DocketNumber: C.A. No. WC 2006-0506
Judges: THOMPSON, J.
Filed Date: 1/8/2009
Status: Precedential
Modified Date: 7/6/2016
In response, Defendant points to the purpose of Regulation 77, which is, to "establish standards and procedures for inspection of vehicles prior to the issuance by insurers of Physical Damage Coverage," as evincing a legislative intent to protect insurers by requiring owners prove the good condition of their vehicle before the insurer is held liable for property damage coverage. Regulation 77 § 2. Accordingly, to find coverage in this case would lead to the absurd and unjust result of allowing the Plaintiff, who neglected to fulfill his obligation under both the contract and the regulatory scheme, to use a statute designed to protect the insurance company, as a weapon against it. With respect to the question of the clarity of the suspension, Defendant points out that Plaintiff was sent a letter, as required by state law, clearly informing Plaintiff of *Page 4 his suspension coverage, and that the additional correspondence with Progressive are explained by the fact that Plaintiff maintained liability coverage with them on the same and other vehicles.
Under G.L. 1956 §
. . . [If] the inspection is not conducted prior to the expiration of the ten (10) business days deferral period, motor vehicle Physical Damage Coverage on the motor vehicle shall be suspended at 12:01 a.m. of the day following the tenth business day, and such suspension shall continue until the inspection is done. . . . Id. at § 10(1).
Section Ten also establishes the notice requirements that accompany the suspension:
Whenever Physical Damage Coverage is suspended, the insurer shall within three (3) business days give notice to the applicant, the producer of record, and any lienholders a completed prescribed NOTICE OF SUSPENSION OF PHYSICAL DAMAGE *Page 5 COVERAGE (Form C) . . . Whenever there is a suspension of Physical Damage Coverage for more than ten (10) days, the insurer shall make a pro-rata premium adjustment (return premium or credit) which shall be mailed to the applicant no later than forty-five (45) days after the effective date of the suspension. After the insurer makes the pro-rata premium adjustment, reinstatement of Physical Damage Coverage shall only be effective upon inspection and payment by the applicant to the insurer of the adjusted premium for the Physical Damage Coverage in full or in accordance with the insurer's normal payment plan, at the insurer's option. Id. at § 10(2).
Finally, Section Ten establishes the consequences for the insurer's failure to inspect under the regulation:
If the motor vehicle is not inspected pursuant to this Regulation due to the fault of the insurer, or if its producer fails to give the verbal or telephone notice required by this Regulation, or fails to mail or deliver the NOTICE OF MANDATORY PRE-INSPECTION REQUIREMENT (Form B) or obtain the ACKNOWLEDGMENT OF REQUIREMENTS FOR PRE-INSPECTION INSPECTION (Form D), Physical Damage Coverage on the motor vehicle shall not lapse. The failure of the insurer to act promptly does not relieve it of its obligation to inspect. Id. at § 10(2).
Here, Plaintiff argues that the notice of suspension, sent on the fourth instead of the third day after the suspension of coverage, constituted ineffective notice and as such, invalidated the suspension. Plaintiff points to Capuano v. Kemper Ins. Companies,
Plaintiff's reliance on those cases, however, is misplaced, as each of those cases deals with cancellation of coverage, as provided for by Department of Business Regulation, Division of Insurance, Regulation 16 ("Regulation 16"), whereas this case is governed by the law of physical damage suspensions as provided for by Regulation 77. In contrast to Regulation 16, which specifically requires that "[n]o insurer shall exercise its right to cancel a policy unless a written notice of cancellation is mailed or delivered to the named insured, at the address shown in the policy, at least thirty (30) days prior to the effective date of cancellation . . ., "2 Id. at § 5(B), Regulation 77, the regulation at issue in this case, requires that "[w]henever Physical Damage Coverage is suspended, the insurer shall within three (3) business days give notice to the applicant." Id. at § 10(2). Thus, unlike a cancellation which is a contractual prerogative of the insurer that becomes effective only after a notice is sent, a suspension becomes effective by operation of law immediately "at 12:01 a.m. of the day following the tenth business day" when no inspection has occurred.Id. at § 10(2).
The distinction between cancellation and suspension makes sense in light of the public policy under girding Rhode Island's automobile insurance regulatory scheme. The legislature has seen fit to mandate that all vehicle operators carry liability insurance and punish those who fail to do so. See §
That is not to say that the regulations are entirely unconcerned with notification. In providing that the insurer send notice of the suspension within three days, the statute would seem to be concerned with ensuring that the insured is aware that the consequences of his actions have actually resulted in the statutorily mandated result and to provide him with the opportunity to end the suspension by having an inspection. A much more difficult case might be where the notice of suspension were sent late and in the time between when it would have initially been received and when it was actually received, the Plaintiff has an accident and seeks recovery. That, however, is not the case before the Court; rather Plaintiff had ample notice, well over a month, and opportunity to have the inspection. He did not. Thus, in light of the clear notice of the suspension provided with more than ample time for Plaintiff to cure his performance deficiencies *Page 8 and the Plaintiff's neglect in doing so, the Court concludes that the late notice, sent a day after the insurer was required to by Regulation 77, did not void the statutorily imposed suspension.
Plaintiff further argues that the Court should make a finding of coverage because the suspension was not "clear, definite, and unequivocal [] declare[ing] that as of a certain date the insurer is no longer bound under the policy." Automobile Club,
The "clear, definite, and unequivocal" standard has never been explicitly applied to suspensions. Id. This is probably because Regulation 77 provides a specific form to be sent notifying the insured of his suspension, and as such, the form is deemed clear and effective as a matter of law. In this case it is uncontroverted that Plaintiff was sent and received the notice required by Regulation 77 entitled "Notice of Suspension of Physical Damage Coverage — You Are No Longer Insured for Physical Damage to Your Car." Thus, there can be no question that the suspension was clear and unambiguous as a matter of law. Furthermore, even assuming the Automobile Club standard were applicable to suspensions, the Defendant's failure to timely tender the pro-rata adjustment fails to cast doubt on the definite and unequivocal nature of the statutorily required notice of suspension. The effect of the premium adjustment provision is not to undo the statutorily imposed suspension but to require that an inspection accompany any future attempt at reinstatement of the policy, ". . . reinstatement of the policy shall only be *Page 9 effective upon inspection and payment by the applicant." Regulation 77 § 10(2). Thus, this Court concludes that the Plaintiff received the notice required by Regulation 77 and that such notice was clear, definite, and unequivocal as a matter of law.
Counsel for Defendant shall submit an appropriate order for entry in accordance with this Decision within ten days from issuance of this Decision.
The director of the department of business regulation may promulgate such rules and regulations as are necessary and proper to carry out the duties assigned to him or her by this title or any other provision of law.
In turn, §
No motor vehicle liability policy or endorsement insuring a private passenger motor vehicle weighing less than ten thousand (10,000) pounds for physical damage coverage, shall be issued in the state of Rhode Island unless the insurer has inspected and photographed the motor vehicle in accordance with rules and regulations set forth by the insurance division of the department of business regulation. This section does not apply to motor vehicles rated or insured under a commercial motor vehicle insurance policy. An insurer may elect to waive inspections and photographs for all motor vehicles upon written notice to the department of business regulation.