Capitol Insurance v. Commonwealth

Opinion by

Judge Doyle,

This is an appeal by Capitol Insurance Company (Capitol) from an adjudication of the Pennsylvania Insurance Commissioner (Commissioner)1 which construed an automobile insurance policy between Capitol *640and Alice M. Hartman (Insured)2 .to provide coverage for the one year period between February 22,1982 and February 22, 1983, including the date of January 15, 1983, on which Insured sustained damage to her automobile in the amount of $3,820.00.

On February 22,1982, Capitol issued to Insured an automobile insurance policy providing collision and Comprehensive coverage for her 1978 Buick Regal automobile. Insured timely paid the initial six months premium due on the policy for the period from February 22, 1982 to August 22, 1982. Then, on or about June 15, 1982, Capitol .prepared for Insured a document entitled “Expiration Notice” which directed the recipient to “ CONTACT YOUR BROKER FOR DETAILS.” Although this notice provided that “failure to pay the premium within the allotted time is construed as a refusal by the applicant to accept the insurance,” no premium amount or policy period was indicated. This document allegedly was mailed both to Insured and to the agent through whom she had purchased her policy. The Commissioner, however, •found as a fact that neither party ever received it.

On January 15, 1983, Insured was involved in an automobile accident, ,as a result of which her Buick Regal was damaged. Capitol refused to pay for the repairs to the vehicle on the basis that Insured’s policy ■had been terminated for nonpayment of premiums. Insured had the vehicle repaired at a cost of $3,820.00 and requested an investigation of her claim by the Pennsylvania Insurance Department. On March 1, 1983, an initial determination was issued in favor of ■Capitol. Following a formal hearing on June 20, 1983, however, this determination was reversed and an *641order was issued directing Insured to pay the premium due for the period from August 22,1982 through February 22,1983 and directing Capitol to pay for all valid claims within the same time period. Capitol was also ordered to “cease and desist its practice of not delivering or mailing’ to its insureds a Notice of Cancellation whenever it attempts ¡to terminate an automobile liability insurance policy at any point in the policy period other than the twelve-month anniversary date.”

We agree with the Commissioner that this case is governed by Federal Kemper Insurance Co. v. Insurance Department, 79 Pa. Commonwealth Ct. 345, 469 A.2d 344 (1984). This Court held in Kemper that the provisions ¡of the Act of June 5, 1968 (Act), P.L. 140, as amended, 40 P.S. §§1008.1-1008.11, do not permit insurance companies to cancel ¡or fail to renew automobile insurance policies which have been in effect for less than one year for nonpayment of premiums3 without providing a formal cancellation notice meeting the requirements of Section 5 of the Act, 40 PjS. §1008.5.

Capitol admits that its notice did not comply with the requirements of .Section 5, but asserts that its notice did constitute an “offer to renew”, and that Section 6 of the Act, 40 P.S. §1008.6, therefore applies. ¡Section 6 provides that a manifestation of willingness to renew by an insurer precludes application of any other provision of the Act. The error in this ¡argument is palpable, because Kemper held that “under the terms of the Act, renewal can only occur upon the expiration of tivelve months of insurance coverage. ...” Id. at 349, 469 A.2d at 346 (¡emphasis in original). This holding was based principally on the language of Sec*642tion 1(2) of the Act, 40 P.S. §1008.1(2), which defines the term “renewal” or “to renew” and which provides, in pertinent part, that

any policy with a policy period or term of less than twelve months . . . shall for the purpose of this act be considered as if written for .successive policy periods or terms of twelve months.

■Obviously, if a policy must be 'in effect for at least twelve months in order to be “renewed”, an offer .to renew .after .six months is meaningless.4

'Capitol next attempts to distinguish Kemper from the case at bar on factual grounds, asserting that a distinction should be drawn-on the basis that nearly five months had passed .since the six month “expiration date” of Insured’s policy when she had her 'accident, as opposed to less than three weeks in the case of the insured in Kemper.5 We do not consider the mere passage of .time to affect the Kemper rationale, as long as the one year anniversary date of a policy has not yet arrived.

Finally, Petitioner urges that Kemper should apply only to required insurance, such as personal injury protection, and not to collision coverage, which is generally optional with an insured. There is no basis for making this distinction either in the language of Kemper or in the language of Section 1(2) of the Act referred to above. Although in general the equities underlying ,the Act may be stronger in cases of personal injury, we think the more logical interpretation *643of the Kemper decision is that it applies to all types of insurance covered under the Act, i.e., ¡to “.bodily injury and property damage liability, comprehensive, and collision coverages and to the provisions therein, if any, relating to medical payments and uninsured motorists coverage,” 40 P..S. §1008.2.

For the reasons given above, we affirm .the decision of the Commissioner.

Order

Now, February 25, 1985 the decision .and order of the Pennsylvania Insurance 'Commissioner in the ■above captioned matter dated December 7, 1983, No. P83-4-12, is hereby affirmed.

This decision was reached prior to the resignation of Judge Williams, Jr.

Tbe adjudication was signed by bearing examiner John J. Flynn on December 7, 1983 and was adopted mmo pro tuno by tbe Insurance Commissioner in an order dated January 31, 1984 and signed by Acting Insurance Commissioner Anthony A. Geyelin.

Petitioner in this appeal is Capitol Insurance Company and Respondents are Acting Insurance Commissioner, Anthony A. Ceyelin, and the Pennsylvania Department of Insurance. Alice M. Hartman has filed a brief as Intervener.

Nonpayment of premiums is otherwise a legitimate ground for cancellation or refusal to renew under Section 4(1) of the Act, 40 P.S. §1008.4(1).

This conclusion makes it unnecessary to consider Capitol’s argument concerning presumption of receipt.

Capitol also attempts to distinguish this case by asserting that there would have been no gap in coverage if Insured had responded to the notice allegedly mailed to her by Capitol. This is not a legitimate basis for distinction, as a similar offer to extend coverage was also made prior to the six month expiration date in Kemper.