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DUNN v. SAFECO INS. CO.

September 28, 1990.

ROBERT H. DUNN AND CHERI DUNN, Appellants,
v.
SAFECO INSURANCE COMPANY OF AMERICA AND GENERAL INSURANCE COMPANY OF AMERICA, Appellees.



This is an appeal by Robert H. Dunn and Cheri Dunn (the insureds) from the granting of summary judgment in

[14 Kan. App. 2d 733]

      favor of the defendants/appellees, hereinafter referred to as the insurance company.

After careful review, we affirm.

The facts of this case indicate that the insureds approached the insurance company's agent seeking to purchase insurance covering a 1988 pickup. In order to obtain coverage, the insureds were required to complete an application, and this application was completed and signed by Cheri Dunn. In the application, Cheri Dunn represented that no driver of the vehicle had ever had his or her driver's license revoked or suspended. She also indicated that Robert Dunn would drive the vehicle approximately ten percent of the time. After the application was completed, it was turned over to the insurance agent along with a check for $124. In response to the receipt of the application and the check for the premium, the insurance agent issued a "binder" showing that coverage was in effect.

  When the application reached the insurance company's main offices, a search of the state motor vehicle records was undertaken and compared to the facts of the application. This search revealed that the insureds had not been truthful in supplying the information on the application. The motor vehicle department records revealed that Robert Dunn's driver's license had been suspended several times and had been cancelled once since 1986.

  At this point, it becomes important to note with particularity the dates on which subsequent events took place. On May 17, 1989, after it had discovered Robert's true driving record, the insurance company mailed a notice to the insureds. This notice was sent by certified mail to the address shown on the application and advised the insureds that no policy had ever been in effect as a result of their misrepresentations. The insurance company also enclosed in that notice a check for the "full return premium." The insureds testified they did not receive this notice, stating that they had moved from the address listed on their application. The insurance company again sent notices to the same address on May 24 and June 3, 1989. Neither notice was received by the insureds.

  On May 19, 1989, the agent sent a letter to the insureds. This letter was sent by regular mail and was received by the insureds. In the letter, the agent advised the insureds that their policy

[14 Kan. App. 2d 734]

      with the insurance company would become void in the near future. The agent offered to find other coverage for the insureds and advised that, if she had not heard from them by May 26, 1989, she would assume that coverage had been obtained elsewhere.

  On May 28, 1989, the insureds wrecked their pickup in a one-vehicle accident, causing damage to that pickup in the amount of $9,600. There were no other vehicles or parties involved, and the insureds themselves are the sole "loss payees" under the policy.

  We note that the insureds had received actual notice from their insurance agent that their policy was about to be cancelled several days prior to the accident involving their pickup. After their accident, the insureds demanded payment of their damages under the policy. The insurance company denied payment on the grounds that it had rescinded the policy ab initio due to the misrepresentations made by the insureds on the application. The insureds then filed this action, seeking to recover damages for breach of contract.

  The insureds argue that the provisions of K.S.A. 1989 Supp. 40-3118(b) apply and that, despite their misrepresentations, the policy or "binder" could only be cancelled in strict accordance with that statute. That statute reads in relevant part:
"(b) Except as otherwise provided in K.S.A. 40-276, 40-276a and 40-277, and amendments thereto, and except for termination of insurance resulting from nonpayment of premium or upon the request for cancellation by the insured, no motor vehicle liability insurance policy, or any renewal thereof, shall be terminated by cancellation or failure to renew by the insurer until at least 30 days after mailing a notice of termination, by certified or registered mail or United States post office certificate of mailing, to the named insured at the latest address filed with the insurer by or on behalf of the insured. Time of the effective date and hour of termination stated in the notice shall become the end of the policy period." (Emphasis added.)
  It is apparent that, if the above-quoted statute applies to this factual situation, rescission ab initio would not be permitted, and the insurance company would be required to have given the insureds at least 30 days notice of termination.

  The question presented for our resolution is one of first impression in this state. We must determine whether K.S.A. 1989 Supp. 40-3118(b) is controlling ...


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