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Munoz v. New Jersey Auto. Full Ins. Underwriting Ass'n

July 15, 1996

(A-115) JOSE R. MUNOZ, PLAINTIFF-RESPONDENT,
v.
NEW JERSEY AUTOMOBILE FULL INSURANCE UNDERWRITING ASSOCIATION, DEFENDANT-APPELLANT, AND STANLEY AGENCY, INC., JOHN QUINN AND JOHN DOE, JOINTLY SEVERALLY AND IN THE ALTERNATIVE, DEFENDANTS. (A-116) JAMES ZIMMERMAN, PLAINTIFF-RESPONDENT, V. THE NEW JERSEY AUTOMOBILE FULL INSURANCE UNDERWRITING ASSOCIATION (N.J.A.F.I.U.A.), DEFENDANT-APPELLANT, AND JOHN DOES 1-10 (FICTITIOUS NAMES), DEFENDANTS. (A-117) PATRICIA NAPOLITANO, PLAINTIFF-RESPONDENT, V. ALLSTATE INSURANCE COMPANY, DEFENDANT-APPELLANT.



On certification to the Superior Court, Appellate Division, whose opinion is reported at The opinion of the Court was delivered by Coleman, J. Justices Handler, Pollock, O'hern and Garibaldi join in Justice COLEMAN's opinion. Justice Stein filed a separate Dissenting opinion. Chief Justice Wilentz did not participate.

The opinion of the court was delivered by: Coleman

(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).

JOSE R. MUNOZ V. NEW JERSEY AUTOMOBILE FULL INSURANCE UNDERWRITING ASSOCIATION, ET AL. (A-115/116/117-95)

Argued February 27, 1996 -- Decided July 15, 1996

STEIN, J., writing for a majority of the Court.

The Munoz, Napolitano and Zimmerman matters were consolidated for purposes of appeal. The issue common to all three cases is whether a notice of cancellation of automobile insurance coverage due to the policyholder's failure to pay premiums must post-date the premium due date, thereby allowing the policyholder a fifteen-day grace period before coverage expires.

Jose Munoz purchased a one-year policy from New Jersey Automobile Full Insurance Underwriting Association (JUA) effective from May 18, 1990 to May 19, 1991. The total annual premium was $1,234. Munoz paid $400 when he purchased the policy, leaving a balance of $834. He made no further payments. On September 14, 1990, Munoz was mailed a cancellation notice informing him that his policy would expire on October 3, 1990 if payment was not received by that date. No payment was received. On October 17, 1990, Munoz was involved in an automobile accident resulting in personal injuries and damage to his vehicle. Munoz made a claim for insurance coverage, which was denied on the basis that his policy had been cancelled.

James Zimmerman purchased a one-year policy from the JUA effective from September 24, 1990 to September 24, 1991. The annual premium was $1,466, payable in installments. Zimmerman made the initial payment of $445. According to the JUA manual of Rules and Rates, the next premium was due sixty days from the effective date of the policy, November 23, 1990. Zimmerman contends that he was not aware of that due date. The record reveals no notice concerning payment of an installment until December 5, 1990, when Zimmerman was mailed a notice of cancellation that stated that the policy would expire on December 22, 1990, if payment was not received by that date. Zimmerman claims that he did not receive that notice. He made no further payments. On March 26, 1991, Zimmerman was involved in an automobile accident and sought personal injury benefits. The JUA denied the claim on the basis that the policy had been cancelled.

Patricia Napolitano was insured through Allstate Insurance Company (Allstate). In September 1991, she received a notice from Allstate instructing her to renew her existing policy, which was due to expire September 23, 1991. Napolitano promptly renewed and requested a change in the policy, which increased her premium by $456.10. Payment of that premium was to be made in four equal installments over the six-month period of the policy. Two weeks after the effective date of the policy, Napolitano received two bills in close succession; the first for approximately $230, and the second for $116.53. Napolitano was confused over whether the $230 bill was an error or merely advisory. She paid only the $116.53 bill. She received a notice of cancellation that instructed her to disregard the notice if payment had already been made. Believing that she had made the appropriate premium payment, Napolitano disregarded the notice and made no additional payments. On December 21, 1991, Napolitano was injured in an automobile accident. Her claim for personal injury benefits was denied by Allstate on the basis that the policy had been cancelled.

Napolitano, Zimmerman and Munoz instituted proceedings in the Law Division to obtain coverage under their cancelled policies. In Munoz, the trial court concluded that the applicable statutory provisions, read together, require that the fifteen-day notice of cancellation for failure to pay premiums be issued after the date of default in payment in order to provide a window of opportunity for the insured to pay the amount past due. Therefore, the court ordered reinstatement of the policy. The Appellate Division affirmed the decision of the trial court.

In Zimmerman, the trial court rejected Zimmerman's claim that he had not received the December 2, 1990 cancellation notice based on its Conclusion that the JUA had sufficiently demonstrated proper mailing of that notice. On appeal, Zimmerman raised for the first time the issue of premature notice as plain error. The Appellate Division, relying on Munoz and Christian v. Ormsby, reversed the decision of the trial court, ruling that there was coverage notwithstanding proper mailing.

In Napolitano, the insured argued that cancellation was improper because the notice was prematurely sent and because she reasonably relied on the language of the notice instructing her to disregard same if payment had been made. The trial court directed a verdict in favor of Allstate, concluding that it was not bound by Munoz and Christian. The trial court found it unlikely that the Legislature intended to extend coverage beyond an insured's default in payment simply because the required cancellation notice was mailed early. The Appellate Division reversed on the premature notice issue, citing the Munoz and Christian decisions.

The Supreme Court granted certification to address the issue of premature notice of cancellation.

HELD:

The plain language of the applicable statutory and regulatory provisions permits insurers to send requisite notice of cancellation of insurance in advance of the premium due date.

1. Where a statute is clear and unambiguous, a court may not impose an interpretation other than the statute's ordinary meaning. The relevant provisions concerning cancellation for non-payment of premiums do not by their terms require that notice post-date the payment due date. In order for a notice of cancellation for non-payment of premiums to be effective, it need only state the reasons for the cancellation and be mailed or delivered at least fifteen days prior to the date of cancellation. Nothing in the statutes can be read as precluding insurers from mailing notice in advance of the due date. Moreover, the applicable administrative regulations addressing cancellation for non-payment do not require that notice post-date the premium payment due date. (pp. 9-11)

2. The plain language of the statute and regulations requires only that notice of cancellation for non-payment of premium be mailed or delivered at least fifteen days, and not more than thirty days, in advance of the effective date of cancellation, which must be no more than ten days prior to the last day for which coverage has been paid by the prior premium. The notice may be mailed prior to default in payment, as long as those conditions are met. (pp. 11-12)

3. When the plain meaning of a statute is clear and unambiguous, that meaning governs unless there is specific legislative intent to the contrary. The language of the relevant statute conveys no other intent than to ensure that each policyholder receive fifteen days of notice before his or her policy is cancelled and to require the insurance company to identify the reason for cancellation. Nothing in the legislative history suggests that the Legislature intended to provide a fifteen-day grace period. (pp. 12-16)

4. The problem of free insurance where a notice post-dates default can be minimized by proper scheduling on the part of insurance companies. At oral argument, the Court was informed that the insurance industry is taking corrective action to adopt procedures such as those urged here. Nonetheless, it is recommended that the Commissioner of Insurance consider adopting regulations that would require all insurance companies to do so. (pp. 16-18)

5. A notice of cancellation that does not comport with the appropriate timing and mailing requirements is deemed ineffective. Thus, Zimmerman may have an alternative basis for seeking reinstatement in light of his assertion that the JUA terminated coverage more than ten days before the carry date in contravention of applicable regulation. A remand is required for a determination of that issue. (pp. 18-20)

Judgment of the Appellate Division is REVERSED in all three cases. The Zimmerman case is REMANDED to the Law Division for further proceedings in accordance with this opinion.

JUSTICE STEIN, Dissenting, is of the view that no inquiry into the legislative intent is necessary because the statute is clear on its face. The Court's reading of the statute, in addition to contradicting its plain meaning, thwarts both the public policy in favor of preserving coverage and the unmistakable legislative intent in enacting the statute.

JUSTICES HANDLER, POLLOCK, O'HERN and GARIBALDI join in JUSTICE COLEMAN's opinion. JUSTICE STEIN filed a separate Dissenting opinion. CHIEF JUSTICE WILENTZ did not participate.

The opinion of the Court was delivered by COLEMAN, J.

The question common to these three appeals is whether a notice of cancellation of automobile insurance coverage due to the policyholder's failure to pay premiums must post-date the premium due date, thereby allowing the policyholder a fifteen-day grace period before coverage expires. Plaintiffs failed to make payment and were consequently denied coverage by their respective carriers for accidents occurring after the putative cancellation dates.

The trial court found there was coverage for the accidents in two of the three cases. The Appellate Division held that all three plaintiffs were entitled to coverage under their policies. It reasoned that a notice of cancellation for failure to pay premiums is premature and hence invalid when it is issued before the point in time at which the payments become delinquent.

We granted certification, 142 N.J. 573 (1995), and now reverse. We hold that the plain language of the applicable statute and regulations do not require that notice of ...


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