Barbara TERRY, Plaintiff-Co-Appellant, v. MONGIN INSURANCE AGENCY and Utica Mutual Insurance Company, Defendants-Appellants, Phillip G. WADZINSKI, Pecard Chemical Company, Valerie A. Winquist, Beth A. Boyer, Employers Mutual Casualty Company, and Security Mutual Casualty Company, Defendants-Co-Appellants, Joan A. JOHNS, Defendant, ECONOMY FIRE & CASUALTY COMPANY, Defendant-Respondent-Petitioner, ASSOCIATED HOSPITAL SERVICES, INC., Intervening Plaintiff.
No. 80-976
Supreme Court of Wisconsin
January 18, 1982
105 Wis. 2d 575 | 314 N.W.2d 349
Argued December 1, 1981.
For the reasons set forth, I would dismiss the petition for review as having been improvidently granted.
I am authorized to state that Chief Justice Bruce F. Beilfuss joins this dissenting opinion.
A joint brief was filed by Philip A. Munroe and Di Renzo & Bomier of Neenah, for defendants-co-appellants; and by James J. Hinchey, Jr., Bruce B. Deadman and Everson, Whitney, Everson, Brehm & Pfankuch, S.C., of Green Bay, for defendants-appellants, and oral argument by Mr. Munroe.
SHIRLEY S. ABRAHAMSON, J. This is a review of of a decision of the court of appeals1 reversing a judgment of the circuit court for Brown county, Richard G. Greenwood, circuit judge. We affirm the decision of the court of appeals.
The relevant facts are not in dispute. On December 17, 1976, Barbara Terry went to the office of Mongin Insurance Agency to purchase automobile insurance. A representative of Mongin completed an “Econo-Plan” policy application to Economy Fire & Casualty Company for Terry. The application included information about Terry, the expected use of the car, and the amount and types of coverage requested. Terry paid Mongin the first quarter‘s premium in advance. Mongin forwarded the application to Economy. It did not forward the premium payment to Economy, and there is no indication in the record whether retention of the premium by Mongin was standard practice. Economy responded by sending Mongin a printed “Application Acknowledgment Form” concerning Terry dated December 21, 1976, on which a checkmark had been placed next to the following words:
“2. Application bound 30 days from date on the application pending file clearance unless terminated sooner or replaced by a policy.”
The next communication from Economy to Mongin is dated December 31, 1976. This communication advised Mongin that Terry‘s binder coverage would be cancelled as of January 5, 1977, and explained that because Terry had two recent speeding convictions, not one as shown on the application, Economy could “not issue the Econo-Plan policy.” Economy requested Mongin to “advise the
Terry initiated a suit against Mongin and its errors and omissions carrier, Utica Mutual Insurance Company, claiming that Mongin was responsible for failing to obtain coverage for Terry after Economy cancelled the binder. Utica impleaded Economy, and thereafter Terry, along with the claimants against Terry, asserted that Economy‘s cancellation of the binder was ineffectual and that Economy was liable for damages caused by Terry‘s negligence in the auto accident.
On motions for summary judgment filed by various parties, the circuit court granted summary judgment for Economy and dismissed Economy from the case concluding that Economy had effectively cancelled its binder prior to the accident. The court of appeals concluded that Economy did not comply with the ten-day notice requirement set forth in
The sole question of law presented by this review is one of statutory interpretation, i.e. whether
“(2) MIDTERM CANCELLATION. (a) Permissible grounds. Except as provided by par. (c), no insurance policy may be canceled by the insurer prior to the expiration of the agreed term or one year from the effective date of the policy or renewal, whichever is less, except for failure to pay a premium when due or on grounds stated in the policy, which must be comprehended within one of the following classes:
“1. Material misrepresentation;
“2. Substantial change in the risk assumed, except to the extent that the insurer should reasonably have foreseen the change or contemplated the risk in writing the contract;
“3. Substantial breaches of contractual duties, conditions or warranties; or
“4. Attainment of the age specified as the terminal age for coverage, in which case the insurer may cancel by notice under par. (b) accompanied by a tender of a proportional return of premium.
“(b) Notice. No cancellation under par. (a) is effective until at least 10 days after the 1st class mailing or delivery of a written notice to the policyholder.
“(c) New policies. Paragraphs (a) and (b) do not apply to any insurance policy that has not been previously renewed if the policy has been in effect less than 60 days at the time the notice of cancellation is mailed or delivered. No cancellation under this paragraph is effec-
tive until at least 10 days after the 1st class mailing or delivery of a written notice to the policyholder. . . .”3
Economy argues that
We must therefore begin, as did the court of appeals, with a discussion of binders and policies. Both binders and policies are contracts of insurance. The statutes, however, define only the term policy; they do not define the terms binder and contract of insurance.
The binder is a well-known and often used instrument in the insurance industry. The Wisconsin legislature has specifically authorized the issuance of binders.
“631.05 Oral contracts of insurance and binders. No provision of chs. 600 to 646 may be interpreted to forbid an oral contract of insurance or issuance of a written binder. The insurer shall issue a policy as soon as reasonably possible after issuance of any binder or negotiation of an oral contract.”
Although the Wisconsin insurance statutes do not define the word binder, the treatises and the cases are in agree-
The legislature has defined a policy as “any document other than a group certificate used to prescribe in writing the terms of an insurance contract, including endorsements and riders and service contracts issued by motor clubs.”
“A policy of insurance is the written or printed form to which the agreement or contract between the parties has been reduced, and which evidences such agreement or contract.” 1 Couch on Insurance 2d, sec. 3:1, p. 119 (1959).
Although we are not persuaded by Economy‘s reasoning that a binder is not encompassed by the term policy as used in the statute, we need not—and do not—decide in the instant case whether the term “policy” as defined in
We have repeatedly stated that “[t]he aim of all statutory construction is to discern the intent of the legislature,” Green Bay Packaging, Inc. v. ILHR Dept., 72 Wis. 2d 26, 35, 240 N.W.2d 422 (1976), and that a “cardinal rule in interpreting statutes” is to favor a con-
Campbell v. Wilson, 18 Wis. 2d 22, 32, 117 N.W.2d 620 (1962). The court nonetheless has held in Schilbrech v. Inter-Ocean Cas. Co., 180 Wis. 120, 192 N.W. 456 (1923), that oral contracts or binders for accident or health insurance were impliedly forbidden by the insurance laws which required certain contractual formalities for such insurance. The Insurance Laws Revision Committee, created by ch. 406, Laws of 1965, to study and make recommendations for the revision and codification of the state insurance laws, proposed
“NOTE: This section is intended to eliminate any such notion as that resulting in the decision in Schilbrek [sic] v. Inter-Ocean Gas. [sic] Co. (1923), 180 Wis. 120, 192 N.W. 456, that oral contracts or binders are impliedly forbidden because of particular sections of the code, especially those requiring certain contractual provisions. Of course this section does not require their use either. However, the oral insurance contract is a useful—indeed, necessary—device in some kinds of insurance; so also is the written binder. Any doubt about validity should be eliminated, in any case in which the general law of insurance contracts would otherwise find them valid. The statute of frauds has application to insurance only for unusual situations, apart from contracts that are promises ‘to answer for the debt, default or miscarriage of another person.‘” Laws of 1975, ch. 375, sec. 41, note to
sec. 631.05 .
We recognize that
“631.36 Termination of insurance contracts by insurers. (1) SCOPE OF APPLICATION. (a) General. Except as otherwise provided in this section or in other statutes or by rule under par. (c), this section applies to all contracts of insurance based on forms which are subject to filing and approval under s. 631.20(1).
“(b) Contracts more favorable to policyholder. The contract may provide terms more favorable to policyholders than are required by this section.
“(c) Exemption by rule. The commissioner may by rule totally or partially exempt from this section classes or parts of classes of insurance contracts if the policyholders do not need protection against arbitrary or unannounced termination.
“(d) Other rights. The rights provided by this section are in addition to and do not prejudice any other rights the policyholder may have at common law or under other statutes.
“(e) Construction. Nothing in this section prevents the rescission or reformation of any life or disability in-
surance contract not otherwise denied by the terms of the contract or by any other statute.”
The legislature did not state in
“‘Form’ means a policy or application prepared for general use and does not include one specially prepared for use in an individual case. See also ‘policy.‘”
The parties agree that the written binder for automobile insurance is not a form subject to filing and approval but that the application and the Econo-Plan policy (which was contemplated by the application and the binder) are such forms. If a binder is viewed as a contract of insurance based on an application or on a policy or on both an application and a policy, then a binder falls within the scope of
If we look at
Interpreting
“. . . For the average individual who purchases property or liability insurance, much of the value of his insurance lies in the fact that he may rely on the security of his property to insulate his savings from disasters beyond his control and give him some peace of mind. If an insurer may cancel a policy at mid-term without justification, or may decline to renew without sufficient notice, these values are undermined.” Id. at 266.
The purpose of
P.2d 1 (1970); State Automobile Mutual Ins. Co. v. Babcock, 54 Mich. App. 194, 220 N.W.2d 717 (1974); Georgia Farm Bureau Mutual Ins. Co. v. Gorden, 126 Ga. App. 215, 190 S.E.2d 447 (1972). Although Economy attempts to distinguish these cases on the basis of statutory or factual differences, we do not think the differences are material, and we find the reasoning of these cases persuasive.
We conclude that the legislature intended
By the Court.—Decision of the court of appeals affirmed.
COFFEY, J. (dissenting). I agree with the legal analysis contained in Mr. Justice STEINMETZ’ dissent to the majority opinion and dissent separately to point out that the majority opinion completely fails to consider whether Barbara Terry is a “policyholder” as defined in
I believe that the majority has erred in its decision by failing to consider whether Barbara Terry was a “policyholder” as defined by
“600.03 Definitions, usages and synonyms. In chs. 600 to 646, unless the context indicates otherwise:
“(37) ‘Policyholder’ means the person who controls the policy by ownership, payment of premiums or otherwise. See also ‘insured.‘”
In the case at bar, all communications concerning Terry‘s application of insurance were between the Mongin Insurance Agency representing Terry and Economy Fire and Casualty Company. In addition, Economy never received any premium for the insurance of the binder. The first quarter‘s premium was paid to Mongin by Terry and retained by Mongin for the entire time period that the binder was in effect. Under these facts, Barbara Terry cannot be considered a “policyholder” under the statutory definition of that term. She neither paid any money to Economy for the binder nor did she control the binder as evidenced by the fact that all communications concerning it were between Mongin and Economy. In fact, it was Economy that controlled the binder during the period of time relevant to this dispute.
Thus, even in light of the majority‘s construction of the term “policy” as including the binder issued in this case, it is clear that Barbara Terry was not entitled to ten days’ notice of cancellation as she was not a policyholder as defined in the insurance statutes. For this reason, the result reached by the majority opinion is erroneous regardless of the construction of the term “policy.”
Independent of my belief that Barbara Terry was not a policyholder and, therefore, not entitled to the statutory notice of cancellation is my conviction that the majority opinion will have adverse ramifications on Wisconsin insurance law. Among these adverse effects is that the majority‘s construction of
An insurance binder was designed to allow the insurer to provide temporary coverage to a potential insured while the insurer verified the information contained in the application for insurance. The binder furthered the public policy of having drivers continually insured during the period required to process insurance applications. The majority‘s construction of
It is a reality of life that many persons allow their insurance coverage to lapse before applying for a new insurance policy. These same people continue driving, although uninsured. If insurers are reluctant to issue binders, these persons will expose other users of the roadways to an increased danger of being harmed by an uninsured and financially irresponsible driver.
Where binders are still used by insurers, I believe the majority‘s opinion will have the adverse effect of causing the insurers to raise the cost of an insurance policy,
Considering each of the adverse effects of the majority decision, I believe that it is eminently clear that the legislature did not intend to require an insurer to give ten days’ statutory notice to cancel a binder. Because of the short term and temporary nature of the insurance afforded by a binder, common law reasonable notice is both fair and adequate as it was in the case at bar. The longer statutory notice was intended to apply only to insurance “policies” which establish a greater contractual commitment between the parties than do “binders.”
The fallacy of the majority‘s construction of
For the above stated reasons and those stated in the dissent of Justice Steinmetz, I would reverse the decision of the court of appeals.
I am authorized to state that Mr. Justice WILLIAM G. CALLOW joins in this dissent.
While it is true there is some existing law in other jurisdictions that a binder, when issued, by reference includes all conditions and terms of the requested policy to which it relates, including notice provisions,1 the Wisconsin legislature has not provided for such a result in this state.
The Wisconsin statutes distinguish between a policy and a binder.
The majority holds that
I would hold that under the circumstances of this case a binder may be terminated by giving the person applying for insurance reasonable notice of cancella-
- (1) On December 21, 1976, Economy sent agent Mongin a printed application acknowledgement form, the significant language being: “Application bound 30 days from date on the application pending file clearance. [U]nless terminated sooner or replaced by a policy.”
- (2) On December 31, 1976, Economy sent a cancellation to Mongin for Barbara Terry. As to the notice it stated: “Please advise the applicant that all binder coverage we have been affording will end at 12:01 a.m. Jan. 5, 1977.”
- (3) Carl Mongin, of the corporate Mongin agency, testified in his deposition that he informed Barbara Terry on January 4, 1977, that Economy refused to accept her.
- (4) On January 7, 1977, Carl Mongin told Barbara about applying for insurance with another company, Viking, and told her she would have to sign an application for a policy with Viking.
- (5) Barbara Terry acknowledged that on January 7, 1977, Carl Mongin told her:
- (a) Economy refused to cover her.
- (b) She did not have coverage.
- (6) The accident occurred on January 8, 1977.
There is a real dispute in this case between Barbara Terry and the Mongin agency as to whether she was led to believe she had coverage in another company, but that has no influence in determining the notice period of cancellation for the binder. Neither is it necessary nor permissible herein to discuss whether Mongin is Terry‘s or Economy‘s agent, since that is an issue also in the cause of action against Mongin.
I would hold under the circumstances of this case that Barbara received actual notice of cancellation of the Economy binder before she had the accident. Economy was not required to give ten days’ notice of cancellation of the binder, since a binder is not a contract of insurance based on forms which are subject to filing and approval under
The majority advises Economy to go to the legislature if Economy believes it is contrary to public policy to require ten days’ notice of cancellation of binders and to make that argument there and not to the courts.5 I do not believe the legislature has established the public policy adopted by the majority applying the notice requirement to binders. The legislature has distinguished
I would reverse the court of appeals, remand to the trial court and affirm the trial court‘s judgment in granting Economy‘s motion for summary judgment dismissing the pleadings as to Economy Fire and Casualty Company.
I am authorized to state that Mr. Justice William G. Callow joins in this dissent.