Failure to Pay a Premium Results in Cancellation

No Coverage After Failure to Pay Premium Before Ten Days Notice to Cure Cancellation
Post 4900

In a this first-party automobile negligence action, defendant, USA Underwriters (USAU), appealed the trial court's order denying its motion for summary disposition even though policy had been cancelled six months before accident.

In Cynthia Jackso v. John Doe and Eddie Jennard Richardson, and USA Underwriters, No. 367269, Court of Appeals of Michigan (September 19, 2024) the Court of Appeals resolved the dispute by applying Michigan statutes.

FACTS

USAU provided auto insurance coverage to Willie Jackson to provide auto insurance, including uninsured motorist benefits from January 6, 2020, to July 6, 2020. USAU issued a notice of cancellation on January 9, 2020, after Willie Jackson failed to pay the premium amount owed of $980.58 on January 8, 2020. The notice stated coverage would terminate unless USAU received the Minimum Amount Due before the Cancellation Date.

The cancellation date was January 19, 2020, at 12:01 a.m. The reason for cancellation was "NON PAYMENT OF PREMIUM." Willie Jackson failed to pay by the due date, the policy was canceled, and USAU concluded there was no coverage on the subject vehicle from January 19, 2020, to December 7, 2020.

On June 2, 2020, plaintiff, Cynthia Jackson, was a passenger in the Lesabre owned by her father, Willie Jackson, and was allegedly injured after being involved in a motor vehicle accident. In 2023, plaintiff filed suit, seeking no-fault uninsured motorist coverage from USAU.

USAU moved for summary disposition arguing the policy of insurance was canceled on January 19, 2020, for nonpayment of premiums and there was no policy with USAU under which plaintiff could bring a claim for uninsured motorist coverage. The trial denied USAU's motion concluding the cancellation was ineffective because the language in the notice of cancellation was conditional.

ANALYSIS

USAU argued Willie Jackson failed to pay his bill. USAU argued providing Willie Jackson with 10-days' notice did not render the cancellation notice "conditional" or otherwise ineffective but was required by statute.

The statute provides: "A termination of insurance shall not be effective unless the termination is due to reasons which conform to the underwriting rules of the insurer for that insurance." MCL 500.2123(4). MCL 500.3020

The objective of MCL 500.3020(1)(b) is to make certain that all of those who are insured under a policy are afforded a period of time, ten days, either to satisfy whatever concerns have prompted cancellation and thus revive the policy or to obtain other insurance, or simply to order their affairs so that the risks of operating without insurance will not have to be run. The insurance contract in this case allowed cancellation during the policy period by USAU under certain circumstances, including, in relevant part: for nonpayment of premium.

The language of the cancellation notice was peremptory, explicit, and unconditional. The notice of cancellation provided Willie Jackson an opportunity to cure, i.e., make the payment within 10 days, to avoid cancellation, but did not render the notice conditional. The condition already occurred when Willie Jackson did not pay the premium by its due date. The USAU cancellation notice was valid under MCL 500.3020(1)(b).

Because USAU complied with the statute the insurance policy was canceled on January 19, 2020, and was not in effect at the time of plaintiff's accident on June 2, 2020.

Even when viewing the evidence in the light most favorable to plaintiff, plaintiff was not entitled to uninsured motorist benefits under the USAU Policy because the policy was canceled on January 19, 2020, and was not in effect on June 2, 2020, when the accident occurred. USAU is entitled to a reversal of the trial court's order and sent the case back to the trial court directing it to enter an order granting USAU summary disposition.

ZALMA OPINION

Insurance is a contract. The USAU contract, like all insurance policies, required the insured to pay a premium for it to be effective. Mr. Jackson did not pay the premium and the policy was cancelled in accordance with the policy condition and the Michigan statute. The Plaintiff had the chutzpah to seek coverage on a cancelled policy seeking benefits without fulfilling the required condition of paying a premium.

(c) 2024 Barry Zalma & ClaimSchool, Inc.

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