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In a published decision, the Court of Appeals determined that a “notice of cancellation” to an insured for nonpayment of a premium before nonpayment actually occurred does not satisfy the cancellation requirements set forth in MCL 500.3020 and, thus, is ineffective to cancel the policy. Yang v Everest National Ins Co.[1] This Opinion was signed by Judge Shapiro and Judge Gleicher; Judge Swartzle issued a concurring opinion.[2]
In Yang, Everest National Insurance Company mailed its insured, Yang, a bill for the second premium installment payment that contained a notice of cancellation for nonpayment of the premium. The document informed Yang that he must pay the premium by October 26, 2017, and failure to do so by that due date would result in the cancellation of his policy effective October 27, 2017.
Yang failed to pay the premium payment by October 26, 2017. On October 30, 2017, Everest sent Yang an offer to reinstate the policy wherein it provided that his policy was cancelled as of October 27, 2017, because it did not receive the premium payment by the due date. Yang sent payment for the premium on November 17, 2017, and Everest reinstated the policy on that date. The notice of reinstatement informed Yang that there was a lapse in coverage from October 27, 2017 to November 17, 2017.
In the meantime, Yang and his wife were involved in a motor vehicle accident on November 15, 2019, when they were struck by a car while walking across a street. They initiated a lawsuit against Everest, as Yang’s personal insurer, and Motorists Mutual Insurance Company, as the insurer of the vehicle that struck the plaintiffs. Everest argued that plaintiffs were not entitled to benefits under the policy because the policy was cancelled before the accident occurred. The trial court disagreed with Everest finding that its notice of cancellation was not valid because it was sent before nonpayment occurred.
On appeal, the Court affirmed the lower court’s decision on the basis that Everest’s preemptive cancellation notice to Yang did not constitute a notice of cancellation under MCL 500.3020(b)(1). The Court reasoned that for a cancellation to take place under the statute, the event triggering the right to cancel must have taken place first. In other words, the Court held that it is not sufficient that the insurer warn the insured that a future failure to pay the premium will result in cancellation; rather, the insurer must notify the insured that because of an already-occurred failure to pay, the policy will be cancelled in ten days. Thus, in order for a notice of cancellation to comply with MCL 500.3020, issuance of a notice of cancellation requires that the grounds for cancellation have occurred before the notice is issued.
In his concurring opinion, Judge Swartzle found that Everest failed to comply with the requirements of its policy without reaching the broader question of what MCL 500.3020 does and does not permit with respect to cancellation notices in general.
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[1] ___ Mich App ___ (2019)(Docket No 344987), available at: http://publicdocs.courts.mi.gov/OPINIONS/FINAL/COA/20190827_C344987_52_344987.OPN.PDF
[2] Id., available at: http://publicdocs.courts.mi.gov/OPINIONS/FINAL/COA/20190827_C344987_53_344987C.OPN.PDF
