State Farm Fire v. Van Horn

F I L E D
United States Court of Appeals
Tenth Circuit
UNITED STATES COURT OF APPEALS
FEB 11 1998
FOR THE TENTH CIRCUIT
PATRICK FISHER
Clerk

STATE FARM FIRE & CASUALTY
COMPANY,

Plaintiff-Appellee,
No. 97-5131
v. (D.C. No. 96-CV-1144-B)
(N.D. Okla.)
DAVID VAN HORN; PORTIA VAN
HORN,

Defendants-Appellants.

ORDER AND JUDGMENT *

Before BRORBY, BARRETT, and BRISCOE, Circuit Judges.

After examining the briefs and appellate record, this panel has determined

unanimously to grant the parties’ request for a decision on the briefs without oral

argument. See Fed. R. App. P. 34(f); 10th Cir. R. 34.1.9. The case is therefore

ordered submitted without oral argument.

*
This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. The court
generally disfavors the citation of orders and judgments; nevertheless, an order
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.
 Defendants David Van Horn and Portia Van Horn appeal the district court’s

entry of summary judgment in favor of plaintiff in this declaratory judgment

action filed pursuant to 28 U.S.C. § 2201(a). We affirm.

Plaintiff issued a fire insurance policy to defendants, who chose to pay the

premiums on a quarterly basis. In June 1995, and September 1995, defendants

failed to make their quarterly payments, so plaintiff sent cancellation notices to

defendants, and defendants subsequently made the payments to keep the policy in

effect. Defendants did not make the quarterly payment due December 14, 1995.

The property that had been covered by the fire insurance policy sustained damage

due to fire on June 1, 1996. Plaintiff claims it sent a cancellation notice to

defendants on December 27, 1995, advising defendants that the policy would be

canceled in ten days. After the ten days had expired, plaintiff canceled the fire

insurance policy as of January 11, 1996.

Defendants admit that they did not make any payments on the policy after

October 1995. They claim, however, that they did not receive the cancellation

notice mailed on December 27, 1995, and that, under Oklahoma law, plaintiff

could not cancel the insurance policy unless it had proof that they actually

received the cancellation notice.

Plaintiff filed this declaratory judgment action in federal district court on

December 11, 1996. Shortly thereafter, defendants filed a complaint in an

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Oklahoma state court claiming, among other things, that this plaintiff breached its

contract under the subject fire insurance policy. Based on that filing, defendants

then moved for dismissal of the federal action. The district court denied the

motion and ultimately granted plaintiff’s motion for summary judgment.

On appeal, defendants assert that the district court erred in failing to

dismiss the federal court case in favor of the state court case. They also maintain

that Oklahoma law requires proof that they, as the insureds, actually received the

cancellation notice, and that proof that the notice was mailed is inadequate to

sustain the summary judgment.

We review a district court’s decision to deny defendants’ motion to dismiss

the federal declaratory judgment action for an abuse of discretion. See Wilton v.

Seven Falls Co., 515 U.S. 277, 289-90 (1995). Upon consideration of defendants’

arguments and the factors listed in State Farm Fire & Casualty Co. v. Mhoon, 31

F.3d 979, 983 (10th Cir. 1994), for evaluating whether a federal district court

should hear a declaratory action, we conclude that the district court did not abuse

its discretion.

Turning to the merits, we review de novo the district court’s summary

judgment order, applying the same standards as the district court under

Fed. R. Civ. P. 56(c). See Wolf v. Prudential Ins. Co. of Am., 50 F.3d 793, 796

(10th Cir. 1995). There is no dispute that Oklahoma state law controls. In

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applying Oklahoma law, we afford no deference to the district court’s legal

rulings. See Salve Regina College v. Russell, 499 U.S. 225, 238-39 (1991).

Defendants do not contest that the fire insurance policy permitted

cancellation upon ten day’s advance written notice. They do not contend that

their address listed on the policy was incorrect. They claim that they did not

receive the cancellation notice. They claim their mortgagee also did not receive

the cancellation notice, even though a copy was mailed to him. Consequently,

defendants argue, they successfully rebutted plaintiff’s evidence that it mailed a

cancellation notice, thereby defeating summary judgment.

Defendants rely on Great American Indemnity Co. v. Deatherage, 52 P.2d

827, 831 (Okla. 1936), and Farmer’s Insurance Exchange v. Taylor, 193 F.2d 756

(10th Cir. 1952), for the proposition that actual notice of cancellation is required

before an insurance policy can be canceled. Deatherage held that the evidence

failed to show that the insurance company mailed a cancellation notice to the

insured. See Deatherage, 52 P.2d at 831. Taylor was bound by Deatherage’s

holding. See Taylor, 193 F.2d at 759. Deatherage, however, has been

distinguished from cases similar to this one where notice of cancellation was

mailed in strict compliance with the terms of the insurance policy to the insured’s

address as listed on the policy. See, e.g., Midwestern Ins. Co. v. Cathey, 262 P.2d

434, 435-36 (Okla. 1953). Accordingly, Deatherage and Taylor are inapposite.

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 Oklahoma law does not necessarily require that an insurance company

prove that the insureds received notice of cancellation of a fire insurance policy.

Where the insurance company strictly complied with the terms of the policy for

cancellation, including mailing a notice of cancellation to the insureds at their

address shown on the policy, the risk of non-receipt falls on the insureds. See

Cathey, 262 P.2d at 435-36; accord Richardson v. Brown, 443 F.2d 926, 926, 928

(10th Cir. 1971); Gilmore v. Grand Prix of Tulsa Corp., 383 P.2d 231, 234-35

(Okla. 1963). The burden is on the insurance company to show that notice of

cancellation was mailed to the address shown on the policy. See Oaks v. Motors

Ins. Corp., 595 P.2d 789, 792 (Okla. 1979).

In support of its claim that the cancellation notice was mailed to defendants

at the address listed on the policy in strict compliance with the policy terms,

plaintiff presented the statement of its employee, Tim Elliott, who testified that

on December 27, 1995, he followed the customary procedures in mailing a

cancellation notice to defendants whereby he checked the address, verified the

postmark date, and presented the notice to a United States Postal Service official.

See Appellants’ App. at 318-26. We are not persuaded by defendants’ argument

that Mr. Elliott did not establish mailing because he could not remember mailing

the specific cancellation notice to defendants. He testified that he never varied

his routine of mailing cancellation notices, see id. at 324, and his initials appear

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on the plaintiff’s copy of the cancellation notice, indicating that he mailed it, see

id. at 329-30. Under Oklahoma law, proof of mailing in strict compliance with

the terms of the policy is sufficient to cancel the policy, even where the insured

did not receive it. See State Farm Mut. Auto. Ins. Co. v. Chaney, 272 F.2d 20,

21-22 (10th Cir. 1959) (insurance policy canceled by mailing cancellation notice

to address on policy, even though notice returned as undeliverable); Cathey,

262 P.2d at 435-36 (same). Moreover, defendants were several months in arrears

on the payment of the premiums and should have anticipated a cancellation of the

policy. See Cathey, 262 P.2d at 436.

Relying on dicta in Deatherage, 52 P.2d at 831, defendants also argue that

the Oklahoma fire insurance policy statute, Okla. Stat. tit. 36, § 4803, permitting

an insurance company to cancel a policy by giving five days’ written notice to the

insureds, requires proof that the insureds actually received a cancellation notice.

The holding of Deatherage, however, was limited to whether the notice of

cancellation was mailed, and did not require interpretation of a statute. See

Cathey, 262 P.2d at 436 (“real issue” in Deatherage was whether notice of

cancellation was mailed; dictum misleading). Defendants cite no other authority

for their position that the statute requires proof of actual notice, and later case

law dictates the result reached here by the district court. See, e.g., id. at 435-36;

Richardson, 443 F.2d at 928.

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 Defendants’ remaining arguments are without merit. Defendants’ motion to

certify a question to the Oklahoma Supreme Court is DENIED.

The judgment of the United States District Court for the Northern District

of Oklahoma is AFFIRMED.

Entered for the Court

James E. Barrett
Senior Circuit Judge

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