Freeman v. Bonnes Trucking, Inc.

WOLLE, Justice

(concurring specially).

I concur in the result reached by the majority and in the reasoning of all of the majority opinion except a portion of division IA. I disagree with the court’s interpretation of section 515.80. I believe that statute required only that the group insurer Guardian serve notice of cancellation for nonpayment of premium upon the premium-paying and policy-holding employer Bonnes Trucking with whom Guardian had contracted, not on the Freemans and other persons covered by the group policy. I agree, however, that judgment against Guardian should be affirmed; the form, content and timing of Guardian’s written notices to Bonnes Trucking did not comport with the statutory notice requirements of section 515.80.

The trial court found that on November 19, 1979, the group policy was cancelled by Guardian and that notice of the cancellation was given to Bonnes Trucking, though not to Freeman. The uncontradicted evidence conclusively establishes the contrary with respect to Bonnes Trucking. The written notices were deficient in several respects. The record discloses that Guardian sent Bonnes Trucking written notices concerning policy cancellation or lapse on November 20 and December 19, 1979, and on February 8, 1980. The November 20 notice provided that if payments of overdue and current premiums (with no amount specified) were not received “WITHIN TEN DAYS,” the policy “will be cancelled as of the effective date of lapse,” identified as “11-15-79”. The later written notices referred to cancellation as having occurred on November 15, 1979. None of the notices complied with the requirement of section 515.80 that the insured be notified of the amount due and the amount necessary to pay the customary short rates. None of the notices provided that Bonnes would have “thirty days after service of such notice” within which to pay.

Guardian had the burden of proving effective cancellation; the notice was required to be given in strict compliance with the statute. Farmers Insurance Group v. Merryweather, 214 N.W.2d 184, 189-91 (Iowa 1974). Because the cancellation notice required by section 515.80 was not given to Bonnes Trucking, we would not need to reach the question whether Guardian was also required to serve notice upon all members covered by the group policy. On that issue, however, I disagree with the majority’s interpretation that service of the required notice “upon the insured” means service upon all employees or group members.

First, Bonnes Trucking was certainly “the insured” to the extent that it had agreed to provide coverage for its employees and contributing dependents and undertook to perform that obligation by purchasing the Guardian policy. Bonnes Trucking was the insured because when Guardian paid covered medical or other expenses of *881 the group members, Bonnes Trucking did not have to.

Secondly, a reading of section 515.80 and the related sections 515.81 to 515.84 which follow suggests quite clearly that the required notice is to be directed to that person —“the insured” — who has been paying premiums, who now must pay the overdue premium to avoid cancellation, and who can be held liable for unpaid premiums. The typical group member would not be able to comply with the notice by paying the entire overdue group premium necessary to keep the policy in force. The typical group member would be unable, without considerable analysis of records beyond his control, to determine the accuracy of the information contained in the notice. The typical group member could not readily determine if the premium referred to in the notice had thereafter been paid by the employer within the grace period provided for in the statutory notice of cancellation. Neither would the group member be liable to the insurer for payment of all or a short-rate portion of the overdue premium.

To ascertain legislative intent we may consider the language used in the statute and the objects sought to be accomplished, seeking a sensible, workable, practical and logical construction. Hansen v. State, 298 N.W.2d 263, 265-66 (Iowa 1980); Janson v. Fulton, 162 N.W.2d 438, 443 (Iowa 1968). It is presumed that a just and reasonable result is intended. Iowa Code § 4.4 (3) (1983). Inconvenience or absurdity should be avoided. Quinn v. First National Bank, 200 Iowa 1384, 1386-87 , 206 N.W. 271, 272 (1925). Applying these established principles of statutory interpretation, I believe the expressed intent of section 515.80 is to require that the specified notice be given only to the party with whom the insurer directly contracts and from whom the insurer can reasonably expect to receive the premium. Had the legislature intended that all group members be given notice, a different form and content of notice for those persons would certainly have been specified either in Iowa Code chapter 509 or in Iowa Code chapter 515.

Consequently, I concur in affirming the judgment against Guardian not because Guardian failed to serve the Freemans but rather because it did not serve an effective cancellation notice upon Bonnes Trucking.