Kilkenny, Halpern and Lane. The opinion of the court was delivered by Halpern, J.A.D.
For convenience, the defendant and third-party plaintiff-respondent will be referred to as "Roddie"; the third-party defendant-appellant as "N.J.M."; and the fourth-party defendant as "bank." N.J.M. appeals from a judgment against it in favor of Roddie on the third-party complaint. The facts are as follows:
Roddie, an assigned risk under the Motor Vehicle Security-Responsibility Law (N.J.S.A. 39:6-23 et seq.), obtained auto liability insurance from N.J.M. through Clarke, an insurance broker. This enabled him to own and drive a car in New Jersey. He borrowed $251.67 from the bank to pay the premium on the policy. Simultaneously with the issuance of the policy on January 27, 1967, Roddie executed a note and financing agreement with the bank which is recognized and referred to in the policy issued to Roddie by N.J.M. as will later appear.
The note agreement required Roddie to make eight monthly payments to the bank of $23.86 commencing on February 27, 1967. The note agreement authorized the bank to pay N.J.M. the full premium due, and in the event of Roddie's default it provided:
4. Default by the undersigned insured in the payment of any installment hereunder when due shall render the whole unpaid balance of principal hereof immediately due and payable, without notice, and if default continues for ten (10) days thereafter, shall constitute an election by the undersigned insured to cancel said policy. It is agreed that, in such event, the undersigned insured will promptly return the policy and the payee is hereby authorized to notify the insurance company of such cancellation, and to collect and receive from such company all returned or unearned premium for application as above mentioned. It is also agreed that the undersigned insured will pay all cancellation fees.
5. To effectuate the foregoing, said insurance company is hereby authorized and directed: * * *
(b) To pay any unearned premium to said payee which may become due on account of cancellation of said policy at any time by the undersigned insured, the payee or the insurance company; * * *.
The relevant portions of the insurance policy provided:
14. Cancelation: This policy may be canceled by the named insured by surrender thereof to the company or any of its authorized agents or by mailing to the company written notice stating when thereafter the cancelation shall be effective. This policy may be canceled by the company by mailing to the named Insured at the address shown in this policy written notice stating when not less than ten days thereafter such cancelation shall be effective. The mailing of notice as aforesaid shall be sufficient proof of notice. The time of the surrender or the effective date and hour of cancelation stated in the notice shall become the end of the policy period. Delivery of such written notice either by the named insured or by the company shall be equivalent to mailing.
If the named insured cancels, earned premium shall be computed in accordance with the customary short rate table and procedure. If the company cancels, earned premium shall be computed pro rata. Premium adjustment may be made either at the time cancelation is effected or as soon as practicable after cancelation becomes effective, but payment or tender of unearned premium is not a condition of cancelation.
The endorsements on the policy, which were added because of the loan by ...