Commercial Credit Corp. v. Premier Insurance Co. , 12 Utah 2d 321 ( 1961 )

CROCKETT, Justice.

On January 9, 1960, Cecil R. Stacey had a wreck in his 19S9 Ford automobile which he was purchasing on conditional sales contract owned by plaintiff, Commercial Credit Corporation. He had had a collision insurance policy issued by defendant, Premier Insurance Company, in which Commercial Credit was named as loss payee. But on November 25, 1959, about six weeks prior to the accident, Mr. Stacey had requested Premier Insurance to cancel the policy, which it did and returned the unearned premium to him without giving any notice to Commercial Credit. Upon the foregoing facts, disclosed at pre-trial, the court rendered summary judgment on the policy in favor of the plaintiff, Commercial Credit, and against the defendant, from which the latter appeals.

The question is this: did the failure of Premier Insurance to give notice of can-celation to the loss payee, Commercial Credit, have the effect of continuing the policy in force as to that company.

The first source to look for the answer is in the policy, which is to be construed to resolve any doubts or uncertainties against the defendant inasmuch as that company prepared and issued it.¹ In that regard certain of its provisions have particular significance: it

“ * * * may be canceled by the insured named in the declarations by surrender thereof to the company * * or by mailing to the company written notice stating when thereafter the can-celation shall become effective.” (Emphasis added.)

The name of the purchaser, Stacey, does not appear in the portion of the policy denoted as “declarations.” The only party listed there is the loss payee. So while it is true that the provision above quoted authorizes cancelation by the “insured” and does not expressly obligate the company to give notice, it is plainly indicated that the loss payee was recognized as having an interest in the policy. This is further borne out by the fact that the “definitions” in the policy define the “insured” in terms of the ownership of the automobile; and that an endorsement, issued by the insurance company as a separate document, provided, "any loss hereunder is payable, as interest may appear, to the insured * * * and Commercial Credit Corporation.”

It is appreciated that it was the primary insured (Stacey) who took out the insurance and paid for it, and that he had a right to cancel and obtain a refund of the unearned portion of the premium. Nevertheless, by issuing the separate endorsement the defendant Premier acknowledged the loss payee (Commercial Credit) as an insured under the policy. This it may not have had to do, but having done so, it was obliged to know that the loss payee would be looking to it for protection. Defendant Premier was then duty bound to treat the loss payee, Commercial Credit, as an insured whose rights could not be canceled without notice.

Under such circumstances it would be manifestly unjust to permit the insurer to enter into an agreement with one of the insured parties, unbeknown to the other, to cancel the policy and leave the latter both unprotected and without warning so it could take measures to forestall loss. The insurance company (Premier) is in a better position than the co-insured (Commercial Credit) to know of any change in the status of the policy. It seems neither unfair nor unduly burdensome to require the insurance company to make at least reasonable efforts to notify the co-insured before cancelation becomes effective as to the latter. Difficulty will result only where, as here, the insurance company, aware of its obligation to an insured who may suffer loss by unwarned withdrawal of the protection, fails to notify the latter so that it can safeguard its interests.

That the foregoing conclusion is consistent with the duty of an insurance company to those it holds out protection to is attested by the fact that the defendant’s own office, on January 26, 1960, two weeks after the loss occurred, sent a letter to the plaintiff which read in part:

“Enclosed are copies of two letters pertaining to Mr. Stacey’s request for cancellation. It was our omission in not notifying you.” (Emphasis added.)

In spite of the defendant’s protestations that this employee was not authorized to make any such admission, this letter reflects a sensible and practical view of the obligation of an insurance company to its insured where more than one are covered by its policy.

Affirmed. Costs to plaintiff (respondent).

WADE, C. J., McDONOUGH, J., and PARLEY E. NORSETH, District Judge, concur.

1 . That in case of doubt or uncertainty contracts are to be so construed, see Huber & Rowland Const. Co. v. City of South Salt Lake, 7 Utah 2d 273, 323 P.2d 259.