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BANKERS AND SHIPPERS INSURANCE COMPANY OF NEW YORK v. MERIDIAN NAVAL FEDERAL CREDIT UNION

JUNE 01, 1983

BANKERS AND SHIPPERS INSURANCE COMPANY OF NEW YORK
v.
MERIDIAN NAVAL FEDERAL CREDIT UNION



BEFORE BROOM, HAWKINS AND DAN LEE

HAWKINS, JUSTICE, FOR THE COURT:

Bankers and Shippers Insurance Company of New York, an insurance corporation of that state, appeals from a Lauderdale County Circuit Court judgment in favor of Meridian Naval Federal Credit Union, a Mississippi corporation.

The issue we address on this appeal is whether the insurance company was obligated to give notice to the credit union of the lapse of an insurance policy for nonpayment of a renewal premium by a borrower from the credit union on a mobile home, secured by a security agreement in favor of the credit union. We agree with the circuit judge that there was such a duty, and in failing to give the notice the insurance policy, as to the credit union, was in effect at the time of the fire which destroyed the trailer. We affirm.

 FACTS

 On April 19, 1977, James F. Tyree and his wife, Ann M. Tyree, were indebted to Meridian Naval Federal Credit Union (credit union). The debt was evidenced by a promissory note executed by the Tyrees, and secured by a security agreement on a mobile home owned by Mrs. Tyree. *fn1 On that date, Mrs. Tyree secured a hazard insurance policy from the agent of Bankers and Shippers Insurance Company of New York (insurance company). The

 credit union was shown as a lender in the policy, with loss payable to it to the extent of its interest.

 The policy was for a one year period, expiring April 19, 1978. On March 22, 1978, the local agent of the insurance company mailed Mrs. Tyree a notice that the policy would expire April 18, 1978, unless renewed. Another notice was mailed to Mrs. Tyree on April 14, 1978, that the policy would lapse unless renewed. No notice of any kind was given the credit union. Mrs. Tyree, who had by that time sold her mobile home to a third party, did not pay any renewal premium, and the policy by its terms lapsed as to her.

 On May 3, 1978, the trailer was totally destroyed by fire. At that time the principal sum of $4,975.88 was due by Mr. and Mrs. Tyree on their note to the credit union.

 The credit union filed suit in the Circuit Court of Lauderdale County under the policy, alleging that the insurance company had a duty under Mississippi Code Annotated section 83-13-9 (1972), and the terms of the policy, to give it written notice of the policy termination, and because of this failure to notify, the policy was in effect. The insurance company's defense was that there was no duty to notify the credit union, the policy lapsing by its own express terms upon the nonpayment of a renewal premium, and thus there was not a cancellation within the meaning of the statute or terms of the policy.

 There was a non-jury trial, and the circuit judge, relying primarily on our recent case of National Security Fire & Casualty Co. v. Mid-State Homes, Inc., 370 So. 2d 1351 (Miss. 1979), agreed with the credit union, found that the insurance company had violated the duty to notify the credit union, and the policy was, as to the credit union, in full force and effect. Judgment for the amount of the debt was rendered in favor of the credit union.

 LAW

 On this appeal the insurance company seeks to distinguish Mid-State Homes from the present case by arguing that in that case the policy was a" continuous policy, "while in this case the contract was for one year only. Our opinion stated:

 The fire insurance policy involved in this case is a continuous policy subject to the payment of the premium specified and contains the following provision:

 In consideration of the provisions and stipulations herein, or added hereto, and of the premium above specified, this company, for the term of one year beginning at noon of the date hereof to noon, of the following yearly date, standard time, at the location of the property insured, and continuously thereafter from year ...


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