Nationwide Mutual Insurance v. Edwards , 67 N.C. App. 1 ( 1984 )

WHICHARD, Judge.

The court made findings of fact, which are supported by competent evidence and are thus conclusive on appeal. Broughton v. Broughton, 58 N.C. App. 778, 781, 294 S.E. 2d 772, 775, disc. rev. denied, 307 N.C. 269, 299 S.E. 2d 214 (1982). The sole issue is the propriety of the conclusion and adjudication that plaintiffs policy provided coverage to the extent of its limits.

While the court did not state the basis of its conclusion, it appears to be that because of its agent’s knowledge of conditions extant at the issuance of the policy, plaintiff either waived or was estopped to assert the trailer exclusion. We find evidence neither of such knowledge nor of other facts sufficient to create a waiver or estoppel, and accordingly reverse.

Specific exclusions of coverage when an insured vehicle is used with an uninsured trailer, or when an insured trailer is used with an uninsured vehicle, consistently have been held valid and enforceable because of the added hazard created by towing a trailer. 12A M. Rhodes, Couch on Insurance 2d § 45:1089, at 745 (Rev. ed. 1981); 6C J. Appleman, Insurance Law and Practice § 4438, at 442-49 (1979); Annot., 31 A.L.R. 2d 298, 302 (1953). Whether the towed trailer caused or contributed to the loss in question is immaterial. Maryland Casualty Co. v. Cross, 112 F. 2d 58, 60 (5th Cir.), cert. denied, 311 U.S. 701, 85 L.Ed. 455, 61 S.Ct. 141 (1940); 6C J. Appleman, supra, at 457-58.

Under North Carolina law, coverage in excess of that required by the Financial Responsibility Act, G.S. 20-279.21, is voluntary. “The liability, if any, of the [carrier] for coverage in excess of that required by the Act must be judged according to the terms and conditions of the policy.” Caison v. Insurance Co., 36 N.C. App. 173, 178, 243 S.E. 2d 429, 432 (1978); see also Younts v. Insurance Co., 281 N.C. 582, 585, 189 S.E. 2d 137, 139 (1972). Plaintiff concedes its liability to the limits set by the Act, but argues that it has no liability above those limits because of the exclusionary clause in the policy.

Our Supreme Court set forth general principles governing construction of insurance contracts in North Carolina in Trust Co. v. Insurance Co., 276 N.C. 348, 354-55, 172 S.E. 2d 518, 522 (1970); see also Woods v. Insurance Co., 295 N.C. 500, 505-06, 246 S.E. 2d 773, 777 (1978). Absent ambiguity reasonably susceptible to conflicting interpretations, courts must enforce the contract as written, giving effect to each word and clause. They “may not, under the guise of interpreting an ambiguous provision, remake the contract and impose liability upon the company which it did not assume and for which the policyholder did not pay.” Trust Co., supra, 276 N.C. at 354, 172 S.E. 2d at 522. See generally 1 R. Anderson, Couch on Insurance 2d §§ 15:15 to :17 (1959); 13 J. Ap-pleman, Insurance Law and Practice §§ 7383-84 (1976).

The policy here covers the tractor and “any semi-trailer.” This coverage is, however, “subject to all the terms of [the] policy having reference thereto.” The “Basic Automobile Liability Insurance” section includes the “trailer exclusion” set forth above. The court found as facts that Brafford was the only named insured, that the trailer was owned by Edwards, that the trailer was not covered by “like insurance,” and that the trailer was not designed for use with a four wheel private passenger automobile. At the time of the accident, then, the tractor fell within the precise language of the exclusionary clause, and Edwards was not an “insured” under its terms. Plaintiff promised to pay only on behalf of the “insured.” Under the precise terms of the policy, then, plaintiff has no liability. No other reasonable interpretation or alternative basis for liability is presented. Thus, nothing else appearing, the company was entitled to a judgment declaring absence of coverage beyond that statutorily required.

An insurance company may waive its right to assert exclusions from coverage.

If an insurer, notwithstanding knowledge of facts then existing which by the language of the policy defeats the contract of insurance, nevertheless insures property, it will be held to have waived the policy provisions so far as they relate to the then existing conditions.

Fire Fighters Club v. Casualty Co., 259 N.C. 582, 585, 131 S.E. 2d 430, 432 (1963); see Rea v. Casualty Co., 15 N.C. App. 620, 625, 190 S.E. 2d 708, 712, cert. denied, 282 N.C. 153, 191 S.E. 2d 759 (1972); see also Cato v. Hospital Care Association, 220 N.C. 479, 484, 17 S.E. 2d 671, 674 (1941); Midkiff v. Insurance Co., 198 N.C. 568, 571-72, 152 S.E. 792, 794 (1930); Midkiff v. Insurance Co., 197 N.C. 139, 143, 147 S.E. 812, 814 (1929); Aldridge v. Insurance Co., 194 N.C. 683, 686, 140 S.E. 706, 708 (1927) (all finding waiver based on actual knowledge of agent). But see Iowa National Insurance Co. v. Coltrain, 143 F. Supp. 87, 89 (M.D.N.C. 1956) (general knowledge of operations insufficient where agent had no specific knowledge of operation of trucks by third party in violation of policy provision); Midkiff v. Insurance Co., 197 N.C. 144, 145, 147 S.E. 814, 815 (1929) (knowledge of general practice in community insufficient; agent must have knowledge of particular insured’s violation of provision of policy at time policy issued); Greene v. Insurance Co., 196 N.C. 335, 340, 145 S.E. 616, 618 (1928) (knowledge of agent of insured’s violation, when acquired after issuance of policy, not imputed to insurer so as to create waiver or estoppel). The claimant has the burden, on a waiver issue, of establishing knowledge by the agent of facts existing at the issuance of the policy. Fire Fighters, supra, 259 N.C. at 586, 131 S.E. 2d at 433.

The evidence here shows that plaintiffs agent knew defendant Edwards was in the process of acquiring the tractor, that he would operate it, and that the named insured had no use of it or interest in it except as the holder of legal title while awaiting the outstanding balance of the purchase price. It does not show that the agent knew Edwards intended to operate the tractor with an uninsured trailer. The insurance would have remained in effect had he driven the tractor alone or with a trailer not owned or hired by him. The record establishes that he did not purchase the trailer until six days after the policy was issued. The claimant thus has failed to show that the agent possessed any knowledge which would evoke a finding of waiver.

Knowledge by the agent of events occurring after issuance of the policy cannot support waiver. Greene v. Insurance Co., supra, 196 N.C. at 340, 145 S.E. at 618. Arrangements between Edwards and plaintiff or its agent subsequent to the accident are thus irrelevant.

Defendant has argued, in effect, that the actions of plaintiffs agent amounted to a misrepresentation which equitably estops plaintiffs assertion of the exclusion. Estoppel is an affirmative defense which must be specially pleaded. G.S. 1A-1, Rule 8(c); Stuart v. Insurance Co., 18 N.C. App. 518, 522, 197 S.E. 2d 250, 253 (1973). Failure to plead an affirmative defense ordinarily results in waiver thereof. Smith v. Hudson, 48 N.C. App. 347, 352, 269 S.E. 2d 172, 176 (1980). The parties may, however, still try the issue by express or implied consent. G.S. 1A-1, Rule 15(b).

Defendant-administratrix neither pled nor tried the case on this theory. She thus cannot now present it on appeal. Delp v. Delp, 53 N.C. App. 72, 76, 280 S.E. 2d 27, 30, disc. rev. denied, 304 N.C. 194, 285 S.E. 2d 97 (1981); Grissett v. Ward, 10 N.C. App. 685, 687, 179 S.E. 2d 867, 869 (1971).

Had defendant-administratrix properly presented the issue, she did not offer sufficient evidence thereon to support a judgment in her favor. The party claiming protection under the rule of equitable estoppel has the burden of establishing facts warranting its application. In re Will of Covington, 252 N.C. 546, 549, 114 S.E. 2d 257, 260 (1960); 31 C.J.S. Estoppel § 160 (1964). Defendant has not sustained this burden.

Our Supreme Court has stated:

[T]he essential elements of an equitable estoppel as related to the party estopped are: (1) Conduct which amounts to a false representation or concealment of material facts, or, at least, which is reasonably calculated to convey the impression that the facts are otherwise than, and inconsistent with, those which the party afterwards attempts to assert; (2) intention or expectation that such conduct shall be acted upon by the other party, or conduct which at least is calculated to induce a reasonably prudent person to believe such conduct was intended] or expected to be relied and acted upon; (3) knowledge, actual or constructive, of the real facts. As related to the party claiming the estoppel, they are: (1) lack of knowledge and the means of knowledge of the truth as to the facts in question; (2) reliance upon the conduct of the party sought to be estopped; and (3) action based thereon of such a character as to change his position prejudicially.

Hawkins v. Finance Corp., 238 N.C. 174, 177-78, 77 S.E. 2d 669, 672 (1953), quoted with approval in Transit, Inc. v. Casualty Co., 285 N.C. 541, 549, 206 S.E. 2d 155, 160 (1974). It is not necessary that the conduct of the party estopped be intentional; negligence may provide a basis for application of the doctrine. Transit, Inc., supra, 285 N.C. at 550-51, 206 S.E. 2d at 160-61 (failure to inform insured of changed business coverage in renewal); see also 16B J. Appleman, Insurance Law and Practice § 9088, at 560 (1981); 28 Am. Jur. 2d Estoppel and Waiver § 61 (1966).

The facts found here show only that (1) Edwards went to plaintiffs agent to obtain insurance for the tractor, (2) the agent knew he did not have legal title, (3) the agent told him Brafford would have to be the “named insured,” (4) he accepted this arrangement and bought insurance so that he could operate the tractor, and (5) six days later he bought a trailer. There is no evidence that Edwards owned a trailer at the time he obtained the policy, or that he told the agent, then or later, that he intended to purchase one for use with the insured tractor.

There is no evidence that plaintiffs agent informed Edwards of the consequences of someone other than the “named insured” towing his own uninsured trailer with the insured tractor. She had no duty to warn him of all contingencies which could defeat coverage, however. “[A]n insurance agent is not required to affirmatively warn his customers of provisions contained in insurance policies.” 16C J. Appleman, Insurance Law and Practice § 9168, at 176 (1981); see also Farber v. Great American Insurance Co., 406 F. 2d 1228, 1233 (7th Cir. 1969) (“we have found no authority for the proposition . . . that an insurance agent must affirmatively warn his customers of the provisions contained in the insurance policies”). Persons entering contracts of insurance, like other contracts, have a duty to read them and ordinarily are charged with knowledge of their contents. Setzer v. Insurance Co., 257 N.C. 396, 401-02, 126 S.E. 2d 135, 138-39 (1962); see also Biesecker v. Biesecker, 62 N.C. App. 282, 302 S.E. 2d 826 (1983); 16B J. Appleman, supra, at 573. The record contains no representation by the agent which could have led Edwards reasonably to believe there was any coverage other than that supplied by the terms of the policy itself. Cf. Collard v. Universal Automobile Insurance Co., 55 Idaho 560, 45 P. 2d 288 (1935) (agent, after full disclosure to him of title situation, stated “the policy will be in force”); Farmers Mutual Automobile Insurance Co. v. Bechard, 80 S.D. 237, 122 N.W. 2d 86 (1963) (agent expressly told insured he was covered “regardless of what he was driving”); see 16B J. Appleman, supra, at 555-60.

There is no evidence of knowledge on the part of the agent, actual or constructive, of real facts inconsistent with the terms of the policy when issued. When the policy was issued, Edwards did not own the trailer, and there is no evidence indicative of an intent to purchase or hire one. “[T]o make the rule of imputing notice from facts exciting inquiry apply, it must appear that the inquiry suggested, if fairly pursued, would have resulted in knowledge of the fact.” 44 Am. Jur. 2d Insurance § 1589, at 597 (1982); see also Lancaster v. Insurance Co., 153 N.C. 285, 69 S.E. 214 (1910) (insurance company not estopped to assert non-ownership exclusion by failure to inquire about ownership); 16B J. Appleman, supra, at 571-72.

There is no evidence from which an estoppel could be found, then, unless the statement by the agent that Brafford would have to be the “named insured,” since he was the titleholder, amounts to a misrepresentation or concealment of a material fact. G.S. 20-4.01(26) defines “owner” as

[a] person holding the legal title to a vehicle, or in the event a vehicle is the subject of a chattel mortgage or an agreement for the conditional sale or lease thereof or other like agreement, with the right of purchase upon performance of the conditions stated in the agreement, and with the immediate right of possession vested in the . . . conditional vendee . . . said . . . conditional vendee . . . shall be deemed the owner for the purpose of this Chapter.

Under this definition the agent arguably could have issued the policy with Edwards as the “named insured.” In that event, the accident would have been covered.

The legal milieu in which the agent acted, however, included not only the foregoing statute, but also the case law interpreting the term “owner.” The general rule is that “as between a vendor and vendee of a vehicle, the vendee cannot acquire valid owner’s liability insurance until legal title has been transferred or assigned to him by or at the direction of the vendor.” Ohio Casualty Ins. Co. v. Anderson, 59 N.C. App. 621, 623, 298 S.E. 2d 56, 58 (1982), cert. denied, 307 N.C. 698, 301 S.E. 2d 101 (1983); see also Insurance Co. v. Hayes, 276 N.C. 620, 640, 174 S.E. 2d 511, 524 (1970); Gaddy v. Insurance Co., 32 N.C. App. 714, 716, 233 S.E. 2d 613, 614 (1977); Gore v. Insurance Co., 21 N.C. App. 730, 733, 205 S.E. 2d 579, 582 (1974). Our Supreme Court has stated that

for purposes of tort law and liability insurance coverage, no ownership passes to the purchaser of a motor vehicle which requires registration under the Motor Vehicle Act . . . until (1) the owner executes, in the presence of a person authorized to administer oaths, an assignment and warranty of title on the reverse of the certificate of title, including the name and address of the transferee, (2) there is an actual or constructive delivery of the motor vehicle, and (3) the duly assigned certificate of title is delivered to the transferee.

Insurance Co. v. Hayes, supra.

In Ohio Casualty Ins. Co. v. Anderson, supra, 59 N.C. App. at 624, 298 S.E. 2d at 58, this Court rejected the argument that “one who does not hold legal title to a vehicle cannot under any circumstances obtain owner’s liability insurance thereon.” It stated that “[t]he ‘owner’ of a vehicle is the holder of the legal title ‘[ujnless the context otherwise requires.’ ” Id. at 626, 298 S.E. 2d at 59 (quoting G.S. 20-4.01). It held that “[t]he discrete facts and circumstances” dictated a holding that the policy covered the vendee, though he was not the holder of the legal title, since coverage was clearly intended and a contrary holding would have provided no coverage whatever. Id. “The discrete facts and circumstances” there are not present here, however, and that case has no bearing on resolution of this one.

Given the general rules in North Carolina that one who does not hold legal title to a vehicle cannot obtain owner’s liability insurance thereon, and that a vendee cannot acquire such insurance until legal title has been transferred or assigned to him, we do not believe the agent’s statement that only the titleholder could be the “named insured” can be held to constitute “[c]onduct which amounts to a false representation or concealment of material facts.” Hawkins v. Finance Corp., supra. Defendants thus have failed to show conduct on the part of the agent from which an estoppel could be found.

The continued acceptance of premiums by the company does not constitute grounds for waiver or estoppel. The law does not require automatic notification to insurers when their insureds purchase additional vehicles, nor do insurers have a legal duty to determine what other vehicles the insured owns. There is no evidence that the company knew Edwards owned a trailer until after the accident. It thus continued to provide the limited coverage for which it had contracted.

Had Edwards been involved in a second accident under like conditions, acceptance of premiums might have supplied grounds for waiver or estoppel. See Gouldin v. Insurance Co., 248 N.C. 161, 164-66, 102 S.E. 2d 846, 848-49 (1958) (general rules); Annot., 1 A.L.R. 3d 1139 (1965). Such is not the case here, however.

On this record we find no basis for holding that the plaintiff provides coverage in the full amount of its policy. Accordingly, the judgment is reversed, and the cause is remanded for entry of a judgment in accordance with this opinion.

Reversed and remanded.

Judge WEBB concurs. Judge Phillips dissents.