Creaghe v. Iowa Home Mutual Casualty Co.

United States Court of Appeals for the Tenth Circuit · Evidence

EvidenceInsurance cancellationHearsayhearsayverbal actsoral agreementcontract terminationinsurance policy cancellation

Facts

The insurer had issued a liability policy on Osborn's commercial truck, a copy of which had to be filed with the Colorado Public Utilities Commission, and cancellation required ten days' notice to the Commission. According to the insurer's agent and the agent's secretary, Osborn came to the agent's office on October 19, said he wanted the insurance cancelled immediately, and received back a previously dishonored premium check; the policy was already in the agent's possession because coverage changes had been made. The agent forwarded the policy to the insurer and advised it of the cancellation, and the insurer sent notice to the Commission, which responded on October 29. The accident with plaintiff occurred on November 25, and the insurer later refunded $28.58 to Osborn about seven months after the cancellation.

Issue

Whether the evidence established, as a matter of law, that Osborn effectively cancelled the policy before the accident, including compliance with policy and Commission notice requirements, and whether testimony recounting Osborn's statements requesting cancellation was inadmissible hearsay. The court also considered whether delay in refunding unearned premium prevented the insurer from relying on the cancellation.

Rule

An insured may effectively cancel a policy under cancellation provisions by communicating the desire to cancel, and where the policy is already in the agent's possession, such proof can be equivalent to physical surrender. Notice requirements to the relevant regulatory body are satisfied when the company sends notice and more than the required period elapses before the loss. Testimony about what contracting parties said in making or terminating an oral agreement is not hearsay when offered to prove that the statements were made, not that their contents were true. Return of unearned premiums is not necessarily a condition precedent to cancellation.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Tulsa, Nina Barrett met with an insurance broker at Red Mesa Risk Agency while the broker already had her commercial van policy for endorsement changes. In front of the broker's receptionist, Nina said, "End this coverage today," and left. In later litigation over a crash occurring weeks afterward, the receptionist is called to testify that Nina made that statement.

If the testimony is offered only to prove that Nina uttered words terminating coverage, how should the court rule on a hearsay objection?

Explanation. The majority held that testimony recounting what a contracting party said in making or terminating an oral agreement is not hearsay when offered to prove only that the words were spoken. The utterance itself is the fact in issue. Any witness who heard the words may testify; admissibility does not depend on the declarant's unavailability or on proving the truth of the words' content. (Derived from Creaghe v. Iowa Home Mutual Casualty Co. (n.d.).)