GLOBE AMERICAN CASUALTY COMPANY v. MICHELLE E. DAVIDSON, EARL R. KEMPLIN
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RENDERED: April 25, 2003; 2:00 p.m.
NOT TO BE PUBLISHED
Commonwealth Of Kentucky
Court of Appeals
NO. 2001-CA-000628-MR
GLOBE AMERICAN CASUALTY COMPANY
v.
APPELLANT
APPEAL FROM CAMPBELL CIRCUIT COURT
HONORABLE WILLIAM J. WEHR, JUDGE
ACTION NO. 00-CI-00009
MICHELLE E. DAVIDSON,
EARL R. KEMPLIN
APPELLEE
OPINION
VACATING AND REMANDING
** ** ** ** **
BEFORE:
BARBER, McANULTY, AND SCHRODER, JUDGES.
McANULTY, JUDGE:
This is an appeal from a summary judgment
granted to Michelle E. Davidson in an automobile negligence and
insurance coverage case.
We vacate the judgment and remand to
the trial court.
On December 19, 1998, Appellee, Earl R. Kemplin
(Kemplin), obtained insurance coverage on a 1988 Chevrolet Astro
van with Appellant, Globe American Casualty Company, by making a
partial premium payment.
On December 31, 1998, after Kemplin
failed to pay the remainder of the premium when due, Appellant
mailed him a notice of cancellation of his policy.
denies having received the notice.
Kemplin
Effective January 17, 1999,
Appellant canceled Kemplin’s policy for non-payment of premium.
Around February 11, 1999, Kemplin made another partial premium
payment to Appellant, so Appellant temporarily reinstated the
policy.
On March 19, 1999, Appellant mailed Kemplin a second
notice of cancellation which notified Kemplin that his insurance
coverage through Appellant would cease on April 4, 1999, due to
non-payment of premium.
The notice of cancellation referenced
Kemplin’s policy number; however, the notice did not specify
that the policy covered the Chevrolet van.
At the time
Appellant mailed the notice, Kemplin was in the process of
moving and denies having received the second notice.
On April 11, 1999, Kemplin was driving Appellee,
Michelle Davidson (Davidson), to work in the Chevrolet Astro van
when Kemplin had a one-car accident, injuring Davidson.
Appellant denied coverage for Davidson’s claimed loss because it
took the position that it had effectively canceled Kemplin’s
insurance coverage as of April 4, 1999.
Davidson filed a
complaint in Campbell Circuit Court asserting a negligence
action against Kemplin and a bad faith action against Appellant
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as a result of Appellant’s denial of her claim.
In response,
Appellant filed a declaratory action seeking a ruling by the
court that Globe did not owe a duty of defense or
indemnification to Kemplin because Appellant had effectively
canceled Kemplin’s insurance policy prior to the accident.
Globe filed a motion for summary judgment on its declaratory
action.
Davidson filed a cross-motion for summary judgment,
seeking a ruling that Appellant owed a duty of defense and
indemnification to Kemplin.
Relying on Kentucky Farm Bureau Ins. Co. v. Gearhart,
Ky. App., 853 S.W.2d 907 (1993), the trial court issued an order
denying Appellant’s motion for summary judgment and granting
Davidson’s cross-motion for summary judgment.
The trial court
held that Appellant’s cancellation notice was defective because
Gearhart requires the vehicle insured to be designated on the
cancellation notice, and Appellant only provided the policy
number.
Subsequently, the trial court made its initial order
denying Appellant’s motion for summary judgment and granting
Davidson’s motion for summary judgment final and appealable, and
this appeal followed.
The sole issue on appeal is the applicability of the
holding in Gearhart to the facts of this case.
Appellant
presents three arguments in support of its assertion that it
effectively canceled Kemplin’s automobile insurance policy prior
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to the accident.
First, Appellant argues that its cancellation
notice complied with KRS 304.20-040 which does not require a
description of the vehicle.
Moreover, Appellant argues that
Gearhart was factually specific and does not require that a
notice of cancellation for an insurance policy covering only one
vehicle identify the vehicle.
Finally, Appellant argues that
equity principles require a reversal of the trial court’s
decision.
In response, Appellee asserts that the trial court
ruled correctly that Kemplin’s insurance was not canceled
properly due to the defective notice of cancellation sent by
Appellant.
In addition, Appellee argues that Appellant does not
have clean hands because it did not follow established
principles of Kentucky insurance policy cancellation law,
therefore it can not rest on principles of equity law.
Pursuant to Kentucky Rules of Civil Procedure (CR)
56.03, summary judgment is proper "if the pleadings,
depositions, answers to interrogatories, stipulations, and
admissions on file, together with the affidavits, if any, show
that there is no genuine issue as to any material fact and that
the moving party is entitled to a judgment as a matter of law."
The standard of review of a trial court's granting of summary
judgment is "whether the trial court correctly found that there
were no genuine issues as to any material fact and that the
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moving party was entitled to judgment as a matter of law."
Scifres v. Kraft, Ky. App., 916 S.W.2d 779, 781 (1996).
Where
the relevant facts are undisputed and the dispositive issue
becomes the legal effect of those facts, our review is de novo.
See Western Ky. Coca-Cola Bottling Co., Inc. v. Revenue Cabinet,
Ky. App., 80 S.W.3d 787, 790 (2001).
In this case, the contents
of the cancellation notice are undisputed, and the dispositive
issue is the legal effect of the notice; thus, our review is de
novo.
KRS 304.20-040 governs the cancellation of automobile
insurance policies.
“‛Policy’ means an automobile liability
insurance policy, delivered or issued for delivery in this
state, insuring a single individual or husband and wife resident
of the same household, as named insured, and under which the
insured vehicles therein designated” are of certain types.
304.20-040(1)(a).
(2)
Regarding cancellation of insurance,
(a) A notice of cancellation of a
policy shall be effective only if it is
based on one (1) or more of the
following reasons:
1.
Nonpayment of premium;
...
(3)
No notice of cancellation of a policy
to which subsection (2) of this section
applies shall be effective unless
mailed or delivered by the insurer to
the named insured at least twenty (20)
days prior to the effective date of
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KRS
cancellation; provided, however, that
where cancellation is for nonpayment of
premium, at least fourteen (14) days’
notice of cancellation accompanied by
the reason therefor shall be given.
Thus, under KRS 304.20-040, an insurer may cancel an automobile
insurance policy for nonpayment of the premium.
In order to
effectively cancel the policy for nonpayment of the premium, the
insurer must (1) mail or deliver a notice of cancellation to the
insured; (2) giving at least fourteen (14) days’ notice; and (3)
providing the reason for the cancellation.
There is no dispute
that Appellant’s cancellation notice complied with KRS 304.20040.
As between Appellant and Kemplin, the insurance
contract is consistent with KRS 304.20-040.
The contract
includes the following cancellation provisions:
3.
If this policy has been in effect for 60
days or more, or if this is a renewal or
continuation policy, we may cancel by
mailing to the named insured shown in
the Declarations at the address shown in
this policy:
a. At least 14 days notice if
cancellation is for nonpayment of
premium;
...
4. After this policy is in effect for 60
days, or if this is a renewal or
continuation policy, we will cancel only
a.
For nonpayment of premium...
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There is no dispute that Appellant’s cancellation notice
complied with the contract between the parties.
In addition to KRS 304.20-040 and the contract between
the parties, we must consider the holding of Gearhart, a case
decided by this court which addressed the issue of the proper
cancellation by the insurer of an automobile insurance policy.
See Gearhart, supra, 853 S.W.2d at 909.
Appellee Davidson
argues that Gearhart requires that a designation of the vehicle
for which coverage is being canceled be provided in the actual
notice of cancellation.
We agree that dictum in the Gearhart
opinion seems to suggest that the mere provision of a policy
number on the notice of cancellation is not adequate notice to
cancel an automobile policy; however, we believe the result was
specific to the facts of the case based on the content of the
cancellation notice at issue and the underlying circumstances.
In Gearhart, Gearhart had three separate automobile
insurance policies with Farm Bureau covering three separate
vehicles, one of which was an Isuzu.
S.W.2d at 908.
See Gearhart, supra, 853
Gearhart had full coverage on the Isuzu.
Id.
Eventually, Gearhart decided to sell the Isuzu and purchase a
Ford van.
Id.
He went to his local Farm Bureau office to
obtain only liability coverage on the Ford and to cancel the
full coverage on the Isuzu.
The local office issued
Id.
Gearhart a temporary certificate of insurance on the Ford, and
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the temporary certificate had the same policy number as the
Isuzu.
Id.
At this time, Farm Bureau advised Gearhart that no
payment was necessary because he had a credit from the premium
he had previously paid on the Isuzu.
Id. at 908.
In February of 1988, as a result of some paperwork
shuffling between Gearhart’s local Farm Bureau office and Farm
Bureau’s Louisville office, Farm Bureau sent Gearhart a
cancellation notice indicating that his coverage would end in
fourteen days.
Id.
The notice indicated the policy number
issued initially for the Isuzu and temporarily assigned to the
Ford, but, more significantly, the cancellation notice also
specifically indicated that it covered the Isuzu.
Id.
Gearhart
disregarded the notice because he no longer owned the Isuzu.
Id. at 908.
In April of 1988, Farm Bureau sent another notice to
Gearhart stating that the policy number at issue was no longer
in active status, and he could reactivate it.
Id.
“Significantly, this notice also referred to the covered vehicle
as a 1982 Isuzu, and noted a copy to the bank which held the
lien on it.”
Id. at 908.
Eventually, in October of 1988, an accident occurred
involving Gearhart’s Ford van.
to pay or defend the claim.
Id. at 909.
Farm Bureau refused
Gearhart settled the claim, and
brought suit against Farm Bureau alleging that he was damaged by
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the attempted cancellation of the automobile liability policy.
Id. at 907.
A jury found in favor of Gearhart, and Farm Bureau
appealed asserting that it had properly canceled the policy.
Id. at 909.
On appeal, this court applied the relevant sections of
KRS 304.20-040 set out above and held that Farm Bureau’s notice
of cancellation was inadequate as a matter of law.
Id. at 909.
This court reasoned as follows:
It takes no great leap of logic to conclude
that the cancellation notice of a policy
must include a proper designation of the
vehicle covered. In fact, such would appear
to be the plain meaning of the statute,
which we must uphold. Moreover, requiring
proper designation of the covered vehicle
will serve to alert the ordinary and
reasonable person that coverage is about to
expire, unlike the mere indication of a
policy number, which the vast majority of
people simply do not know. As a result, the
legislature must have intended to require
proper designation of the covered vehicle
for cancellation to be effective.
Id. at 909 (internal citations omitted).
We believe the fundamental issue in Gearhart as well
as the instant case is the adequacy of notice to the insured
that the insurer is canceling an automobile policy.
Moreover,
we distinguish Gearhart from this case based on the facts that
Gearhart had three separate insurance policies with the same
insurer for three separate vehicles, and the notice of
cancellation that the insurer sent Gearhart designated a vehicle
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that the insured no longer owned.
We believe the court’s
discussion in Gearhart is limited to those facts.
In this case, however, there is no dispute that
Kemplin only had one insurance policy with Appellant under which
he insured one vehicle, and Kemplin does not contend that any
information provided by Globe American in the cancellation was
incorrect.
In other words, there is no reason to conclude the
cancellation was inadequate.
In addition, Appellant’s notice of
cancellation complied with KRS 304.20-040 and the automobile
insurance contract.
Under these circumstances, we believe the
trial court improperly granted summary judgment in favor of
Michelle E. Davidson on the basis that the notice sent by
Appellant to Kemplin was defective on its face because it only
provided the policy number and did not designate that the
cancellation was for a particular vehicle.
Because we conclude that the cancellation notice need
not designate the automobile to be effective when the insured
obtains a single insurance policy with the insured on a single
vehicle, we do not consider the equitable arguments made by the
parties on appeal.
Accordingly, the judgment of the Campbell Circuit
Court is vacated for the foregoing reasons, and the case is
remanded for proceedings consistent with this opinion.
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SCHRODER, JUDGE, CONCURS.
BARBER, JUDGE, DISSENTS.
BRIEF FOR APPELLANT:
BRIEF FOR APPELLEE:
J. Bradford Derifield
McBrayer, McGinnis, Leslie &
Kirkland
Frankfort, Kentucky
Robert E. Blau
Jolly, Blau, Kriege & Turner
Cold Spring, Kentucky
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