Cohen v. Pennsylvania Casualty Co.

Marbury, C. J., delivered the opinion of the Court. This case was heard by the Baltimore City Court without the intervention of a jury, and a judgment was given in favor of the defendant for costs, from which the plaintiff took an appeal here. It appears from the record that on September 4th, 1940, the plaintiff, now the appellant, was run into and injured in Maryland by an automobile truck owned by a certain Daniel S. Silvia of Charleston, South Carolina. The accident occurred in the City of Baltimore, suit was instituted against Silvia in the Baltimore City Court, and on November 10th, 1941, a judgment was rendered in favor of the appellant against Silvia for $5,000 as a result of a judgment by default and an inquisition by a jury.

This judgment was not paid, and a writ of fi. fa. was issued, and returned “nulla bona.” Thereafter the appellant sued the appellee, claiming that on the date of the accident, there was in force a policy of insurance issued by the appellee, whereby Daniel S. Silvia was insured against liability for bodily injury occurring under circumstances such as did that of the appellant. The appellee filed a general issue plea and three special pleas. The third plea was to the effect that the policy of insurance referred to in the declaration had been cancelled before the date of the alleged accident, and was not then in full force and effect. This was the question upon which the trial judge decided the case in favor of the appellee. ³⁴³ The uncontradieted testimony shows that Silvia was generally engaged in buying and selling produce and in trucking.

A truck, driven by one of his employees, went north through Maryland on September 4th, 1940, and had the accident. This truck was going for a load of potatoes which Silvia was buying in New Jersey, and which he intended to resell for his own account. It was empty when the accident happened. Silvia carried a policy of insurance with the Pennsylvania Casualty Company, which he and the appellee had cancelled as of the 31st of August, or the 1st of September, a few days before the accident.

Silvia stated that he cancelled it because his occupation was seasonal, and September and October were off season. The policy was cancelled by agreement, and a large unearned premium credited to Silvia. The insurance company was not notified of the accident, because Silvia thought he had no insurance. He did not operate under the Interstate Commerce Commission, and had no operating license outside of South Carolina.

He had to have a policy to operate under a Public Service License in South Carolina, and when he took out the policy, he had the Public Service Commission of South Carolina notified, and had an endorsement placed on the policy to assure compliance with the South Carolina law. His season was from November to April, and then his trucks traveled out of the state daily. This continued until June. In July and August he operated his trucks for himself and not for hire.

The policy is in the record, and by its terms applies only to accidents which occur while the automobile is owned, maintained, and used for the purposes stated as applicable in the declarations. These accidents are geographically limited to the United States, exclusive of Alaska, and to the Dominion of Canada. The purposes are stated as pleasure and business. It is provided that the policy may be cancelled by either party by written notice.

The policy in this case was not cancelled in the way mentioned, but was cancelled by joint agreement. The South Carolina Code of 1932, Section 8511, requires ³⁴⁴ a policy for public liability where motor vehicles are operated under a certificate of public convenience and necessity issued by the Public Service Commission. In order to comply with this section, an endorsement was .placed upon the policy making it comply with the South Carolina law. This endorsement contains a statement that the liability of the company extends to injuries whether occurring on the route and in the territory authorized to be served by the insured, or elsewhere in the State of South Carolina.

There is also a provision that the endorsement may not be cancelled without cancellation of the policy, and such cancellation may be effected by the company or the insured by giving thirty days’ notice in writing to the Public Service Commission of South Carolina. This notice was admittedly not given. It is agreed that the endorsement is in accordance with the General Rules and Regulations issued under the South Carolina Motor Vehicle Carriers Law. ■ The South Carolina statute obviously could not operate without the limits of that state. It could, although it did not, require a general coverage policy before a certificate of public convenience and necessity would be issued.

Silvia’s policy itself, if in force, operated anywhere in the United States. The appellee claims that, while the endorsement was not cancelled in accordance with the South Carolina statute, the only effect of such failure was to keep the policy in force in the State of South Carolina. The policy itself, which might have covered this accident, had it been in force, it claims, was lawfully cancelled by mutual consent prior to the time of the accident. The Maryland Financial Responsibility -Law, Section 182 of Article 56, as it was in force on the date of the accident, applies only to motor vehicles used or to be used in the transportation of passengers or property for hire.

The Maryland statute also provides that no cancellation shall be valid unless the Commissioner of Motor Vehicles is notified thirty days before the expiration date. No notice of such cancellation was ever given to the Commissioner of Motor Vehicles, but the appellee ³⁴⁵ claims that, as the truck in question was not being used for hire, it did not come within the provisions of the Maryland act, and, therefore, the policy is not to be construed under its terms, and no notice of cancellation in Maryland was necessary. The court below upheld the contentions of the appellee. The appellant contends, on the contrary, that the agreement of cancellation was ineffective as to any of the policy, because the South Carolina endorsement could not be cancelled in that way, that the whole contract of insurance, policy and endorsement, was a single one, and that as the loss was within the coverage contained in the policy, the appellee is liable.

The first question, therefore, to consider is whether the attempted cancellation of the policy was effective, except as within the State of South Carolina. The appellee agreed with the insured, on April 20, 1940, to pay on behalf of the latter, damages for bodily injury imposed on him by law caused by accident arising out of the ownership of his automobiles, one of which was that involved in this accident. The agreement is embodied in what is called a National Standard Automobile Policy, and was to expire on April 20, 1941. Except as to rights acquired by persons injured while the policy was in force, there was nothing in it to prevent the parties to it, i. e., the insured and the appellee, from cancel-ling the policy at any time before it expired.

That is what they did, according to the undisputed testimony in the record. On August 31st, 1940, the insured, Silvia, executed a release to the appellee, certifying that the policy had been lost, mislaid, or destroyed, and the insurance having been cancelled, he released the company from any liability. The insurance company’s record shows that the actual cancellation took place on September 1, 1940, and that a return premium of S886.20 was credited to the insured. On the same date on which the policy was issued, there was attached to it, and made a part of it, the endorsement which amended the policy to assure compliance with the South Carolina law.

This endorsement applied only to ³⁴⁶ damages resulting from the use of motor vehicles under a certificate of public convenience and necessity issued by the Public Service Commission of South Carolina on the route or in the territory authorized to be served or elsewhere in the state. There is a provision that the insured agreed to reimburse the company for any payment the company would not have been obligated to make under the policy, except for the agreement contained in the endorsement, and there is the further proviso, heretofore mentioned, that the endorsement cannot be cancelled without cancelling the policy. Such cancellation may be effected by either the company or the insured giving ' thirty days’ notice to the Public Service Commission of South Carolina. The effect of this endorsement, of course, was to make the policy one given under the South Carolina Motor Vehicle Carriers Law.

It appears that no routes or territory had ever been authorized for the insured by the Public Service Commission of South Carolina, but as the accident did not occur in that state, it is not necessary to pass on what effect that might have upon the liability of the appellee in case of an accident there. In South Carolina, the policy and its endorsement would be construed as a compliance with the statute, and as in Maryland, if there were conflict, the statute would control. Brownlee v. Charleston Motor Exp. Co., 189 S. C. 204, 200 S. E. 819 ; Keystone Mut.

Casualty Co. v. Hines, 180 Md. 676 , 26 A. 2d 761 , and cases there cited. That, however, only applies within the limits of the state which has enacted the statute. Such a statute cannot have an extra-territorial effect, and if the policy is broader than the statute, as in the case before us, and covers accidents occurring anywhere in the United States, except. Alaska, and in Canada, its construction, outside of the state, depends on the terms of the policy itself.

The reason for this is that the policy itself is a simple contract between the parties, and they are bound by its terms, but when it is made to serve, in a particular state, as a policy issued under a compulsory insurance law, then the public in that state have an interest in it. It is then ³⁴⁷ presumed to be issued with the knowledge of what is required for the protection of that public, and that knowledge, therefore, in any particular state, is read into such a policy. In the case before us, as we have noted, the South Carolina law does not broaden the policy, nor does it restrict it. Its effect, when the policy was in force, was that the insured was not only covered in South Carolina, as required by the statute of that state in certain kinds of operations, but he was covered as to other operations in that state, and in other states as well.

When he and the company attempted to cancel the policy, they did not file any notice of cancellation as required by the endorsement, so that clearly that part of the policy, which was required under the South Carolina law, remained in force. The public interest and the public necessity demanded that, but the public interest and the public necessity did not require the continuation of other parts of the policy applying elsewhere, or covering a broader liability. There seems to be no good reason why the insured and the company cannot terminate at will that part of their contract, and we agree with the court below, that they did so terminate if either on August 31st or at least on September 1st, which was the date on the appellee’s books. It is frequently the case that insurance policies cover two classes of insurance, namely, the compulsory insurance required by the statute of a particular state, and general insurance, good everywhere, or good for other purposes than those required by the statute.

In the case before us, we have the general insurance contained in the policy, and the compulsory insurance provided in the endorsement. It is just as usual, and perhaps more so, to find the policy written to accord with the statute, and an extra-territorial rider attached. In a case of the latter nature, an insurer in Massachusetts extended his liability under a policy given to comply with the compulsory insurance law there by attaching a clause, which insured the policyholder for damages on account of in ³⁴⁸ juries suffered from accidents occurring within the limits of continental United States of America by reason of the operation, maintenance, and use of his motor vehicle. The coverage description in the compulsory insurance clause was different from that in the extra-territorial clause.

An accident occurred outside of Massachusetts, and suit was brought for consequential damages to parents arising from bodily injuries sustained by their children. The Massachusetts court concluded that the wording of the compulsory insurance clause did not include such coverage, but that the extra-territorial insurance was not so limited, and in so doing said: “The policy comprehended two distinct kinds of insurance. The first was specifically stated to be the compulsory insurance required by the statute as a condition precedent to the registration of the motor vehicle in this commonwealth. The second was not required by any statute but was a purely voluntary contract of insurance relating to accidents occurring in certain territory outside of this