The opinion of the court was delivered by: ZIEGLER
This is a civil action to recover the proceeds allegedly due under a contract of insurance between plaintiff, Del Boring Tire Service, Inc., (Del Boring) and defendant, Federal Emergency Management Agency (FEMA). Jurisdiction is predicated on 42 U.S.C. § 4503. Presently before the court are the cross-motions of the parties for summary judgment. For the reasons set forth herein, the motion of defendant will be granted and the motion of Del Boring will be denied.
The stipulation of facts submitted by the parties establishes the following. Del Boring is a corporation engaged in the business of selling tires in the area of Johnstown, Pennsylvania. On February 11, 1977, Donald F. McLaughlin, President of Del Boring, applied for two policies of flood insurance through the Widmann-Fronheiser Insurance Agency (Widmann Agency). That same day, the Widmann Agency prepared the appropriate documents and, together with a premium check, forwarded them to the National Flood Insurers Association.
On February 17, 1977, McLaughlin wrote to the Widmann Agency authorizing a cancellation of the two policies.
On March 8, McLaughlin completed NFIA's cancellation form, which was forwarded to the insurer.
NFIA returned the cancellation form to the Widmann Agency on March 16, 1977, with an explanatory memorandum. Copies of the memo have apparently been misplaced or destroyed, but the parties have stipulated the memo stated that the cancellation could not be processed until the policies had been issued.
General Accident Fire & Life Assurance Corp., Ltd. (General Life), the appropriate servicing agency, processed and countersigned the initial application of plaintiff for the insurance coverage on March 21, 1977. The Widmann Agency received policies issued by NFIA on plaintiff's behalf on July 15, 1977. On the same day, the Widmann Agency returned the policies to NFIA, citing McLaughlin's cancellation letter of February 17, 1977.
On July 20, 1977, the Johnstown area was inundated with flood waters causing severe damage to the facilities of Del Boring.
Plaintiff's cancellation notice was not countersigned and processed by General Life until October 27, 1977. On November 17, 1977, General Life issued two checks payable to Del Boring for the premiums paid to NFIA. Plaintiff received the drafts on December 15, 1977, but McLaughlin refused to endorse them. On that same day, plaintiff submitted a claim for flood loss under the policies, which was denied by defendant in May of 1978. This action followed.
FEMA premises its motion for summary judgment on two alternative grounds: (1) plaintiff's letter of February 17, 1977, and its submission of a cancellation form on March 8, 1977, coupled with the return of the insurance policies on July 15, 1977, constituted a cancellation of the contract of insurance; or (2) if the policies were not cancelled, Del Boring's failure to submit a claim and proof of loss within 60 days as required by the contract negates any right to the proceeds.
McLaughlin's letter on behalf of plaintiff to the Widmann Agency dated February 17, 1977, provided as follows:
Acting on this letter, the Widmann Agency delivered to McLaughlin a NFIA document entitled "Cancellation Notice." McLaughlin signed the document and mailed it to NFIA.
Upon receipt of the policies on July 15, 1977, the Widmann Agency returned them, citing McLaughlin's cancellation letter of February 17, 1977. Defendant contends these acts constituted a cancellation of the insurance policies prior to the flood of July 20. Del Boring rejoins that defendant's obligation to refund "the excess of paid premiums" was a condition precedent to cancellation which must be strictly construed in order to render the cancellation effective.
Because we accept defendant's construction of the contract and reject Del Boring's position, we hold that plaintiff was not insured at the time of the loss and summary judgment must therefore be entered on behalf of defendant.
A cancellation of a contract of insurance is conditional only where the insured "unequivocally make(s) known to the insurance company the conditional nature of his act." Palardy v. Canadian Universal Insurance Co., 360 F.2d 1007, 1010 (2d Cir. 1966). The intent of ...