were sent to both the first and second mortgagees so that the policy was not in effect on October 9, 1976.
In support of their position, the Plaintiffs assert (1) that the notice of cancellation which was sent to the Martha Company and which purportedly cancelled the policy effective June 1, 1976 did not comply with the formal requirements for a notice of cancellation and therefore did not serve to terminate insurance coverage, (2) that even if the notice of cancellation was valid, Nationwide's agent, Gwilym Maddock, agreed with the President of the Martha Company prior to the date of cancellation that the policy would continue in force if the Martha Company made a partial payment of the premium then due and remitted the balance of the premium to Nationwide during June and July of 1976 and, finally, (3) that because Nationwide accepted partial and late payments from the Martha Company prior to the date of cancellation, Nationwide waived its right to cancel the policy based upon failure to pay the entire premium on the date that it was due. Nationwide takes the opposite position with respect to each of the Plaintiffs' arguments and, in addition, asserts that the obtaining of the Mutual Fire policy by Fidelco represented a cancellation by substitution. Because the Court concludes that the policy was not in effect on October 9, 1976 since it was cancelled with respect to the Martha Company on June 1, 1976 by virtue of a proper notice of cancellation, there was no agreement reinstating or continuing the policy past that date and no waiver on Nationwide's part with respect to late or partial payments, the Court will not reach Nationwide's argument relating to cancellation by substitution.
First, the Plaintiffs assert that the cancellation notice sent to the Martha Company on or about May 14, 1976 was not a proper notice of cancellation. Under Pennsylvania law, the conditions of cancellation set forth in a fire insurance policy must be strictly complied with should the insurer decide to cancel the policy. The cancellation notice must be written and must be a positive and unequivocal statement of cancellation indicating unmistakably to the insured an intention on the part of the insurer that it will no longer be bound under the policy after the effective cancellation date. See Pomerantz v. Mutual Fire Ins. Co., 279 Pa. 497, 124 A. 139 (1924). In Pomerantz, the Court found a purported notice of cancellation defective because the notice merely requested the insured to return his insurance policy to the company for purposes of cancellation but did not indicate unequivocally that cancellation would take effect at a certain time. The Plaintiffs assert that although the cancellation notice sent to them on or about May 14, 1976 was unequivocal on its face in that it indicated that because of the failure to pay a premium coverage would be terminated effective 12:01 a.m. on June 1, 1976 the conditions on the back of the notice stating Inter alia, that cancellation would not become effective if the insured paid the premium prior to the cancellation date listed on the front, made the notice conditional rather than unequivocal. However, the Court is not convinced that the conditions on the back of Nationwide's cancellation notice render the notice conditional rather than unequivocal. The notice is not phrased in the form "If you do not pay your premium this policy will be cancelled." Rather, it indicates affirmatively that the insurer has made a decision not to continue coverage but provides the insured with an opportunity to prevent cancellation by prompt action on his part in paying the overdue premium. It is the view of the Court that the notice sent by Nationwide was sufficient to indicate to a person of reasonable understanding that his insurance coverage would cease at a certain date. Therefore, the notice met the requirements of Pennsylvania law.
The Plaintiffs' next contention, and the most crucial issue in this case, is that Nationwide's Scranton agent, Gwilym Maddock, agreed with George Carros, the President of Martha Company, in late May of 1976 that the Nationwide fire policy would continue in effect so long as a portion of the outstanding premium was paid by the Martha Company and the balance paid in June and July of 1976, two months during which payments of premium ordinarily would not be payable under the 10-month installment payment plan for payment of the annual premium. The fire insurance policy had an anniversary date of August 10, and was issued under a "10-pay" plan, by which the Martha Company, had it paid all installments when due, would have made a deposit on August 10 of a particular policy year and remitted the balance in nine equal monthly installments so that for the last two months of the policy year no premiums would be due. The Plaintiffs rely heavily upon the testimony of Mr. Carros, whose deposition was taken prior to the trial of this case and who died prior to the trial. Were the Court wholly to believe Mr. Carros's testimony and wholly to disbelieve Mr. Maddock's testimony with regard to what words were exchanged between the two following Mr. Carros's receipt of the notice of cancellation, the Court is not convinced that the Plaintiffs would have met their burden of demonstrating that an oral agreement including the terms described above had been reached between the parties. However, this Court has carefully considered both the testimony of Mr. Maddock and Mr. Carros and finds as a fact that when Mr. Carros inquired of Mr. Maddock as to what could be done about the cancellation and whether an agreement relating to a partial payment in May of 1976 followed by payment of the balance of the overdue premium in June and July of 1976 could be made, Mr. Maddock responded that there had been difficulties with the payment of premiums in the past but that an agreement had always been reached before. There was no commitment by Maddock to bind Nationwide to continue coverage. The Court specifically finds Mr. Maddock to be credible based upon his demeanor while testifying and upon other factors including his lack of actual authority to bind Nationwide to a policy in excess of $ 600,000 and based also on his previous conduct, which generally consisted of accepting either a late payment, a partial payment, or a second payment from the Martha Company where a check remitted to Nationwide had been returned for insufficient funds. The most that Mr. Maddock did was imply a hope that Nationwide would continue the policy in effect without making any specific guarantees to anyone at the Martha Company that coverage would continue. The legal effect of Mr. Maddock's statement that things similar to what Mr. Carros suggested had been arranged in the past did not bind Nationwide to the arrangement proposed by Mr. Carros. In determining whether an agreement had been reached between parties, the controlling factor in determining their intentions relates to outward manifestations, including the words spoken. See Beliron Construction Co. v. Potomac Ins. Co., 230 Pa.Super. 379, 326 A.2d 499 (1974). Consent by both parties to the specific terms of the contract is essential to the formation of such an agreement. See Shipley v. Pittsburgh & L.E.R. Co., 83 F. Supp. 722, 750 (W.D.Pa.1949); Reich v. Vegex, Inc., 51 F. Supp. 99 (E.D.Pa.1942), Aff'd 137 F.2d 647 (3d Cir. 1943). Mr. Maddock's words were in the form of reassurances given to Mr. Carros that there had been problems in the past and that things would probably be worked out. However, Mr. Maddock did not state that he agreed to a rescission of the cancellation notice or that he agreed to keep the policy in effect, and he did not agree to any specific payment terms suggested by Mr. Carros. Rather, after assuring Mr. Carros in the manner described above, he took the check for $ 2,004.00 which represented a partial payment of the premium due and remitted the check along with his copy of the cancellation notice to Nationwide. About March 1, 1976, however, Nationwide's underwriters had agreed between themselves that the Martha Company was a bad risk and that if there were a future cancellation for nonpayment of premiums, the policy would not be reinstated. Mr. Maddock was so informed following Nationwide's receipt of the partial payment and his copy of the cancellation notice. Based upon the words exchanged between Mr. Carros and Mr. Maddock in May of 1976, this Court concludes that there was no agreement reached which would invalidate Nationwide's otherwise proper cancellation notice.
The final argument advanced by the Plaintiffs is that because of Nationwide's conduct in the past with respect to either late or partial payments it waived its right to insist upon either prompt or full payment of premiums and that the tender of a partial payment by the Martha Company should have been accepted and should have served to continue the policy in effect notwithstanding the cancellation notice. The Court finds, however, that Nationwide's conduct with respect to the acceptance of either late or partial payments during the life of this policy was limited to two instances. The first relates to the January, 1976 billing for premiums for the months of November, December, and January. The Martha Company paid one-third of the premium and no notice of cancellation was sent nor did Nationwide indicate that partial payment of a premium would not be accepted. With respect to the late payment, a $ 2,841.00 audit premium on the workmen's compensation policy was accepted late by Nationwide on February 24, 1976. However, the notice of cancellation indicated that coverage would be terminated at 12:01 a.m. on February 24, 1976. A check for the full amount of the premium was received by Nationwide's agent, Mr. Maddock, on February 24, 1976 and remitted to Nationwide the following day. It is the view of the Court that these two isolated instances do not amount to a course of conduct which would lead a reasonable person to assume that Nationwide would not insist upon prompt payment of a full premium in the future.
In general, the waiver of a contractual right depends upon the doing of some act by the carrier from which the insured might reasonably conclude that the insurer would not insist upon one of its rights. See, e.g., Schifalacqua v. CNA Insurance, 567 F.2d 1255 (3d Cir. 1977). Additionally, however, in order for conduct to constitute a waiver of a right of cancellation, the insured must be misled or lulled into some delay in the performance of his obligations by the act of the insurer. See Brown v. Pennsylvania Cas. Co., 207 Pa. 609, 56 A. 1125 (1904); See also Sack v. Glens Falls Ins. Co., 360 Pa. 424, 61 A.2d 852 (1948). In this case, the Martha Company was not misled by Nationwide's prior acceptance of either a late or partial premium with respect to its conduct in May of 1976. The evidence demonstrates that the Martha Company failed to pay its premiums not because it did not believe that it was required to do so in order to maintain insurance coverage but because of financial difficulties which resulted in the filing of the Chapter XI proceeding in April of 1976. Further, Mr. Carros, who took over the responsibilities of the Martha Company with respect to the payment of insurance premiums at that time was not aware of either the problems relating to the partial or late payment in the past or that Nationwide had accepted such payments. Finally, the Martha Company did not rely upon Nationwide's prior course of conduct to its detriment because it had ample opportunity after receiving both the notice of cancellation and Nationwide's letter on May 28, 1976 that it would stand upon its cancellation to secure insurance coverage equivalent to that which had been supplied by Nationwide prior to the date of the fire. The Court is not convinced that Mutual Fire would have written a policy in the amount of $ 3,000,000 on the building and $ 600,000 on the contents had the Nationwide policy been in effect or had Mutual Fire believed that the Nationwide policy was in effect at the time such coverage was secured. Although the Mutual Fire policy covered neither loss of rents nor business interruption, the Martha Company could have acquired such coverage prior to October 9, 1976. The Martha Company did not change its position to its detriment in reliance upon the past course of conduct of Nationwide. Finally, since Nationwide had the right to cancel the policy for no reason so long as proper notice was given, even if it waived any right to cancel for nonpayment the cancellation was proper.
Based upon the foregoing discussion, the Court reaches the following
IV. Conclusions of Law.
1. The notice of cancellation sent to the Martha Company by Nationwide on or about May 14, 1976 effectively cancelled Nationwide's fire insurance and workmen's compensation policies as of June 1, 1976.
2. Nationwide's acceptance of a partial payment of a past due premium in January of 1976 and of a late payment on February 24, 1976, did not constitute a waiver of Nationwide's right to cancel the policy for the Martha Company's failure to submit the entire past balance of premiums due by the effective date of cancellation.
3. Nationwide's agent, Gwilym Maddock, did not agree with George Carros, the President of the Martha Company, to extend coverage beyond that date in consideration of the partial payment of the premium then due plus an agreement by the Martha Company to remit the balance of such outstanding premium in June and July of 1976.
4. The Nationwide policy was not in effect on October 9, 1976.
An appropriate order will be entered directing the entry of judgment in favor of the Defendant.
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