rep. 95). In the Williams Case the defendant insured a schooner for a period from April 27, 1868, to November 30, 1868, and the insured gave a note for the premium, payable in six months. The insurance contract stipulated that if the note was not paid at maturity, the policy was to be "void" so long as the note remained unpaid. On November 12th, after the due date of the note, a loss occurred. On November 19th the indorsers of the note paid the full amount thereof to the insurance company. The court interpreted the word "void" to mean that the policy was suspended while the note remained unpaid and, since the loss occurred before the note was paid, no recovery was allowed upon the policy despite the fact that the insurance company had received and retained the full amount of the premium. The court also rejected the argument that the suspension provision was contrary to public policy in reasoning which we follow in the instant case but do not repeat at length. See pages 465 to 468 of the Williams Case.

This case was followed in a companion case, Williams v.Republic Ins. Co., 19 Mich. 469, where the facts were similar, except that the insurer refused to accept the belated payment of the note.

While the facts of the Williams Case are not identical with those under consideration, the principles there stated are of application here. There is nothing in the instant case which warrants our changing or refusing to enforce the contract into which the parties have voluntarily entered. It is fundamental that courts may not write a new contract for the parties.

Appellee also contends that the garnishee defendant is estopped to deny liability under the policy of insurance. This question was not raised at the trial nor passed upon by the trial judge and, therefore, cannot be considered here.

The judgment entered upon the directed verdict is reversed without a new trial and, with costs to appellant.

WIEST, C.J., and BUTZEL, SHARPE, CHANDLER, and NORTH, JJ., concurred with BUSHNELL, J.