JUSTICE STARCHER delivered the Opinion of the Court.
CHIEF JUSTICE ALBRIGHT concurs and reserves the right to file a concurring
opinion.
JUSTICE MAYNARD dissents and reserves the right to file a dissenting opinion.
2. “By virtue of the authority of Article VIII, Section 21 of the Constitution of West Virginia and of Code, 1931, 2-1-1 it is within the province of the Legislature to enact statutes which abrogate the common law.” Syllabus, Perry v. Twentieth St. Bank, 157 W.Va. 963, 206 S.E.2d 421 (1974).
3. Under W.Va. Code, 33-6A-1(e)(7) [2000], if an insurance company chooses to issue a new policy of automobile liability insurance to an insured, and the insured fails to pay the initial premium or otherwise provide necessary consideration for the new policy, the insurance company may cancel the policy. However, the cancellation of the policy can take effect no earlier than ten days after notice of the cancellation is provided to the insured.
4. Where there has been an invalid cancellation of an automobile liability insurance policy, the policy remains in effect until the end of its term or until a valid cancellation notice is perfected, whichever event first occurs.
Starcher, J.:
In this
appeal from the Circuit Court of Cabell County, we are asked to review a circuit
judge's summary judgment order, in favor of an insured, in an insurance declaratory
judgment action.
This
appeal centers on the validity of an insurance company notice, issued eleven
days after its insured had been in an automobile collision, telling its insured
that it was cancelling her automobile liability insurance policy. The insurance
company indicated in the notice that the cancellation was retroactive to a date
that preceded the collision, and therefore that the insured had no coverage for
the collision.
The circuit court's November 22, 2004 summary judgment order found the cancellation notice was ineffective. The circuit court ruled that a cancellation notice cannot be retroactive because state law requires an automobile insurance company to give an insured ten days advance notice before a policy cancellation takes effect. Because the insurance company failed to follow state law and prospectively notify the insured that her policy was being cancelled, the circuit court granted summary judgment to the insured and ruled that she was entitled to coverage under the insurance policy. The insurance company now appeals.
As set
forth below, we affirm the circuit court's summary judgment order.
Ms. Conley presented the insurance agent with a check for $174.00, which the application called the “minimum required down payment.” The application stated, however, that “if my premium remittance is not honored by the bank no coverage will be bound.” (See footnote 1)
Thereafter, on August 30, 2001, West Virginia National issued Ms. Conley an insurance policy bearing Policy No. WV1032724. West Virginia National delivered to Ms. Conley a declarations page setting forth the policy number and the extent of automobile liability coverage. Ms. Conley was also provided with a certificate of insurance and two “proof of insurance” cards. Each of these documents showed that the effective dates of coverage were from August 15, 2001, to February 15, 2002.
Also on August 30, 2001, West Virginia National mailed a “personal automobile premium billing statement” to Ms. Conley. This billing statement requested that Ms. Conley, in order to “avoid the termination of your coverages,” make an installment payment of $88.55 by September 9, 2001. Additionally, the billing statement advised Ms. Conley that if she remitted her premium payments on a timely basis, “continuous coverage” would be ensured. The billing statement set forth the same policy number and the same effective policy period as the other documents: August 15, 2001, to February 15, 2002.
One day later, on August 31, 2001, Ms. Conley was involved in an automobile accident that, allegedly as a result of her negligence, caused injury to three individuals. Ms. Conley thereafter notified West Virginia National of the accident.
West Virginia National refused to provide a defense or coverage to Ms. Conley for the accident. By a letter dated September 11, 2001 - twenty-seven days after her check was presented to the insurance agent with her application and eleven days after her accident - West Virginia National informed Ms. Conley that her check had been dishonored by her bank and returned due to insufficient funds. Further, West Virginia National stated that “the above insurance has been rescinded as of August 15, 2001, resulting in no coverage provided to you by this company.”
The individuals injured in the accident with Ms. Conley subsequently sought coverage from their own insurer, appellee Dairyland Insurance Company (“Dairyland”). After Dairyland had paid out nearly $26,000.00 to its insureds, Dairyland filed a complaint against appellee Ms. Conley on July 24, 2003, for subrogation. Ms. Conley answered Dairyland's complaint by denying she had been negligent. Further, Ms. Conley filed the instant third-party complaint for declaratory relief against appellant West Virginia National. In her third-party complaint, Ms. Conley alleged that because West Virginia National had improperly cancelled her policy, the policy was in effect on the date of the accident, and therefore that West Virginia National had improperly denied her coverage and a defense.
Ms. Conley subsequently filed a motion for summary judgment against West Virginia National, arguing that W.Va. Code, 33-6A-1(e)(7) [2000] (See footnote 2) requires an insurance company to give an insured ten days notice prior to the cancellation of an insurance policy for failure of consideration to be paid upon the initial issuance of a policy. In an order dated November 22, 2004, the circuit court granted the motion for summary judgment, finding that West Virginia National “failed to comply with West Virginia Code §33-6A-1(e)(7), in that it failed to provide Ms. Conley with ten (10) days notice of cancellation.” Because West Virginia National “did not give appropriate notice of cancellation to Ms. Conley, there was an invalid cancellation and, hence, automobile insurance was in effect on the date of the automobile accident.”
West
Virginia National now appeals the circuit court's November 22, 2004 declaratory
judgment order.
No
insurer once having issued or delivered a policy providing automobile liability
insurance for a private passenger automobile may, after the policy has been in
effect for sixty days, or in case of renewal effective immediately, issue or
cause to issue a notice of cancellation during the term of the policy except
for one or more of the reasons specified in this section:
Appellant West Virginia National, however, argues that the ten-day notice requirement in W.Va. Code, 33-6A-1(e)(7) is applicable only to situations where the insurance company has “issued or delivered a policy[.]” West Virginia National maintains that W.Va. Code, 33-6A-1(e)(7) is wholly inapplicable to this case because it never delivered or issued an insurance policy to Ms. Conley because no insurance contract was ever formed. The appellant's argument centers on the fact that an insured's payment of a premium is the consideration essential to the formation of an insurance contract. In the absence of a premium _ particularly when the customer tries to pay premiums with a worthless check _ the appellant argues there is no insurance contract, and no coverage. The appellant therefore argues that this case is controlled by West Virginia National's insurance application language rather than West Virginia law. West Virginia National's insurance application explicitly stated that “if my premium remittance is not honored by the bank no coverage will be bound.” In the absence of consideration by the appellee, the appellant argues that no insurance contract was formed on August 15, 2001, no policy was ever issued and, therefore, no notice of cancellation was appropriate or required by W.Va. Code, 33-6A-1(e)(7).
The appellee counters the appellant's argument in a two-fold manner. First, as a factual matter, the appellee challenges the appellant's claim that “no policy was issued” by pointing out that West Virginia National provided Ms. Conley with a policy number; a declarations page describing her liability insurance coverage; a certificate of insurance; two proof of insurance cards for the vehicle; and a billing statement, all setting the policy period from August 15, 2001, to February 15, 2002. Furthermore, the appellee points out that West Virginia National advised Ms. Conley on September 11, 2001, that it had “rescinded” her policy; Ms. Conley asserts that “rescind” is defined as “to cancel” or “to take back,” terms that infer that even West Virginia National believed a policy was in effect that was being cancelled. In sum, the appellee argues that the facts establish that West Virginia National believed it issued a new insurance policy to Ms. Conley.
Second,
as a legal matter, the appellee asserts that West Virginia National cannot use
its application language to contractually defeat the effect of W.Va. Code,
33-6A-1. The appellee contends that the phrase “failure of consideration
to be paid” in W.Va. Code, 33-6A-1(e)(7) includes those situations
where a customer pays an initial premium with a bad check. The appellee contends
that once an insurance company chooses to issue a new automobile insurance policy
to a new customer, and there is later a failure of consideration
to be paid by the customer in any fashion, W.Va. Code, 33-6A-1 requires
the insurance company to afford the customer ten days notice before terminating
the policy.
After
carefully considering the parties' arguments, and examining the legislative history
of W.Va. Code, 33-6A-1, we accept the appellant's interpretation of the
statute as correct. Our Legislature enacted W.Va. Code, 33-6A-1 specifically
intending to prevent the retroactive cancellation practices such as that done
by the appellant in this case. Indeed, history reveals that this and similar
statutes in other states were enacted _ often at the urging of the insurance
industry _ in reaction to the public perception of a nationwide legacy of arbitrary
and capricious policy termination practices by insurance companies. Furthermore,
it was perceived that these termination practices usually worked to the detriment
of the innocent general public. To counter these termination practices, to protect
insureds, and _ most importantly _ to protect innocent third parties who might
be injured by the insureds, legislatures enacted statutes with two goals: restricting
the reasons insurance companies could rely upon to terminate automobile liability
policies, and requiring insurance companies to provide advance notice of the
effective date of the termination.
To counter public criticism of insurance industry termination practices, some insurance companies voluntarily adopted policy language limiting their rights to cancel or refuse to renew insurance policies. (See footnote 4) However, because many insurance companies continued to defend their seemingly arbitrary and capricious termination practices and refused take voluntary action, the insurance industry “propos[ed] and support[ed] state legislation to regulate cancellation and non-renewal.” James D. Ghiardi and Robert O. Wienke, “Recent Developments in the Cancellation, Renewal and Rescission of Automobile Insurance Policies,” 51 Marq.L.Rev. 219, 220 (1968). (See footnote 5) As commentators noted in 1968:
There
is little question that problems exist as to the cancellation and nonrenewal
of automobile insurance policies and that legislation is needed to prevent
arbitrary and capricious cancellations. Legislation should be enacted which
would limit the reasons for which insurers may cancel automobile insurance
policies since any prior cancellation may hinder the policyholder in obtaining
future coverage, or may increase the premium which he would be required to
pay[.]
51 Marq.L.Rev. at 250.
State legislatures, in response to the perception of a growing problem, began to enact two types of legislation to regulate the termination of automobile liability insurance policies: legislation limiting the reasons why insurance companies could cancel or refuse to renew policies; and legislation requiring that policyholders receive advance notice of the effective date of cancellation of a policy.
By 1968, at least twenty-four state legislatures _ including the West Virginia Legislature _ had enacted laws placing restrictions on the reasons why an insurance company could terminate a policy. 51 Marq.L.Rev. at 220. For example:
[T]he
recently enacted Illinois statute . . . provides that after the insurer has a
sixty day underwriting period in which to investigate the risk, the company can
cancel for specified reasons. These reasons include: nonpayment of premium; material
misrepresentations; violations of the terms or conditions of the policy; failure
to disclose accidents or violations; failure to disclose necessary information
to the insurer; aiding fraudulent claims; convictions of certain traffic violations;
an accident record, conviction record (criminal or traffic), physical, mental
or other condition which is such that his operation of an automobile may endanger
public safety; or certain changes in the condition or use of the insured behicle
[sic]. . . .
Wisconsin
has recently enacted a statute which prohibits the insurer from basing his cancellation
or refusal to renew upon certain prohibited grounds [such as age, residence,
race, color, creed, national origin, ancestry or occupation of anyone who is
an insured].
51 Marq.L.Rev. at 225-26.
Furthermore, by 1968 at least nineteen state legislatures had enacted laws requiring insurance companies to provide the insured with advance notice of the effective date of cancellation of a policy. “These statutes require that the effective date of cancellation . . . be at least ten to forty-five days from the date of the mailing of the notice.” 51 Marq.L.Rev. at 221-22. A model act proposed by the National Association of Insurance Commissioners demonstrates the time limits legislatures were imposing upon insurance companies, stating:
No
insurer shall cancel an automobile insurance policy unless a written notice of
cancellation is mailed or delivered to the last known mailing address of the
named insured as shown in the records of the insurer at least twenty (20) days
prior to the effective date of cancellation, except that when cancellation is
for nonpayment of premium, notice shall be mailed or delivered to the named insured
at the last known mailing address as shown in the records of the insurer at least
ten (10) days prior to the effective date of cancellation. Such notice shall
be accompanied by a written explanation of the specific reasons for the cancellation.
See National Association of Insurance Commissioners, “Automobile
Insurance Declination, Termination and Disclosure Model Act” § 3(B),
IV NAIC Model Laws, Regulations and Guidelines at 725-3 (1997).
The West
Virginia Legislature adopted W.Va. Code, 33-6A-1 in 1967, and in doing
so initially limited only the reasons why an insurance company could cancel an
existing policy. It was not until 1981 and 1982 that the Legislature adopted
modifications to W.Va. Code, 33-6A-1 _ modifications which are the subject
of the instant appeal _ which required an insurance company to give a policyholder
advance notice of the effective date of cancellation of a policy.
The statute _ as originally written _ only applied to insurance policies that had been in effect for sixty days; for the first fifty-nine days, the insurance company did not have to have a reason for cancelling the policy. This sixty-day period was adopted because it is the custom of the insurance industry _ and sound public policy, to boot _ to provide insurance customers with on-the-spot, temporary insurance coverage in the form of a binder until the customer's application information can be verified and a formal policy issued. (See footnote 8) This sixty-day period allows insurance underwriters a short period in which to investigate a customer's application and determine whether or not the risk is acceptable. (See footnote 9) See Syllabus Point 1, Conn v. Motorist Mut. Ins. Co., 190 W.Va. 553, 439 S.E.2d 418 (1993) (“W.Va.Code, 33-6A-3 (1967), states that if an automobile liability insurance policy has been in effect sixty days or if renewed, the insurer or its duly authorized agent shall in the notice of cancellation specify the reason or reasons relied upon by such insurer for such cancellation.”)
Missing
from the 1967 variation of W.Va. Code, 33-6A-1 was any statutory requirement
that a policyholder receive advance notice from the insurance company that their
insurance policy was being cancelled. (See
footnote 10) That requirement first appeared in 1981.
As part of these 1981 initiatives, the Legislature adopted two statutes that imposed certain notice requirements for insurance companies to follow when an insurance policy was being cancelled.
First, the Legislature amended W.Va. Code, 33-6A-1 to, for the first time, include a notice requirement. The statute continued to permit an insurance company to cancel a policy for any reason if a policy had been in effect for less than sixty days, and cancel for the limited statutory reasons if the policy was in effect for sixty days or more. However, the statute mandated that any cancellation, regardless of the reason or lack thereof, would not take effect until thirty days after notice of the cancellation was given to the policyholder. As amended, W.Va. Code, 33-6A-1(e)(7) [1981] stated, in pertinent part:
Notwithstanding
any of the provisions of this section to the contrary, no insurance company may
cancel a policy of automobile liability insurance without first giving the insured
thirty days' notice of its intention to cancel.
1981 Acts of the Legislature, Chapter 157 at 727-28.
Second, the Legislature required insurance companies to notify both the policyholder and the commissioner of motor vehicles whenever an automobile insurance policy was being cancelled, and the cancellation could not take effect until thirty days after the notice was given. W.Va. Code, 17D-2A-5(a) [1981] stated:
Cancellation
or termination of the insurance policy by the insurance carrier is effective
only upon the expiration of thirty days' notice of cancellation . . . to the
commissioner of motor vehicles and to the insured. (See
footnote 11)
Once the commissioner of motor vehicles received the notice, the commissioner
was empowered to suspend the vehicle registration of the uninsured vehicle. 1981
Acts of the Legislature, Chapter 157 at 724-25.
We believe that the thirty-day notice requirements in these two statutes were designed to ensure that a policyholder had sufficient time to take remedial action to correct an erroneous cancellation notice or to obtain replacement insurance coverage. The purpose of a cancellation notice “is to make the insured aware that the policy is being terminated and to afford the insured the time to obtain other insurance prior to termination of the existing policy.” Conn v. Motorist Mut. Ins. Co., 190 W.Va. 553, 557, 439 S.E.2d 418, 422 (1993), quoting Automobile Club Ins. Co. v. Donovan, 550 A.2d 622, 623 (R.I.1988). The notice requirements also ensure that the commissioner of motor vehicles has time to take action against the policyholder. Lastly, the requirements ensure that innocent third parties who might be injured by a financially-irresponsible policyholder's negligence were protected. (See footnote 12)
But the effect of these 1981 amendments is obvious: if an insurance company chose to issue an automobile liability policy to an insured, then the insurance company could not cancel the policy for any reason without first giving the insured and the commissioner of motor vehicles thirty days' notice of the cancellation date; in the absence of thirty days notice, any notice of cancellation was void and coverage continued to be available under the policy.
The way the thirty-day notice of cancellation requirement in W.Va. Code, 33- 6A-1(e)(7) works was demonstrated by Justice Davis in Bailey v. Kentucky National Ins. Co., 201 W.Va. 220, 496 S.E.2d 170 (1997). In Bailey, the insured purchased a high-risk automobile insurance policy effective from May 25, 1993, to May 25, 1994. The insuredpaid one-fourth of the annual premium to the insurance company at the time his policy was issued on May 25, 1993. One month later, the insurance company sent the insured a premium notice indicating that the first of five installments for the remainder of his annual premium would be due on July 29, 1993.
When the insured in Bailey failed to pay his first installment premium by the due date, the insurance company mailed him a notice of cancellation dated August 2, 1993.
The cancellation notice indicated that the automobile insurance policy would
be cancelled effective seventeen days later, on August 19, 1993. The cancellation
notice clearly stated that the policy was being cancelled “due to nonpayment
of premium.” Furthermore, on August 25, 1993, the insurance company mailed
the insured a $16.78 check as a “premium refund,” and the insured
received and cashed the check.
On September
16, 1993, the insured in Bailey was killed in an automobile accident.
The insured's family sought to recover underinsured motorist benefits from the
insurance company. The insurance company denied coverage, claiming that the policy
had been effectively cancelled on August 19, 1993. The insured's family filed
a declaratory judgment action against the insurance company, but a circuit court
concluded that the policy had been properly cancelled prior to the insured's
death.
In 1997 in Bailey, this Court unanimously reversed the circuit court on an issue similar to the issue in the instant case. We agreed that the insurance company's reason for cancellation _ a failure to pay premiums _ was proper under the law. What was problematic was the timing of the notice of cancellation. We found that because of the operation of W.Va. Code, 33-6A-1(e)(7), the insurance company was required to give the insured thirty days of advance notice that his policy was being cancelled. Because the insurance company only gave the insured seventeen days of advance notice, we determined that the insurance policy had not been properly cancelled and that the policy was still in effect at the time of the insured's death. Discussing W.Va. Code, 33-6A-1(e)(7), we stated:
This
provision effectively states that an insurer may not cancel a policy of insurance
that has been in effect for sixty days, for one of the enumerated reasons, unless
it first provides the insured with thirty days' notice. (See
footnote 13)
Bailey, 201 W.Va. at 227, 496 S.E.2d at 177. Applying the statute to
the facts, we said:
Although
the stated reason for cancellation was proper, Kentucky National's purported
cancellation was not valid because it failed to provide the decedent with the
requisite thirty days' notice. With respect to a similar situation we have recognized
that “[w]here there has been an invalid cancellation, the automobile liability
insurance policy remains in effect until the end of its term or until a valid
cancellation notice is perfected, whichever event first occurs.” Conn
v. Motorist Mut. Ins. Co., 190 W.Va. 553, 558, 439 S.E.2d 418, 423 (1993)
(citation omitted). Since Kentucky National failed to perfect a valid notice
of cancellation, its purported cancellation was void, and the decedent's automobile
insurance policy remained in effect at the time of his fatal accident on September
16, 1993.
201 W.Va. at 228, 496 S.E.2d at 178.
The facts in Bailey involved a situation somewhat different from the instant case: the insured in Bailey had paid the premiums due upon the initial issuance of his insurance policy and had missed a subsequent installment premium. Still, interpreting and applying language added to W.Va. Code, 33-6A-1(e)(7) in 1981, we concluded in Bailey that even though the insured had failed to pay the installment premiums due, the statute mandated that the insurance company give the insured thirty days of notice before cancelling the policy. If the insurance company provided anything less than thirty days' notice, Bailey made clear that the cancellation was wholly ineffective and coverage continued for the rest of the policy term, or until a proper cancellation notice was provided. Bailey, 201 W.Va. at 228, 496 S.E.2d at 178.
Taken one step further, and read literally, it appears that the 1981 variation of W.Va. Code, 33-6A-1(e)(7) had an even more far-reaching financial effect on the insurance industry than what was shown in Bailey. The 1981 amendments placed the insurance industry in the position of providing thirty days or more of insurance coverage to individuals who had not only missed a premium payment, but who had never made an initial premium payment in the first place. In other words, if an insured failed to even attempt to make a premium payment with his or her insurance application, but the insurance company still chose to issue documentation evidencing that liability coverage existed on the date the application was completed, then under the 1981 amendments, the insured, the commissioner of motor vehicles, and the general public were entitled to presume that the insurance customer was insured up to the limits of the policy. Even though the insured had never paid a dime in premiums, the policy could not be properly cancelled until thirty days after the insurance company gave notice that the policy was being cancelled.
The Legislature, realizing this effect of its 1981 amendment, reacted quickly to ameliorate its effect on the insurance industry.
To be sure, the 1982 variation of W.Va. Code, 33-6A-1 continued to impose the 1981 requirement that “no insurance company may cancel a policy of automobile liability insurance without first giving the insured thirty days' notice of its intention to cancel[.]” However, the Legislature revised W.Va. Code, 17D-2A-5, and completely eliminated the requirement that insurance companies give insureds and the commissioner of motor vehicles 30 days' advance notice before a cancellation could take effect. The revised statute simply required insurance companies to “notify the commissioner of motor vehicles . . . of the effective date of cancellation or termination” of a motor vehicle policy. 1982 Acts of the Legislature, Chapter 106 at 644-45. (See footnote 14)
Likewise, the Legislature adopted language into W.Va. Code, 33-6A-1 which was intended to reduce from thirty days to ten days the notice required to be given to a new insurance customer “upon cancellation of automobile liability policy for failure of consideration upon initial issuance of policy.” 1982 Acts of the Legislature, Chapter 106 at 638. As the statute was finally enacted, W.Va. Code, 33-6A-1(e)(7) [1982] read, in pertinent part:
Notwithstanding
any of the provisions of this section to the contrary, no insurance company may
cancel a policy of automobile liability insurance without first giving the insured
thirty days' notice of its intention to cancel: Provided, That cancellation
of the insurance policy by the insurance carrier for failure of consideration
to be paid by the insured upon initial issuance of the insurance policy is effective
upon the expiration of ten days' notice of cancellation to the insured.
1982 Acts of the Legislature, Chapter 106 at 654.
Although W.Va. Code, 33-6A-1 has been modified by the Legislature five times since 1982, (See footnote 15) the requirement that an insurance company give an insured ten days of advance notice before an automobile policy is cancelled for “failure of consideration to be paid by the insured upon initial issuance of the insurance policy” remains in the statute. This 1982 modification to W.Va. Code, 33-6A-1 forms the focal point of the instant appeal.
The appellant raises a novel interpretation of the phrase “failure of consideration to be paid” in W.Va. Code, 33-6A-1(e)(7), and asserts that the phrase must be read in light of two cases with fact patterns that pre-date the 1967 enactment of the statute. The appellant argues that this phrase only applies when the consideration for issuance of the policy is the applicant's promise to pay the premium at a later date; the notice provisions of the statute would be triggered if the applicant later fails to make the promised payment. Conversely, the appellant argues that the statute does not apply when, like in the current case, the insurance company demands an actual payment of the premium with the application for insurance.
The appellant further argues that when an insurance company demands the actual payment of the premium, and that payment is by a check that is later dishonored by the bank, then no consideration has been given for the contract and no insurance policy is “issued or delivered” under the statute. For instance, in Nationwide Mutual Ins. Co. v. Smith, 153 W.Va. 817, 827, 172 S.E.2d 708, 713 (1970) the Court stated that, “In the absence of the payment of the premium which was to have been paid when the policy was delivered the policy was invalid from its inception[.]” Likewise, in Hare v. Connecticut Mutual Life Ins. Co., 114 W.Va. 679, 681, 173 S.E. 772, 773 (1934) the Court concluded, “The premium is the price of the insurance and payment of the premium is the essence of the insurance contract. No payment _ no insurance. A worthless check is not a payment of anything.” Applied to Ms. Conley, the appellant argues that because she paid her initial premiums with a worthless check, no insurance contract was issued, delivered or formed, and therefore the appellant had no duty to provide her with advance notice of the cancellation of her policy.
We reject the appellant's interpretation of W.Va. Code, 33-6A-1(e)(7). First, the appellant cites us to no West Virginia automobile insurance cases that post-date the adoption of W.Va. Code, 33-6A-1 in 1967. The first case cited by the appellant, Nationwide Mutual Ins. Co. v. Smith, was issued by the Court in 1970, but the facts of the case concern an automobile insurance policy issued in 1964 and an accident that occurred in 1965. The other case cited by the appellant, Hare v. Connecticut Mutual Life Ins. Co., was issued by the Court in 1934 and concerns life insurance. The Legislature is plainly empowered to alter the common law, and appears to have done so when it enacted W.Va. Code, 33-6A-1 in 1967. Syllabus, Perry v. Twentieth St. Bank, 157 W.Va. 963, 206 S.E.2d 421 (1974) (“By virtue of the authority of Article VIII, Section 21 of the Constitution of West Virginia and of Code, 1931, 2-1-1 it is within the province of the Legislature to enact statutes which abrogate the common law.”).
We do concede that the Legislature's choice of the phrase “failure of consideration to be paid” injects some ambiguity into the statute. The common law of contracts gives the word “consideration” a much broader definition than mere payment of money. See, e.g., Syllabus Point 1, Tabler v. Hoult, 110 W.Va. 542, 158 S.E. 782 (1931) (“A valuable consideration may consist either in some right, interest, profit, or benefit accruing to the one party or some forbearance, detriment, loss, or responsibility given, suffered, or undertaken by the other.”). But, contrary to the appellant's position, in the context of insurance “consideration” can be the actual payment of money for premiums rather than just a future promise to pay. W.Va. Code, 33-1-17 [1957] defines the word “premium” in the insurance code as “the consideration for insurance, by whatever named called.” So, while the Legislature may have intended a broader application for the statute, a “failure of consideration to be paid” in W.Va. Code, 33-6A-1(e)(7) can clearly be read to mean a “failure of premiums to be paid.” In the instant case, we are presented with a fact pattern implicating a failure of premiums to be paid on the issuance of a new insurance policy, and so we do not endeavor to explore other potential interpretations for the statute.
We believe that the legislative history behind the enactment and modification of the statute makes the Legislature's intent clear: if an insurance company chooses to issue a new policy of automobile liability insurance to an insured, and the insured fails to pay the initial premium or otherwise provide necessary consideration for the new policy, the insurance company may cancel the policy. However, the cancellation of the policy can take effect no earlier than ten days after notice of the cancellation is provided to the insured.
Certainly, “[t]he purpose of statutory and policy provisions requiring notice to the insured prior to cancellation is to enable the insured to obtain insurance elsewhere before he or she is subjected to risk without protection.” 2 Couch on Insurance, § 32:1 at 32-6 (3d. Ed. 2005). But our holding today also recognizes that motorists carry insurance not only for their own protection, but also for the benefit of third parties who may suffer through the negligence of the motorist. Automobile liability insurance provides motorists and third parties with protection against the foreseeable consequences of driving. When an insured fails to pay consideration upon the issuance of a new insurance policy, W.Va. Code, 33-6A- 1(e)(7) makes the ten-day notice a requisite for an effective cancellation between the parties to the policy as well as to the public. See Erie Ins. Exchange v. Gosnell, 246 Md. 724, ___, 230 A.2d 467, 472 (1967) (“The Act makes the 30 day notice a requisite for an effective cancellation as between the parties to the policy as well as to the public[.]”)
The insurance industry directly benefits from the current legislative scheme. The insurance industry has a guaranteed market because motorists are required by law to purchase automobile liability insurance. “Although the consumer must buy, the consumer benefits from the knowledge that he cannot be denied coverage without good cause and that coverage may only be terminated prospectively, thus, allowing an opportunity to find alternate insurance. This trade off obviously has shortcomings.” Erie Ins. Exchange v. Lake, 543 Pa. 363, 374, 671 A.2d 681, 686 (1996). (See footnote 16)
The insurance
company in the instant case made repeated representations to Ms. Conley that
automobile liability coverage was binding upon the company on August 15, 2001.
The insurance application, the declarations page, the certificate of insurance,
and the insurance cards issued by West Virginia National, all indicated that
coverage started on August 15, 2001. These representations made to Ms. Conley
would be construed by any reasonable, prudent insurance consumer to mean that
a policy had been issued and was
effective on that date. Furthermore, police officers, the commissioner of motor
vehicles, and third parties would also view these representations as evidence
of coverage. (See footnote
17)
The circuit
court therefore did not err when it concluded that the appellant issued or delivered
an automobile insurance policy to Ms. Conley on August 15, 2001; that the policy
was in effect when the automobile collision occurred on August 31, 2001; and
that the attempted cancellation notice on September 11, 2001, was ineffective. “Where
there has been an invalid cancellation, the automobile liability insurance policy
remains in effect until the end of its term or until a valid cancellation notice
is perfected, whichever event first occurs.” Conn v. Motorist Mut. Ins.
Co., 190 W.Va. 553, 558, 439 S.E.2d 418, 423 (1993) (citation omitted).
The circuit court therefore correctly concluded that because West Virginia National failed to issue a proper notice of cancellation, Ms. Conley's automobile liability insurance policy remained in effect on August 31, 2001, and that West Virginia National was required to provide coverage and a defense for Ms. Conley's accident on that date.
Affirmed.