Robert A. Villwock, etc v. Insurance Co. of NA, etc

• Court: Court of Appeals of Virginia
• Decided: March 19, 1996
• Docket: 0434953
• Status: Published

Opinion

COURT OF APPEALS OF VIRGINIA

Present: Chief Judge Moon, Judges Coleman and Fitzpatrick Argued at Salem, Virginia

ROBERT A. VILLWOCK, T/A PIONEER CONSTRUCTION CO., INC. OPINION BY v. Record No. 0434-95-3 CHIEF JUDGE NORMAN K. MOON MARCH 19, 1996 INSURANCE COMPANY OF NORTH AMERICA/CIGNA, CHRISTOPHER R. ROUTH, ROBERT C. HUFFMAN AND UNINSURED EMPLOYERS' FUND

FROM THE VIRGINIA WORKERS' COMPENSATION COMMISSION

R. Louis Harrison, Jr. (R. Louis Harrison, Jr., P.C., on briefs), for appellant.

John M. Poma (Midkiff & Hiner, P.C., on brief), for appellee Insurance Company of North America/CIGNA.

No brief or argument for appellees Christopher R. Routh, Robert C. Huffman and Uninsured Employers' Fund.

Robert A. Villwock appeals the ruling of the Workers'

Compensation Commission that CIGNA, the putative insurer,

complied with Code § 65.2-804(B) in cancelling his workers'

compensation insurance policy. We affirm because credible

evidence supported the commission's finding that the employer

received notice of cancellation.

Robert A. Villwock owns and operates the Pioneer

Construction Company. He had workers' compensation insurance

through CIGNA. The most recent policy was to be effective from

April 7, 1993 through April 7, 1994. As a condition of that

policy, Villwock was required to comply with certain audit

requirements, including provision of payroll records. On March 30, 1993, CIGNA requested payroll information for

an audit. The request was accompanied by a notice that the

information had to be provided within fifteen days in order to

avoid an interruption in coverage. CIGNA received no response

from Mr. Villwock, and sent a second request for information on

May 8th. Villwock's insurance agent, Virginia Fowler, received a

copy of this notice, and contacted Villwock by telephone.

Villwock assured Fowler on two occasions that he would provide

the requested information immediately, but did not do so. CIGNA then requested permission from NCCI, which administers

workers' compensation insurance for the Commonwealth of Virginia,

to cancel Villwock's policy. A copy of this request was sent to

Villwock and his agent. On August 13, 1993, NCCI responded

directly to Villwock, with a copy to CIGNA, informing Villwock

that if he did not provide the requested information within

fifteen days his policy would be cancelled. While both Fowler

and CIGNA received their copies of the aforementioned notices,

Villwock denied receiving any of them.

CIGNA then proceeded with cancellation of the policy

pursuant to Code § 65.2-804(B). On August 27, 1993, it sent a

notice to Villwock, with a copy to the agent, informing him that

his insurance would be cancelled effective September 30, 1993.

The statute requires a thirty-day notice to the employer and the

commission, and CIGNA routinely adds five to seven days to

account for mailing. Under standard office practice, the notices

to Villwock and the agent would be mailed the day the notice was

- 2 - typed, and the commission's would be mailed two to five days

later in a bulk mailing.

The commission did not receive its notice until September

22, 1993. NCCI, to which CIGNA also sent a copy of the notice,

received its notice on September 16. Because it received its

notice less than thirty days from the cancellation date, the

commission changed the effective date of the cancellation to

October 21, 1993, thirty days from its receipt of the notice from

CIGNA. The commission's standard practice was to send a notice

to the employer notifying it of the cancellation and the

effective date. A commission witness testified that this form

was sent, although he was unable to produce a copy of it because

the hard copies of the record had been destroyed. Villwock

denied receiving notice from either CIGNA or the commission. His

agent received her copy of the notice from CIGNA. On November 15, 1993, two employees of Pioneer Construction

fell from a scaffold and were injured, one severely. On the day

of the accident, Villwock contacted his insurance agent, who

informed him that his policy had been cancelled. Villwock

testified that CIGNA did not inform him that the policy was

cancelled until he contacted the company himself in February

1994.

At his deposition, Villwock testified that in June 1993 he

moved from Route 1, Box 148B in Huddleston, Virginia to 112

Autumn Avenue in Huddleston. Villwock did not inform either

CIGNA or his insurance agent of his change of address. He did,

- 3 - however, provide a forwarding order to the post office, and he

received forwarded mail. He was still receiving forwarded mail

as of the deposition date of August 24, 1994. Yet, he testified

that he never received a single item of correspondence from

CIGNA, NCCI, or the commission concerning either the audit or the

cancellation of his insurance. He testified that he was unaware

of any other mail he failed to receive after changing his

address. 1 He acknowledged receiving and cashing a refund check

from CIGNA that was mailed to his former address in March 1994. Villwock's method of dealing with his business mail was

haphazard. Both he and his wife, who helped with the business,

collected the mail. Mail was opened each day "at random" by

either Villwock or his wife. The business and personal mail were

both delivered to the same mailbox. The Villwocks did not open

all of the business mail at once, but instead "at various times."

They did not datestamp the mail.

We construe the evidence in the light most favorable to the

party prevailing below. States Roofing Corp. v. Bush

Construction Corp., 15 Va. App. 613, 616, 426 S.E.2d 124, 126

(1993). The commission's factual findings will not be disturbed

on appeal if supported by credible evidence. Id. This Court is

not bound by the commission's determination of legal questions. 1 At the hearing, Villwock testified that he had changed his address in 1987. The commission cited this date in its decision. The testimony at the deposition concerning the change of address was more clear and detailed, and is also more consistent with other facts in the record. We therefore accept the deposition testimony for purposes of this appeal.

- 4 - Cibula v. Allied Fibers & Plastics, 14 Va. App. 319, 324, 416

S.E.2d 708, 711 (1992), aff'd, 245 Va. 337, 428 S.E.2d 905

(1993).

Resolution of this case requires interpretation of Code

§ 65.2-804(B). The statute provides, in pertinent part: No policy of insurance hereafter issued under the provisions of this title . . . shall be cancelled or nonrenewed by the insurer issuing such policy . . . except on thirty days' notice to the employer and the Workers' Compensation Commission . . .

The threshold question is whether the insurance company must

show that the notice was received, or merely that it was mailed.

The commission's opinion is ambiguous on this issue. For the

reasons set forth below, we hold that CIGNA must show that the

employer received the notice. 2

In American Mutual Fire Insurance Co. v. Barlow, 4 Va. App.

352, 355-56, 358 S.E.2d 184, 186-87 (1987), we held that the

notice must actually be received by the commission in order for

cancellation to be effective. In Barlow, the employer received

the notice but the commission did not. We thus had no need to

decide whether the employer must actually receive the notice.

In deciding whether actual receipt is necessary to effect

cancellation, the language of the statute controls. Where the

2 The commission did not rule explicitly on whether Villwock had received the notice. However, it noted that Villwock had received and cashed the policy refund check--in effect finding that Villwock had received the notice as well. As discussed further below, this finding is amply supported by credible evidence.

- 5 - statute provides that the policy may be cancelled by giving a

certain number of days' notice to the insured, and does not

specify mailing as the method of providing notice, actual receipt

is required for the notice to be effective. 3 This rule is well

established in both cases and commentary. See Scanlon v. Empire

Fire and Marine Insurance Co., 117 Idaho 691, 693-94, 791 P.2d

737, 739 (1990); Larocque v. Rhode Island Joint Reinsurance

Assoc., 536 A.2d 529, 530-31 (R.I. 1988); Nunley v. Florida Farm Bureau Mutual Insurance Co., 494 So.2d 306, 307 (Fla. Dist. Ct.

App. 1986); Osborne v. Unigard Indemnity Co., 719 S.W.2d 737,

740-41 (Ky. Ct. App. 1986); Smith v. Municipal Mutual Insurance

Co., 169 W.Va. 296, 298-99, 289 S.E.2d 669, 670-71 (1982); Rocque

v. Co-operative Fire Insurance Association of Vermont, 140 Vt.

321, 325, 438 A.2d 383, 385-86 (1981); Martin J. McMahon,

Annotation, Actual Receipt of Cancellation Notice Mailed By

Insurer as Prerequisite to Cancellation of Insurance, 40 A.L.R.

867, 873, 883-88 (4th ed. 1985); 43 Am. Jur. 2d Insurance § 391

(4th ed. 1982). 3 The same rule applies to provisions in an insurance policy that set forth requirements for notice of cancellation. Where, as here, the policy provisions conflict with the applicable statute, the statute controls. See Ampy v. The Metropolitan Casualty Insurance Company of New York, 200 Va. 396, 400, 105 S.E.2d 839, 844 (1958) (Code provision regarding cancellation of motor vehicle insurance became part of insurance policy and insurer had to comply with it); see also Boman v. State Farm Mutual Automobile Insurance Co., 505 So.2d 445, 450 (Fla. Dist. Ct. App. 1987); Smith v. Municipal Mutual Insurance Co., 169 W.Va. 296, 301, 289 S.E.2d 669, 671-72 (1982); Martin J. McMahon, Annotation, Actual Receipt of Cancellation Notice Mailed By Insurer as Prerequisite to Cancellation of Insurance, 40 A.L.R. 867, 871 (4th ed. 1985).

- 6 - This rule is consistent with the policy that underlies Code

§ 65.2-804(B). As the Court noted in Barlow, one purpose of the

notice requirement is to allow employers to secure insurance with

another carrier. See also Hartford Accident & Indemnity Co. v.

Fidelity & Guaranty Insurance Underwriters, Inc., 223 Va. 641,

643-44, 292 S.E.2d 327, 328 (1982). If the employer does not

receive the notice, the employer does not have the opportunity to

secure other insurance, and thus the statutory purpose is not

fulfilled. See Larocque, 536 A.2d at 531; Smith, 169 W.Va. at

299, 289 S.E.2d at 671.

CIGNA met its burden of showing, based on credible evidence,

that the employer received the notice. 4 First, CIGNA presented

evidence concerning its regular procedure for mailing notices of

cancellation. This evidence supports a finding that the notice

4 Insurance companies typically meet this burden through application of the presumption that correspondence properly mailed is received by the addressee. See Larocque, 536 A.2d at 532; Osborne, 719 S.W.2d at 741. In Virginia, the mailing of correspondence, properly addressed and stamped, raises a presumption of receipt of the correspondence by the addressee. Washington v. Anderson, 236 Va. 316, 322, 373 S.E.2d 712, 715 (1988). Denial of receipt by the addressee raises an issue for the fact finder. Manassas Park Development Co. v. Offutt, 203 Va. 382, 385, 124 S.E.2d 29, 31 (1962). Here, the notice was not "properly addressed" because, due to Villwock's failure to inform CIGNA of his change of address, it was mailed to his former address and therefore had to be forwarded. We need not decide whether the mailing presumption applies in the circumstances of this case. Even without benefit of the presumption, which disappears upon denial of receipt by the addressee, credible evidence supports the finding that Villwock received the notice.

- 7 - was mailed from CIGNA in the regular manner. Villwock disputes

this, arguing that the commission's late receipt of the notice

negates any inference that the mailing was handled in a regular

manner. However, a postal delay in processing the commission's

copy of the notice, or a delay by the commission handling the

notice once it arrived, is irrelevant to the procedures used by

CIGNA in handling Villwock's notice. Also, the notices to the

commission and Villwock were mailed using different procedures,

with notice to the employer going out the day it was typed, and

notice to the commission going out two to five days later through

bulk mail. While CIGNA's procedures for mailing commission

notices may have contributed to the delay, this does not suggest

that Villwock's notice was handled other than in the regular

manner. Second, none of the correspondence from CIGNA to Villwock

concerning either the audit or the cancellation was returned as

undeliverable. Indeed, CIGNA showed and Villwock acknowledged

that he had received the refund check from CIGNA that was mailed

to his former address. He also testified that he had received

forwarded mail and was unaware of failing to receive any

forwarded mail other than the notices concerning his insurance.

The commission was justified in concluding that Villwock's

haphazard procedures for handling business mail, as well as his

history of failing to respond to verbal notice provided by his

insurance agent, supported the inference that he received the

cancellation notice but failed to respond, either deliberately or

- 8 - through negligence. We hold that Villwock's insurance was

effectively cancelled.

According to Villwock's testimony, mail to his former

address in Huddleston was forwarded to his new address. While

CIGNA added five days to the notice period to account for

mailing, the necessity of forwarding may have delayed the notice

so that the notice period was less than thirty days. However,

even if it was received late, the notice was still effective. Villwock had more than thirty days' notice of the need to

procure substitute insurance. The commission, because it

received its notice less than thirty days before the notice

period set by CIGNA was due to expire, established a new

cancellation date of October 21, 1993. The commission sent a

notice to Villwock that informed him of the new cancellation

date. The commission's action negated any failure to comply with

the thirty-day notice period set by the statute. Moreover, under

the rule generally applicable to cancellation of insurance,

failure to give the notice of the requisite length does not void

the notice; instead, cancellation becomes effective after the

required period has lapsed. See Wright v. Grain Dealers National

Mutual Fire Insurance Co., 186 F.2d 956, 960-61 (4th Cir. 1950)

(applying Virginia law); 43 Am. Jur. 2d Insurance § 389 (1982).

In addition, both CIGNA and NCCI informed Villwock in August,

more than two months before the cancellation date, that his

insurance would be cancelled for failure to provide information

necessary for the audit. Villwock's insurance was effectively

- 9 - cancelled under Code § 65.2-804(B).

Therefore, the judgment of the commission is affirmed.

Affirmed.

- 10 -