Jarvis v. Workmen's Compensation Appeal Board , 497 Pa. 379 ( 1981 )

OPINION OF THE COURT

FLAHERTY, Justice.

This is an appeal from an order of the Commonwealth Court¹ which affirmed the Workmen’s Compensation Appeal Board’s reversal of a referee’s award of benefits to the appellant, Laura E. Jarvis. The award constituted compensation for the death of Enos J. Jarvis (hereinafter Jarvis), appellant’s late husband, who was fatally injured on January 13, 1969, while working within the scope of his employment. Jarvis’ employer, Elsie M. Jarvis t/a John J. Jarvis, had, for seven consecutive years preceding the occurrence of the fatal accident, procured Workmen’s Compensation insurance from the appellee, Phoenix Assurance Company of New York, through the latter’s agent, the Emil Schurgot Agency (hereinafter Schurgot). Each year, near the expiration date of the annual insurance policy, Schurgot billed the employer for the following year’s premium, and payment ensued. The final policy so procured expired on January 9, 1969, just four days prior to Jarvis’ fatal accident. No renewal premium notice had been sent to the employer, since Phoenix Assuranee had terminated Schurgot as its agent. Notice of the termination, however, was not supplied to the insured, nor was it transmitted to the Commonwealth’s Insurance Department, until subsequent to Jarvis’ death.

Phoenix Assurance refused compensation benefits on grounds that the employer’s insurance coverage had lapsed. Appellant asserts, however, that the insurer breached a duty to notify the insured of its intention not to offer a policy renewal, an omission for which liability allegedly accrued to the insurance carrier for losses sustained after expiration of the policy.

In Luther v. Coal Operators Casualty Co., 379 Pa. 113, 108 A.2d 691 (1954), this Court held that no such duty of notification rested upon the issuer of a Workmen’s Compensation policy. The Court declined to hold that by reason of the insurer having renewed policies for successive years without request by the policyholder, an obligation arose to continue offering renewals from year to year indefinitely thereafter, or, if renewals were not to be offered, to inform the insured of the impending policy expiration and of the insurer’s intention not to offer continued coverage:

[WJhere an insurance agent or broker promises, or gives some affirmative assurance, that he will procure or renew a policy of insurance under such circumstances as to lull the “insured” into the belief that such insurance has been effected, the law will impose upon the broker or agent the obligation to perform the duty which he has thus assumed. But here no such promise or assurance was given, nor was there any arrangement between the parties or any instruction given by plaintiff to keep up the insurance at all times or for any particular year . . .

[I]n the absence of an allegation that defendants had promised or contracted to renew the insurance, or that plaintiff had requested that he be kept insured, defendants were under no duty, contractual or otherwise, either to effect a renewal or gratuitously to remind plaintiff that his then present insurance had expired.

379 Pa. at 116-118, 108 A.2d at 692, 693. As was the circumstance in Luther, the factual background of the present case contains no alleged affirmative assurances, promises, or statements, attributable to the carrier or its agent, that could have lulled the insured into believing that policies would be renewed indefinitely or that notice of non-renewal would be provided. Likewise, no request was made by the instant policyholder to maintain insurance coverage in effect from year to year, indefinitely.

Indeed, aside from the brevity of the time between the policy’s lapse and Jarvis’ death, i.e., four days, the present case is not to be distinguished from that of Luther, wherein a nine month period elapsed between the policy’s expiration and the filing of a claim. Certainly, however, the duration of the lapse is not determinative of the insurer’s liability. If a carrier does not inform a policyholder of the expiration of his insurance, and a lapse in coverage thereby results, the insurer’s liability should not be dependent upon whether an arbitrarily demarcated time period has expired prior to the occurrence of an accident for which compensation is sought.

The rationale for the Luther decision was, in essence, that the responsibility for overseeing the continuity of an insured’s coverage rested solely upon the policyholder, and that the insured had no legitimate expectation of assistance in this regard from the insurer. The Court stated:

[The plaintiff policyholder] must certainly have been aware of the fact that he had not received a new policy or any certificate of renewal of the old policy, or that he had paid any premium or been billed for one. . . The fact is that plaintiff was merely assuming that defendants would continue to look after him without his giving any further attention to the matter.

379 Pa. at 117, 108 A.2d at 693.

The stated rationale, although perhaps relevant to expectations arising from insurance contracts entered during the early 1950’s, when the Luther case arose, at least today does not reflect the realities of insurance industry customs, and the concomitant expectations of parties to insurance contracts. Common experience demonstrates that, in practice, routine billing procedures in the insurance field induce the belief that the insured is relieved of responsibility for monitoring the dates for policy expiration and premium payment. The insured has learned to rely wholly upon notices from insurance carriers and their agents for information as to impending expirations of policies and the need for action to maintain coverage. Indeed, this reliance has been encouraged by insurers and their agents, who, in the interest of retaining business, have almost invariably furnished such notices despite the absence of an express request therefor by the insured. The typical policyholder maintains no awareness of the date when his coverage expires, having been lulled into the belief that notice will be forthcoming as to the date when further action on his part is required. The insurance carrier, being responsible for instilling such reliance, cannot be permitted to silently ignore the harm that can result from failure to notify the insured of the termination of an agent, and the consequent non-renewal of coverage. Recognition of a carrier’s duty to provide the expected notice is, therefore, necessary, and when a breach of that duty occurs, as in the present case, the carrier shall be estopped from asserting the expiration of the policy as a bar to recovery.² This Court’s decision in Luther is, accordingly, overruled.

Order of Commonwealth Court reversed.

WILKINSON, J., did not participate in the consideration or decision of this case. ROBERTS, J., files a dissenting opinion in which NIX, J., joins.

1 . Jarvis v. Workmen’s Compensation Appeal Board, 40 Pa.Cmmw.Ct. 44, 396 A.2d 491 (1979).

2 . We find no merit in appellee’s contention that the legislature has, merely by enacting a requirement that insurers provide notice of the non-renewal of automobile insurance policies (Act of June 5, 1968, P.L. 150, No. 78, § 5, 40 P.S. § 1008.5) while failing to address the matter of notice with regard to other types of insurance, demonstrated an intent that the instant notice requirement not be imposed.