Opinion
45824.
ARGUED JANUARY 4, 1971.
DECIDED FEBRUARY 4, 1971. REHEARING DENIED FEBRUARY 24, 1971.
Action on insurance policy. Polk Superior Court. Before Judge Winn.
Rogers, Magruder Hoyt, J. Clinton Sumner, Jr., for appellant.
Marson G. Dunaway, Jr., for appellee.
1. Where the insurer had received a total net yearly premium on the insured's policy from its general agent, who in turn had extended credit to an independent broker who had received from the insured an amount she erroneously advised the latter was the full yearly premium, the insurer's attempt to cancel the insurance for nonpayment of premium was ineffective.
2. Issues abandoned in the trial court will not be considered in this court.
3. The insured was not entitled to recover attorney fees under the provisions of Code § 20-1404.
ARGUED JANUARY 4, 1971 — DECIDED FEBRUARY 4, 1971 — REHEARING DENIED FEBRUARY 24, 1971.
The plaintiff in this declaratory judgment action, Mrs. Lawson, had for several years placed her insurance with or through the broker Crabb Insurance Agency, which in turn had placed the automobile liability coverage through W. K. Stringer Co., which represented several companies, leaving it to Stringer to select the insurer. Miss Crabb had for several years handled her liability insurance in this manner, and Stringer extended credit directly to her, billing her for totals of all unpaid premiums and crediting payments against her account without any attempt to allocate premium payments to individual insureds. Stringer, who was a general agent for the defendant, Canal Insurance Company, itself paid the yearly premium less all commissions on the Lawson policy to Canal and issued an automobile liability policy to Mrs. Lawson, dated July 15, 1968. Lawson had paid Miss Crabb $85 which was understood by both of them to be the full yearly premium, the same as the year before, but the charge entered against Miss Crabb was in fact $182 and she agreed to extend credit to the Lawsons on their promise to reimburse her any overage. Miss Crabb deposited the check in her general business account from which she made periodic payments to Stringer of somewhat over $1,000 between July 15 and October. Her overall account was delinquent, and on September 26, Stringer Company sent out cancellation notices to various insureds, including Lawson, effective October 11, and demanded a $5.00 reinstatement fee. Lawson took the notice to Miss Crabb, who assured him that the mistake was her fault, that she had already sent the premium money in, and that they were covered by the insurance.
On January 3, 1969, Mrs. Lawson was involved in a collision in regard to which suit was subsequently filed against her. On the trial of this action which seeks to establish the validity of the policy, both sides moved for directed verdict. The court directed a verdict to the effect that the attempted cancellation of the policy was not effective, that the policy was in effect for the time stated therein, and submitted to the jury the issue of attorney fees sought by the plaintiff against the defendant on the ground of bad faith. The jury returned a verdict in accordance with the direction of the court and for $1,000 as attorney fees. The appellant insurer enumerates error on the overruling of its motions for directed verdict, judgment notwithstanding the verdict, and new trial on general and special grounds.
1. There is no dispute but that Miss Crabb first assured the Lawsons their total premium for the automobile liability insurance policy was $85, and that she thereafter either assumed the balance of payment herself because of the error or extended credit to them, and that she told them the total premium money had been sent in. If she is to be assumed as an independent broker to be the agent of the insured rather than the insurer, as seems necessary under Code Ann. § 56-801b (5), the case turns on her relations with Stringer Company, the general agent of Canal Insurance Company. It is further undisputed that Stringer extended credit to Crabb and not to any of her insured clients, since its ledger sheet shows that amounts owing as well as amounts paid were kept only as totals with no effort to distinguish between the various policyholders, who appeared only as a charge or a credit on the Crabb account. But Stringer Company went further than this — it advanced the money owing by the Crabb agency as net premiums on the various accounts. The testimony of the defendant's witness was as follows: "You say you already had advanced money to the various insurance companies to cover their premiums, that was true with reference to Canal Insurance Company in this case too, wasn't it? A. Yes, sir. Q. In other words, when you charged Crabb Insurance Agency $182 less the commission you sent to Canal Insurance Company the W. K. Stringer's money for that policy, didn't you? A. Yes, sir. Q. And so after that it was just a matter of whether you were going to collect it back from Miss Emma [Crabb] or not, really, wasn't it? A. That's right. Yes, sir ... Q. What I'm saying is, from time to time you sent out cancellation notices to the people who held insurance policies written by your company for the sole purpose of getting the policyholder to go to the local agent and punch them up to send you the money that they'd paid already on the premium, isn't that right? A. That might be right in the event that the insured had paid the local agent. We don't have any way of knowing what they have collected from their insured."
From the above and other evidence in the case it is clear that Canal Insurance Company, at the time the nonpayment notice was sent out in October, had actually collected the full yearly premium, advanced by Stringer and charged by it against Crabb. It is also clear that the Lawson collision, which occurred on the 171st day of the policy period, was covered under the $85 actually paid by the Lawsons (the net forwarding commission of $27.30 having been credited to Miss Crabb). This is true because Stringer-Canal would not have received the total premium of $182 but a net premium of this amount less the Crabb commission, or $154.70, so that $85 forwarded by Crabb would cover approximately 200 days of insurance. Therefore, both in October when Canal attempted to cancel the policy and on January 3, when the collision occurred, the Lawsons had paid a sufficient sum to keep the policy in force and had been extended credit for the balance and Canal had in fact received a full year's premium. The cancellation for nonpayment of premium was therefore ineffective, and although Canal under Code Ann. § 56-2430 might have effected cancellation at its option, such cancellation must be accompanied or followed by a tender of the return premium to the policyholder, which was not done. In any event, the extension of credit is a valid consideration for the issuance of the policy. Fireman's Fund Ins. Co. v. Lindsey, 32 Ga. App. 683 ( 124 S.E. 369); Loflin v. Home Ins. Co., 40 Ga. App. 246 ( 149 S.E. 308); Reeves v. Progressive Life Ins. Co., 85 Ga. App. 576 ( 69 S.E.2d 882). The direction of a verdict in favor of the plaintiff on this issue was proper.
2. Although the plaintiff's petition contained a prayer that the defendant insurer be required to defend the suit resulting from the January 3 collision, and the answer contained a defense that no proper "notice for proof of loss" was filed and therefore the insurer had no duty to defend this particular claim, nevertheless, a thorough reading of the transcript indicates that this issue was abandoned during the trial of the case. The court directed a verdict "that the cancellation of the policy was not effective and that the policy was in effect for the period of time stated in the policy." Only the issue of attorney fees was submitted to the jury. The defendant was certainly not entitled to a judgment in its favor on this issue as a matter of law under the evidence produced, and it failed both to object to the charge of the court on the ground that the issue was not submitted and to enumerate error on its omission from the charge. No reversible error appears as to this defense.
3. Plaintiff concedes that she is not entitled to attorney fees under Code Ann. § 56-1206, but contends that the verdict was correct under Code § 20-1404 because of the bad faith and stubborn litigiousness of the defendant. The "bad faith" referred to in these sections is not the same. New York Life Ins. Co. v. Bradford, 57 Ga. App. 657 (2) ( 196 S.E. 92). In actions on contracts, attorney fees under Code § 20-1404 may only be awarded where the contract was entered into in bad faith by the defendant in the first instance, or was procured by fraud and deceit. McKenzie v. Mitchell, 123 Ga. 72 (1) ( 51 S.E. 34). Treating this action as a mere breach of contract by an attempted unauthorized unilateral rescission, it becomes obvious that the case must be judged as of the time of the breach (the cancellation notice forwarded in October prior to the collision) and it was error to submit this issue to the jury.
Judgment affirmed with direction that the award of attorney fees be written off. Bell, C. J., and Pannell, J., concur.