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24818 - Walton v. Canal Insurance Company, et al.

Davis Adv. Sh. No. 26
S.E. 2d

THE STATE OF SOUTH CAROLINA

In The Supreme Court





James Q. Walton, Respondent

v.

Canal Insurance

Company, Carl Owens,

individually, Wayne

Kinard, individually,

and Carl Owens and

Wayne Kinard, d/b/a

Owens and Kinard

Transport, Inc., a/k/a

Owens Kinard Timber

Transportation, a/k/a

Owens and Kinard

Timber Transportation,

Inc. Petitioners







ON WRIT OF CERTIORARI

TO THE COURT OF APPEALS





Appeal From Beaufort County

Thomas Kemmerlin, Jr., Special Circuit Judge





Opinion No. 24818

Heard June 4, 1998 - Filed July 20, 1998





AFFIRMED AS MODIFIED





Joseph S. Brockington and Mark C. Brandenburg,

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WALTON v. CANAL INSURANCE COMPANY, et al.





both of Joseph S. Brockington, P.A., of Charleston;

and O. Doyle Martin, of Leatherwood, Walker, Todd

& Mann, of Greenville, all for petitioners.





Colden R. Battey, Jr. and Derek C. Gilbert, both of

Harvey & Battey, P.A., of Beaufort, for respondent.





TOAL, A.J.: In this declaratory judgment action, Canal Insurance

Company ("Insurance Company") has petitioned this Court to review the

Court of Appeals' finding of coverage under S.C. Code Ann. §§ 38-75-740 &

-750 (1989). We affirm as modified.





FACTUAL/PROCEDURAL BACKGROUND

Insurance Company issued a policy to Carl Owens and Wayne Kinard

("Insured") -- who did business as Owens & Kinard Transport, Inc. -- to cover

six tractors and one semi-trailer used in their pulpwood/logging business.

The policy was effective from January 2, 1992 until January 2, 1993. On

December 4, 1992, an employee of Insurance Company's underwriting

department mailed a renewal notice to Insured. On December 16, 1992, a

customer services representative for Insurance Services of Hampton, an

insurance agency, mailed an invoice to Insured for renewal of the policy. No

response was received from Insured.





On January 4, 1993, at 7:00 a.m., an employee of Insured was involved,

while driving a company truck, in an accident with James Walton. At 8:30

a.m. of the same day, Kinard telephoned the customer service representative

for Insurance Services regarding coverage for the truck. Later in the day,

Owens delivered a check to Insurance Services. Insurance Services contacted

Insurance Company, which approved a new policy, effective from 1:35 p.m.,

January 4, 1993 until January 4, 1994.





Walton filed suit against Insured for injuries sustained as a result of

the truck accident. Insurance Company denied coverage. Walton

subsequently commenced this declaratory judgment action to determine

whether coverage existed on January 4th when the company truck was

involved in the accident. The master in equity granted Walton's motion for

summary judgment, finding that insurance coverage existed on January 2 --

4, 1993, during which time the accident occurred.





Insurance Company appealed the matter. The Court of Appeals





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WALTON v. CANAL INSURANCE COMPANY, et al.





affirmed the master's decision on different grounds. Insurance Company has

petitioned this Court, arguing that the Court of Appeals erred in finding

coverage existed under the relevant statutes.





LAW/ANALYSIS





A. APPLICABLE STATUTE

The dispute in this case centers on the interpretation of two statutes,

S.C. Code Ann. §§ 38-75-740 & -750. The first, section 38-75-740, concerns

restrictions on nonrenewal of policies, provides in relevant part:





(a) No insurance policy may be nonrenewed by an insurer

except in accordance with the provisions of this section, and any

nonrenewal attempted which is not in compliance with this

section is ineffective.





(b) A policy written for a term of one year or less may be

nonrenewed by the insurer at its expiration date by giving or

mailing written notice of nonrenewal to the insured and the

agent of record, if any, not less than thirty days prior to the

expiration date of the policy. . . .



(d) The notice required by this section must be given or

mailed to the insured and the agent at their addresses shown in

the policy or, if not reflected therein, at their last known

addresses. Proof of mailing is sufficient proof of notice.



(e) Any notice of nonrenewal shall state the precise reason

for nonrenewal.



S.C. Code Ann. § 38-75-740.





The subsequent section, S.C. Code Ann. § 38-75-750, concerns renewal

of policies:



(a) If an insurer intends to renew a policy, the insurer shall

furnish renewal terms and a statement of the amount of

premium or estimated premium due for the renewal policy period

in the manner required by this section.





(b) If the policy being, renewed (hereinafter "original policy")



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WALTON v. CANAL INSURANCE COMPANY, et al.





is written for a term of one year or less, the renewal terms and

statement of premium or estimated premium due must be

furnished to the insured not less than thirty days prior to the

expiration date of the original policy. . . .





(d) The insurer may satisfy its obligation to furnish renewal

terms and statement of premium or estimated premium due by

either of the following methods:



(1) mailing or delivering renewal terms and

statement to the insured at his address shown in the

policy or, if not reflected therein, at his last known

address, not less than thirty days prior to expiration

or anniversary; or





(2) mailing or delivering renewal terms and

statement to the agent of record, if any, not less than

forty-five days prior to expiration or anniversary,

along with instructions that the agent furnish the

renewal terms and statement to the insured not less

than thirty days prior to expiration or anniversary.





S.C. Code Ann. § 38-75-750 (emphasis added).



In this case, the master held in his order that the renewal statute,

section 38-75-750, was the applicable statutory provision. This statute

requires that notice be given "not less than thirty days prior to the expiration

date of the original policy." The notice here was mailed on December 4,

1992, which was 29 days prior to the January 2, 1993 expiration of the

policy. Accordingly, the notice requirement was not satisfied. The master

found that the policy went into effect without the payment of a premium,

although the insured would have to pay the earned premium for the period

in which the renewal policy was in effect.





The Court of Appeals affirmed the master's order, but employed a

different analysis. It reasoned that the nonrenewal statute, section 38-75-

740, was the applicable statute. The Court of Appeals found that Insurance

Company's attempt to terminate coverage, without having provided the

requisite notice, was ineffective. The Court next looked to the renewal

statute, section 38-75-750, and concluded that because of the lack of notice,

Insured had the right to cancel the renewal policy within the thirty day

period following receipt of the renewal terms. Because Insured had not





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WALTON v. CANAL INSURANCE COMPANY, et al.





elected to cancel the renewal policy at the time the accident occurred,

coverage under the policy had not yet terminated. Insurance Company has

petitioned this Court, arguing that the Court of Appeals erred in applying the

nonrenewal statute. We agree.



Definitions of the terms "renewal" and "nonrenewal" are found in S.C.

Code Ann. § 38-75-720 (1989). "Renewal" means:

the issuance of or the offer to issue by an insurer a policy

succeeding a policy previously issued and delivered by the same

insurer or an insurer within the same group of insurers, or the

issuance of a certificate or notice extending the term of an

existing policy for a specified period beyond its expiration date.





S.C. Code Ann. § 38-75-720(l). "Nonrenewal" means "termination of a policy

at its expiration date. 1 " S.C. Code Ann. § 38-75-720(5).





In Axson v. A. Mortgage Company, Inc., 312 S.C. 433, 441 S.E.2d 193

(Ct. App. 1994), the Court of Appeals held that where an insurer issues

proper notice of an offer to renew and the insured fails to take the necessary

steps to accept the offer, the policy has been nonrenewed by the insured, not

the insurer, and the requirements of section 38-75-740 are inapplicable. We

affirmed the decision of the Court of Appeals. Axson v. A. Mortgage

Company, Inc., 316 S.C. 253, 449 S.E.2d 491 (1994). Our opinion discussed

that the insurance company offered to issue a policy succeeding the

homeowner's previous policy. Since that act constituted a renewal of the

policy, insurance company did not need to provide written notice of

nonrenewal.



In light of the statutory definitions, as well as the Axson opinions, we

conclude that in the present case Insurance Company attempted to renew the

policy, not to "nonrenew" it. The document that Insurance Company sent on

December 4, 1992 to Insured contains at the top of the page in large bold

letters, the words "RENEWAL NOTICE." The notice delineates premium

amounts for the different vehicles. Tt also states that "If premium is shown,

coverage is same as on previous policy." Moreover, an employee of Insurance

Company declared, in an affidavit referring to the same document, that she

sent out the "renewal notice" on December 4, 1992. Clearly, this was an

"offer to issue ... a policy succeeding a policy previously issued and delivered


1 "Expiration date" means "the date upon which coverage under a policy

ends." S.C. Code Ann. § 38-75-720(4).





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WALTON v. CANAL INSURANCE COMPANY, et al.





by the same insurer." See S.C. Code Ann. § 38-75-720(l). It was not a

nonrenewal, the "termination of a policy at its expiration date." See S.C.

Code Ann. § 38-75-720(5).



Because renewal notices are governed by section 38-75-750, Insurance

Company had to furnish to Insured notice of the renewal terms "not less than

thirty days prior to the expiration date of the original policy." Here, the

.policy expired on January 2, 1993; the renewal notice was sent out on

December 4, 1992. Because this was less than thirty days prior to the

expiration date of the original policy, Insurance Company violated the

provisions of section 38-75-750.





B. REMEDY

Once it is ascertained that section 38-75-750 has been violated, it must

then be determined what the remedy should be. Subsection (e) of S.C. Code

Ann. § 38-75-750 provides:





(e) If the insurer fails to furnish the renewal terms and

statement of premium or estimated premium due in the manner

required by this section, the insured may elect to cancel the

renewal policy within the thirty-day period following receipt of

the renewal terms and statement of premium or estimated

premium due. Earned premium for any period of coverage must

be calculated pro rata based upon the premium applicable to the

original policy and not the premium applicable to the renewal

policy.





S.C. Code Ann. § 38-75-750(e) (emphasis added). The words, "the insured

may elect to cancel the renewal policy within the thirty-day period following

receipt of the renewal terms and statement of premium or estimated

premium due," imply that there is an existing policy that one may "cancel."

In other words, under the statute, Insurance Company's failure to provide

notice resulted in the automatic renewal of the policy for a limited period of

time.2


2 Insurance Company argues that even if section 37-75-750 is

applicable, it would apply in a situation where the renewal policy, by express

policy language, either takes effect pursuant to a clause in the insurance

contract or provides a grace period in which the insured may pay an overdue

premium prior to the lapse of the coverage. Insurance Company further

asserts that the intent of the section is to provide the insured with thirty





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WALTON v. CANAL INSURANCE COMPANY, et al.





Although the statute does not explicitly say how long the insured has

to affirm the renewal of the policy, section 38-75-750(e), as noted above, does

provide that the insured may elect to "cancel the renewal policy within the

thirty-day period following receipt of the renewal terms and statement of

premium or estimated premium due." (emphasis added). The most reasonable

construction of this statute is that the insured has thirty days, following

receipt of the renewal statement, to cancel (or affirm) the renewal. In other

words, the policy is automatically renewed to the extent of time necessary to

give the insured thirty days, following receipt of the renewal statement, to

decide to cancel or not. If the insured does not act within this thirty day

window of time, then coverage will not extend beyond this period.3





A number of reasons support such a construction of the statute. First,

the alternatives (either having no sanction for insurance companies or

providing automatic renewal of the policy for the entire year) are not

attractive. A thirty day period following receipt of the renewal terms

provides a reasonable, but not excessive, amount of time for the insured to

determine what he wants to do. Such a rule punishes the insurance

company to the extent of its error. For example, the insured would get ten

extra days if notice were sent out ten days late. At the same time, because

such a rule automatically extends the policy for thirty days following receipt

of the renewal notice, it offers a stimulus to insurance companies to provide

timely notice of renewal to avoid such a situation. A thirty day rule also has

the merit of being clear and definitive in its application.





In the instant case, we find Insured affirmed the policy within thirty

days of the date Insured received the renewal statement. Insurance

Company sent out the renewal notice on December 4, 1992, but the record




days notice of the impending end of coverage and protect against "premium

shock." The section prevents the charging of "short rate" cancellation

premiums to an insured who cancels a renewal policy that has become

effective after the insurer renewed the policy without the insured's consent

or failed to properly notify the insured of the renewal offer thirty days in

advance of expiration. There is absolutely nothing in the language of the

statute itself that would support this construction.





3 Section 38-75-750(e) states that "Earned premium for any period of

coverage must be calculated pro rata based upon the premium applicable to

the original policy and not the premium applicable to the renewal policy."





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WALTON v. CANAL INSURANCE COMPANY, et al.





does not specify when Insured received the notice.4 However, even though

the exact receipt date is unknown, the earliest possible time it could have

been received would have been on December 4th, the day the notice was

mailed out. Thirty days from December 4th was January 3rd, which was a

Sunday.



Under the Rules of Civil Procedure, as well as case law, Sunday is not

included in calculating the end of the thirty day period. Rule 6(a), SCRCP

provides:





In computing any period of time prescribed or allowed by these

rules, by order of court, or by any applicable statute, the day of

the act, event, or default after which the designated period of

time begins to run is not to be included. The last day of the

period so computed is to be included, unless it is a Saturday,

Sunday or a State or Federal holiday, in which event the period

runs until the end of the next day which is neither a Saturday,

Sunday nor such holiday.





Rule 6(a), SCRCP (emphasis added). See Lindsey v. South Carolina Tax

Comm'n, 323 S.C. 57, 448 S.E.2d 577 (Ct. App. 1994)(Rule 6(a), SCRCP

provides, in computing a time period prescribed by a statute, the last day of

the period is to be included, unless it is a Saturday, Sunday or a State or

Federal holiday, in which event the period runs until the end of the next day

which is neither a Saturday, Sunday nor such holiday.). Accordingly, because

the last day of the thirty day period fell on a Sunday, the period ran until

the end of the next day, which was the end of January 4th. Here, Insured

sought to renew the policy on the morning of January 4th. Thus, Insured

acted within the thirty day period during which the policy was still in effect.





CONCLUSION

Based on the foregoing, we AFFIRM AS MODIFIED the decision of

the Court of Appeals.





FINNEY., C.J., MOORE, WALLER and BURNETT, JJ., concur.





4There is a copy in the record of the renewal notice sent to Insurance

Services. This copy has on it a "Received" stamp of December 7, 1992. Thus,

it is likely that Insured received it the same day; however, this cannot be

ascertained from the current record.





p.30