43 N.C. App. 621 | N.C. Ct. App. | 1979
Appellants have not excepted to any finding of fact made by the trial court. Their only exceptions and assignments of error are directed to the court’s conclusion of law No. 6 and to the conclusion of law contained in the second sentence of conclusion of law No. 5. Therefore, this appeal presents for our review only the questions whether these conclusions of law to which exceptions have been taken are supported by the findings of fact, and whether the judgment rendered is in turn supported by the find
We first address the questions presented by appellants’ assignment of error to the conclusion of law No. 6 in which the court concluded as a matter of law that the binder issued to defendant-appellees, Wake Anesthesiology Associates, Inc. and Drs. Haynes, King and Schick, for the period 1 October 1975 to 1 November 1975 is still valid and in full force and effect. From the language employed by the trial court in its conclusion of law No. 6, it is apparent that the court based its conclusion that the binder is still valid on its determination that plaintiffs had “not effectively cancelled their binder pursuant to the terms of the Statement of Intent, Notice of Protest and Reservation of Rights,” and that “[t]he joining of these defendants on October 29, 1975 to these legal proceedings does not constitute notice of cancellation of defendants’ coverage or adequate notice that the plaintiffs intend to exercise rights reserved in Statement of Intent, Notice of Protest and Reservation of Rights.” For the reasons hereinafter stated, we find the binder void from its inception. Therefore we do not reach the question whether, had it been valid when issued, plaintiffs took adequate steps to cancel it. Plaintiffs here were careful to maintain that the binder was null and void as of its inception and not that it was no longer valid because it had been effectively cancelled by them. Indeed, had plaintiffs attempted to cancel the binder, they might have waived a ground for avoiding it. “By purporting to cancel a policy rather than avoid it from its inception, the insurer may be deemed to waive a ground for avoiding it from its inception, with the consequences that if the cancellation should not be operative for any reason, the insurer will find itself in the position of having waived the ground on which it could have avoided the policy and having failed to cancel the policy; and the policy would therefore remain in force.” 17 Couch on Insurance, 2d, § 67:50; see also, 12 Appleman, Insurance Law and Practice, § 7124.
In our opinion, whether the binder is still valid or was void from its inception depends upon the effect which should properly be given to the decision rendered by our Supreme Court in the earlier stage of this litigation, reported in Indemnity Co. v. Ingram, Com’r of Insurance, 290 N.C. 457, 226 S.E. 2d 498 (1976),
It is quite clear, however, that such broad statements as to the effect of a determination of unconstitutionality must be taken with qualifications. The actual existence of a statute, prior to such a determination, is an operative fact and may have consequences which cannot justly be ignored. The past cannot always be erased by a new judicial declaration. The effect of the subsequent ruling as to invalidity may have to be considered in various aspects, — with respect to particular relations, individual and corporate, and particular conduct, private and official. Questions of rights claimed to have become vested, of status, of prior determinations deemed to have finality and acted upon accordingly, of public policy in the light of the nature both of the statute and of its previous application, demand examination.
Chicot Co. Drainage Dist. v. Baxter State Bank, 308 U.S. 371, 374, 84 L.Ed. 329, 332-33, 60 S.Ct. 317, 318-19 (1940).
Our own Supreme Court adopted this approach in Roberson v. Penland, 260 N.C. 502, 133 S.E. 2d 206 (1963), in which it was held that parties who voluntarily signed a consent judgment and executed a deed on the good faith, albeit erroneous, assumption that the statute giving the husband the right to dissent from the will of his wife was valid, had no right to have the consent judgment cancelled and the deed rescinded when it was subsequently determined in other litigation that the statute was unconstitutional. In the opinion in that case, our Supreme Court quoted with approval the following statement from McLean Coal Co. v. Pittsburgh Terminal Coal Corp., 328 Pa. 250, 253, 195 A. 4, 6 (1937):
The unconstitutionality of a statute is a defense to an action only when the liability is created by the statute in question; the invalidity of an act is of no avail when the liability arises*632 from acts indicating the assumption of liability by parties who may, it is true, be acting only because the statute was passed, but who are, nevertheless, voluntarily assuming a relationship which creates a liability.
In the present case, unlike the situations presented in Roberson v. Penland, and in McLean Coal Co. v. Pittsburgh Terminal Coal Corp., supra, plaintiffs did not voluntarily assume any liability. If their liability was not created by the express language of Ch. 427 of the 1975 Session Laws, in a very real sense it was imposed upon them by that statute. True, the statute allowed them a choice, either to issue to any and all applicants declared by the statute to be “eligible”, medical malpractice liability insurance (something which they had never previously done, did not wish to do, and which they had insufficient expertise to do successfully), or to surrender their licenses and cease writing any liability insurance in North Carolina. This was, however, a choice which our Supreme Court held the Legislature had no constitutional power to force plaintiffs to make. Clearly, giving them such a choice could not make their actions in issuing binders, rather than immediately going out of business, voluntary in a legal sense. The highwayman traditionally allowed his victim the choice of surrendering his money or his life, but when the victim responded by handing over his purse, no one seriously contended that he did so voluntarily. When the plaintiffs issued the binders here in question, they did so expressly stating that the binders were being issued under the mandate of the statute, under protest, “and not as a voluntary act of the Company.” The entire record attests the truth of this statement. Plaintiffs here, unlike the plaintiffs in Roberson v. Penland, supra, did not voluntarily enter into a contract under the mistaken assumption that the statute was valid. On the contrary, right from the start plaintiffs here took the position that the statute might be unconstitutional, and they took prompt action to have it declared so. They knew, however, that should they hesitate in rendering prompt compliance with the statute, the Commissioner of Insurance could, and in all probability would, revoke their licenses to do business in North Carolina. At least this was true during the period before they were able to obtain the protection of a court order prohibiting him from doing so, which is precisely the period during which the binders here in question were issued. With their licenses revoked, they would
Even viewing the liability as one having been created by statute, however, the question still remains whether the unconstitutionality of Ch. 427, 1975 Sess. Laws, should be given effect retroactively from the date of the Supreme Court’s opinion declaring that statute unconstitutional. In Lemon v. Kurtzman, 411 U.S. 192, 36 L.Ed. 2d 151, 93 S.Ct. 1463 (1973), the United States Supreme Court recognized that there is no principle which requires absolute retroactive effect to be given in every case to a decision of unconstitutionality, and that courts should consider whether retrospective operation will further or retard the operation of the decision. See Lemon, supra, at 199, 36 L.Ed. 2d at 160-161, 93 S.Ct. at 1468-1469. In Lemon, plaintiffs sought to restrain payments of public funds under contracts made with church-affiliated schools for services performed prior to a determination by the United States Supreme Court that the scheme for payment of state funds to such schools violated the Establishment Clause of the First Amendment. The Supreme Court affirmed a decision of a three-judge federal district court permitting the state to reimburse non-public sectarian schools because it determined that prospective application of the decision of unconstitutionality would not foster the constitutional infirmity of the payment scheme.
The basis on which our Supreme Court found the act creating the Health Care Liability Reinsurance Exchange unconstitutional in Indemnity Co. v. Ingram, supra, was that the State could not,
Additionally, although defendant-appellees here, like the parochial schools in Lemon, supra, relied on the statute and the contract made pursuant to it in continuing to perform services, they, unlike the parochial schools, had notice that the contract was being entered into by the other party under protest and that the constitutionality of the statute was being questioned. On 24 September 1975, six days before the verbal binder to defendant-appellees was issued, plaintiffs mailed to each of their agents in North Carolina, including the Moore & Johnson Insurance Agency, the “Statement of Intent, Notice of Protest and Reservation of Rights,” setting forth plaintiffs’ position. On 29 September 1975, the day before the verbal binder was issued to defendant-appellees, the president of Moore & Johnson Agency wrote a letter to plaintiffs acknowledging receipt of that statement. Harry W. Moore and the Moore & Johnson Agency were independent insurance agents and as such were agents with respect to issuance of the binders not only for plaintiffs but for defendant-appellees as well. (The trial court expressly so concluded in its Conclusion
I had received a request from Wake Anesthesiology Associates, Inc. and Doctors Haynes, King and Schick for medical malpractice coverage. I had explained to them that the coverage available would be that available through the Act. I explained to them the state that existed here in North Carolina in regard to medical malpractice insurance at that time including the availability of it. I can’t exactly recall whether it was during that conversation that I advised them that I had received the Notice and Statement of Intent. It could have been. It could have been actually before that conversation or afterwards. At sometime during the period of time of negotiations for this binder of insurance, they did have notice of the Statement of Intent.
It is clear, therefore, that when the verbal binder was issued on 30 September 1975, defendant-appellees had knowledge of plaintiffs’ Statement of Intent, Notice of Protest and Reservation of Rights, and were on notice that plaintiffs issued the binder under protest, not as their voluntary act, and that plaintiffs intended to consider the policy “null and void as of the inception date” should they have the option to do so by reason of a court decision declaring Ch. 427 of the 1975 Session Laws invalid. Thus, defendant-appellees here, unlike the parochial schools in Lemon, supra, were at all pertinent times fully informed that the validity of their contract and the constitutionality of the statute under compulsion of which it was made were being attacked.
The United States District Court decision in Lemon, 348 F. Supp. 300 (E. D. Penn. 1972), which was affirmed by the United States Supreme Court, focused on the lack of detriment to the State of Pennsylvania in requiring payment to be made under the contracts. Here, it is clear that plaintiffs will suffer substantial
Defendant-appellees contend that the Reservation of Rights attached to their binder is void as against public policy. This contention is without merit. Our Supreme Court has held that “an agreement which violates a provision of a statute or which cannot be performed without a violation of such provision is illegal and void.” Cauble v. Trexler, 227 N.C. 307, 311, 42 S.E. 2d 77, 80 (1947). The contract entered into by defendant-appellees here in accepting the binder for insurance coverage is not such an agreement. The Statement of Intent recited that the coverage was only contingent if Ch. 427 of the Sess. Laws was held unconstitutional. There is no indication that plaintiffs would have refused to recognize the insurance binder as valid if the statute had been held constitutional. Because the statute has now been declared void it no longer represents the public policy of this State, and plaintiffs’ Statement of Intent, Notice of Protest and Reservation of Rights may be given full force and effect.
Plaintiffs also assign error to the trial court’s conclusion that there is no presently existing controversy between plaintiffs and defendants other than defendant-appellees. This action was originally brought by plaintiffs under G.S. § 1-264 to obtain a declaratory judgment that all applications received and binders issued under Ch. 427, 1975 Session Laws, were null, void and unenforceable. Plaintiffs alleged in their complaint that they had been bound on applications for health care liability insurance by their agents. Each of the associations and individual physicians to whom binders were issued was made a party to this suit. The Declaratory Judgment Act grants jurisdiction to our courts to adjudicate cases in which it appears from the allegations of the complaint that a real controversy exists between the parties, that the
Judgment in favor of defendant-appellees is reversed. As to that portion of the judgment denying declaratory relief on the issue of the validity of binders issued to other defendants, the cause is remanded for further proceedings consistent with this opinion.
Reversed and remanded.