
271 S.E.2d 46 (1980)
301 N.C. 138
AMERICAN MANUFACTURERS MUTUAL INSURANCE COMPANY
v.
John Randolph INGRAM et al. (appealed by Wake Anesthesiology Associates, Inc.)
No. 15.
Supreme Court of North Carolina.
October 7, 1980.
*51 John R. Jordan, Jr., Robert R. Price, Henry W. Jones, Jr., Raleigh, for plaintiff-appellee.
Tharrington, Smith & Hargrove by Wade M. Smith and Steven Evans, Raleigh, for defendants-appellants.
HUSKINS, Justice:
This appeal poses the question whether Lumbermens Mutual can avoid its insurance contract with defendant appellants because the Health Care Liability Reinsurance Exchange Act was declared unconstitutional. We hold that the facts of this case require a negative answer.
It is a rule of statutory construction that a statute declared unconstitutional is void ab initio and has no effect. Board of Managers v. Wilmington, 237 N.C. 179, 74 S.E.2d 749 (1953); Idol v. Street, 233 N.C. 730, 65 S.E.2d 313 (1951); Sessions v. Columbus County, 214 N.C. 634, 200 S.E. 418 (1939); State v. Williams, 146 N.C. 618, 61 S.E. 61 (1908). This rule was best stated in Norton v. Shelby County, 118 U.S. 425, 442, 6 S.Ct. 1121, 1125, 30 L.Ed. 178, 186 (1886), where Justice Field, speaking for the Court, said: "An unconstitutional act is not a law; it confers no rights; it imposes no duties; it affords no protection; it creates no office; it is, in legal contemplation, as inoperative as though it had never been passed." Depending on the circumstances, courts have employed other rules which avoid the hard and fast consequences of the rule enunciated in Norton. A court may employ the rule that a statute is presumed valid until declared invalid; or, in a case-by-case analysis, an unconstitutional statute may be given some effect, for example, by way of estoppel or due to a mistake of law. O. Field, The Effect of an Unconstitutional Statute 2-8 (1935).
The United States Supreme Court itself has retreated from the broad statement set out in Norton.
"It is quite clear, however, that such broad statements as to the effect of a determination of unconstitutionality must be taken with qualifications. The actual existence of a statute, prior to such a determination, is an operative fact and may have consequences which cannot justly be ignored. The past cannot always be erased by a new judicial declaration. The effect of the subsequent ruling as to invalidity may have to be considered in various aspects,-with respect to particular relations, individual and corporate, and particular conduct, private and official. Questions of rights claimed to have become vested, of status, of prior determinations deemed to have finality and acted upon accordingly, of public policy in the light of the nature both of the statute and of its previous application, demand examination. These questions are among the most difficult of those which have engaged the attention of courts, state and federal, and it is manifest from numerous decisions that an all-inclusive statement of a principle of absolute retroactive invalidity cannot be justified."
Chicot County Drainage District v. Baxter State Bank, 308 U.S. 371, 374, 60 S.Ct. 317, 318-19, 84 L.Ed. 329, 332-33 (1940); see *52 also, Linkletter v. Walker, 381 U.S. 618, 85 S.Ct. 1731, 14 L.Ed.2d 601 (1965). In a later decision quoting in part from Linkletter and Chicot County, the United States Supreme Court stated:
"The process of reconciling the constitutional interests reflected in a new rule of law with reliance interests founded upon the old is `among the most difficult of those which have engaged the attention of courts, state and federal ....' Consequently, our holdings in recent years have emphasized that the effect of a given constitutional ruling on prior conduct `is subject to no set "principle of absolute retroactive invalidity" but depends upon a consideration of "particular relations ... and particular conduct ... of rights claimed to have become vested, of status, of prior determinations deemed to have finality"; and "of public policy in the light of the nature both of the statute and of its previous application."' ... However appealing the logic of Norton may have been in the abstract, its abandonment reflected our recognition that statutory or even judge-made rules of law are hard facts on which people must rely in making decisions and in shaping their conduct. This fact of legal life underpins our modern decisions recognizing a doctrine of nonretroactivity."
Lemon v. Kurtzman, 411 U.S. 192, 198-99, 93 S.Ct. 1463, 1468, 36 L.Ed.2d 151, 160 (1973) (Citations omitted). This does not mean that every unconstitutional statute, "like every dog, gets one bite, if anyone has relied on the statute to his detriment." New York v. Cathedral Academy, 434 U.S. 125, 130, 98 S.Ct. 340, 344, 54 L.Ed.2d 346, 352 (1977). It does mean that a test of reasonableness and good faith is to be applied in determining the effect which a judicial decision that a statute is unconstitutional will have on the rights and obligations of parties who have taken action pursuant to the invalid statute.
Other courts have adopted such a test in deciding whether to give retroactive or prospective effect to their declaration that a statute is unconstitutional. See, e. g., Cardinal Glennon Memorial Hospital v. Gaertner, 583 S.W.2d 107 (Mo.1979); Wagshal v. Selig, 403 A.2d 338 (D.C.App.1979); Plumley v. Hale, 594 P.2d 497 (Alaska 1979); Cumberland Capital Corp. v. Patty, 556 S.W.2d 516 (Tenn.1977); Stanton v. Lloyd Hammond Farms, 400 Mich. 135, 253 N.W.2d 114 (1977); Perkins v. Eskridge, 278 Md. 619, 366 A.2d 21 (1976).
This Court has also retreated from the absolute rule that an unconstitutional statute is a nullity. In Roberson v. Penland, 260 N.C. 502, 133 S.E.2d 206 (1963), the plaintiffs entered into a consent judgment and executed a deed on the understanding that the defendant widower had a right to dissent from the will of his deceased wife. Following the execution of these documents, this Court held that the statute giving the husband the right to dissent was unconstitutional. The plaintiffs then sought, without success, to have the consent judgment and deed set aside. The Court said:
"In this case the rights of the parties are fixed by solemn warranty deed and consent judgment. These may not be set aside merely because eminent lawyers were unable to anticipate that this Court would strike down the Act of the General Assembly which permitted the dissent. The rights of the parties are fixed by the judgment and the deed. These documents provide road blocks which the Court may not remove merely because the parties were mistaken as to one or more of the factual considerations which induced them."
260 N.C. at 506, 133 S.E.2d at 208. The Court rejected application of the hard and fast rule in Norton and adopted the reasoning of the Chicot County case. It must therefore be recognized in this case that the unconstitutionality of the Reinsurance Exchange Act alone will not void ab initio Lumbermens' contract with defendant appellants.
For Lumbermens to escape the contract, the record must demonstrate that it entered into the contract involuntarily under coercion of the unconstitutional statute. *53 As stated in McLean Coal Co. v. Pittsburg Terminal Coal Corp., 328 Pa. 250, 253, 195 A. 4, 6 (1937), and quoted with approval in Roberson v. Penland:
"The unconstitutionality of a statute is a defense to an action only when the liability is created by the statute in question; the invalidity of the act is of no avail when the liability arises from acts indicating the assumption of liability by parties who may, it is true, be acting only because the statute was passed, but who are, nevertheless voluntarily assuming a relationship which creates a liability."
This record demonstrates that as to defendant appellants, Lumbermens made a studied decision after weighing the alternatives available to it and voluntarily assumed the contractual relationship of insurer.
The insurance binder at issue in this case is not clear in its terms. The "Statement of Intent, Notice of Protest and Reservation of Rights" conflicts with the letter by Cossart. The general rule that a contract is interpreted against the party who drafts it in cases of doubt or ambiguity has been given effect in cases involving problems with insurance. Woods v. Insurance Co., 295 N.C. 500, 246 S.E.2d 773 (1978); Grabbs v. Insurance Co., 125 N.C. 389, 34 S.E. 503 (1899). "Why these two apparently conflicting provisions should have been inserted in the same contract is not easy to perceive, but in keeping with the general rule of construction, with respect to ambiguously worded policies of insurance, where they are reasonably susceptible of two interpretations, we think the one more favorable to the assured should be adopted." Bennett v. Insurance Co., 198 N.C. 174, 176, 151 S.E. 98, 99 (1930). It is difficult to imagine a more ambiguous and equivocal insurance contract than that created by issuing a binder with a reservation of rights as to coverage and following that with a clarifying letter stating defendant appellants were fully covered. Mr. Moore, the agent for both Lumbermens and defendant appellants, wrote Lumbermens' agent, Cossart, requesting confirmation of the coverage. In his 17 October letter, Moore wrote:
"In our conversation you assured me that regardless of the wording in the Statement of Intent, if the Reinsurance Exchange was found to be unconstitutional, the physicians covered by these binders and subsequent policies to be issued when the proper forms are available would have malpractice coverage for the period of their binders or policies. Depending on the Court ruling, it is our understanding that their coverage could be either with the Lumbermens Mutual or some company to be designated as the `carrying company' for the Exchange."
Cossart in reply to this letter on 30 October stated:
"We still do not know where we stand with regard to the constitutionality of the Malpractice Act nor do we know where we stand as far as the St. Paul is concerned, but at this point I think we have to agree that the company is offering binders for malpractice coverage which means that we are the carrier at this point. Hopefully all of this will be resolved the week of Nov. 3 and the persons seeking insurance will find a market that is technically competent to handle this insurance." (Emphasis added)
Construing the ambiguities in favor of the insured, it is clear that Lumbermens deliberately and voluntarily decided to assume the liability and entered into a contract to insure defendant appellants for thirty days regardless of the constitutionality of the Reinsurance Exchange Act. It was a voluntary, arm's length transaction. The Court of Appeals erred in its conclusion to the contrary.
The trial court concluded that the conditions of the reservation of rights were not altered by anyone. It further concluded that Lumbermens, because it had not effectively canceled the binder, remained bound. In these two conclusions, the trial court erred.
An insurance company has a right to fix conditions upon which it will become liable and it is for the party seeking insurance to accept or refuse such conditions. Saunders v. Insurance Co., 272 N.C. 110, 157 *54 S.E.2d 614 (1967); 1 Couch on Insurance 2d § 14:39. The constitutionality of the Reinsurance Exchange Act was not a factor upon which the effectiveness of the binder to defendant appellants was made conditional. The contract entered into by Lumbermens and defendant appellants survived the determination that the Reinsurance Exchange Act was unconstitutional. Any attempt by Lumbermens to make the binder conditional upon the constitutionality of the Reinsurance Exchange through its "Statement of Intent, Notice of Protest and Reservation of Rights" was altered by the letter of Cossart to Moore. Contrary to the conclusion of the trial court, this was an alteration of the insurance contract which Cossart, as plaintiffs' agent, had apparent authority to make.
The argument of plaintiffs throughout has been that there was no valid insurance coverage. Our conclusion as to defendant appellants is to the contrary. Even so, failure to cancel the binder is not a proper reason for holding Lumbermens to its contract. As the Court of Appeals correctly noted, plaintiffs may very well have waived the very ground upon which they sought to avoid this policy and others by any attempt to cancel what they argued was a nullity. The very fact of an attempt to cancel a policy is an admission that there is a policy. 17 Couch on Insurance 2d § 67:50; 12 Appleman, Insurance Law and Practice § 7124.
In view of the posture of this case wherein only one group of defendants appealed to this Court and that group established a special set of facts, we do not reach the question of retroactivity of this Court's decision declaring the Reinsurance Exchange Act unconstitutional. Regardless of whether that decision is retroactive, defendant appellants had a valid, enforceable insurance contract with Lumbermens for the month of October 1975.
As the case now stands with respect to the other defendants, it has been remanded to the trial court for further proceedings to determine the validity of their contracts. On the record before us, we neither reach nor decide the question whether those contracts are enforceable.
For the reasons stated, the decision of the Court of Appeals is reversed. The case is remanded to the Court of Appeals for further remand to Wake Superior Court for entry of judgment in favor of Wake Anesthesiology Associates, Inc., and its employees, Drs. Haynes, King and Schick in accord with this opinion.
REVERSED and REMANDED.
BROCK, J., took no part in the consideration or decision of this case.
