When is a no-fault auto insurance policy cancelled? If a client has failed to pay installment premiums, is the plan automatically terminated, or does the insurance company have to provide a cancellation notice? As in so many other areas of insurance law, it all depends on the language of the policy.
Auto insurance law is as much about contracts as it is about facts. Defense lawyers will try anything to poke holes in your client’s insurance coverage. So when a client has fallen behind on his or her premiums, you can count on a defense that the policy had been cancelled. A recent unpublished case from the Michigan Court of Appeals, Wilson v Titan Insurance Company, provides guidance in how best to respond.
Hallie Wilson bought a 6-month no-fault auto insurance policy from Titan Insurance Company on January 20, 2012. After her initial payment on the policy, Titan sent her a “Premium Payment Notice” (PPN) on February 7 requesting a monthly installment by February 22 and promising payment would “continue [plaintiff’s] coverage in force without lapse.” The back of the PPN contained an “IMPORTANT NOTICE”:
“If the premium payment is not postmarked or received before the due date shown, your insurance will be cancelled for nonpayment of premium. A check which is not honored for any reason will not constitute payment and will not extend coverage.”
The PPN listed a “cancellation-effective” date of February 25. Meanwhile, Titan’s insurance policy said:
Cancellation – This policy may be canceled during the policy period as follows: . . . 2. We may cancel by mailing you at the address last known by us or our agent: a. At least ten (10) days notice by first class mail, if cancellation is for nonpayment of premium.
That language reflects the requirements of MCL 500.3020, which the Court of Appeals summarized like this:
“A policy of casualty insurance, . . . including all classes of motor vehicle coverage,” must include a provision “that the policy may be canceled at any time by the insurer by mailing to the insured . . . a not less than 10 days’ written notice of cancellation . . . .”
Wilson missed that February 22 payment. On February 27, Titan sent out a “Confirmation of Cancellation” stating that the policy was cancelled on February 25 for non-payment.
Then, Wilson was in a serious auto accident on March 5, 2012. The defense attorneys claimed that Titan wasn’t liable to pay any of her $250,000 in First Party benefits because her policy had been cancelled prior to the accident. Titan claimed that the notice included in the PPN sent on February 7 counted as the statutory cancellation notice. Wilson’s attorneys disagreed, and said no notice of cancellation had been sent at all.
The Michigan Court of Appeals concluded “that this case is ultimately controlled by the cancellation-notice provision contained in the insurance policy regarding nonpayment of a premium.” It reviewed the history of Michigan Supreme Court rulings on MCL 500.3020 and its predecessors:
In Eghotz V Creech, The Statute Did Not Apply Because The Insurance Policy Had An Automatic Lapse Clause Built In.
In The 1938 Case Bek V Zimmerman, The Michigan Supreme Court Upheld A Policy Specifically Stating That If The Insured Did Not Pay The Plan Would Automatically Terminate.
As Contrast, In DeHaan V Marvin, The Insurance Company Was Liable For Benefits Even Though The Plaintiff Never Paid Anything Because The Contract Didn’t Have A Cancellation Policy And The Company Had Never Provided Notice.
The court quoted Gramble v Farmers Ins Exch:
“The parties may contract to whatever they wish as long as it does not violate the law or public policy… The quoted statute applies where either the insurer or the insured seeks to terminate the insurance by cancellation; it cannot be stretched to cover a situation where, as here, liability under the contract has become automatically suspended by reason of the precise terms of the insurance agreement. The statute covers those situations where termination of the policy is not automatic but is optional with the insurer and, therefore, cannot be anticipated and provided against by the insured unless he is given ample notice of the intended exercise of that option.”
In summary, the court stated “if a premium installment under an insurance policy is not made when due and the policy contains language reflecting that coverage will lapse, expire, or terminate for nonpayment of a premium, a notice of cancellation under MCL 500.3020(1)(b) need not be pursued.”
But Titan never claimed that its policy contained an automatic termination clause. Instead it claimed that its February 7 PPN counted as a cancellation notice for non-payment that would not occur until February 22. The court found that the policy unambiguously required a cancellation notice “for nonpayment of premium,” the court ruled:
“However, plaintiff was not in default or breach of the policy with respect to premium payments at the time the PPN was sent. It was impossible for Titan to comply with the insurance policy’s 10-day notice provision by mailing a cancellation notice for nonpayment of a premium before the occurrence of that contingency or event. Instead, the notice mailed to plaintiff merely concerned the future possibility of nonpayment. It was not until plaintiff actually missed the due date for making the premium payment that it became feasible for Titan to send a true notice of cancellation for ‘nonpayment of premium.’”
The court found that Titan’s February 27 “Confirmation of Cancellation” was the required 10-day cancellation notice. But because Wilson’s accident happened just a few days later, her policy was still in effect.
When representing car crash victims, attorneys need to be ready to be as meticulous as the insurance defense attorneys. Close reading of the statutes and insurance policies may sometimes threaten your case. But other times, like in Wilson, that same language can win your client benefits and get them the coverage they need.
David Christensen is an auto accident attorney at Christensen Law, in Southfield, Michigan. He has been fighting back against auto insurance companies for over 20 years. If your client has a difficult no-fault issue, contact Christensen Law today for a referral.