Appeals Court Reverses Insurance Policy Cancellation Notice Before Premium Due Date
A Cleveland insurance company’s cancellation notice before a customer’s premium due date did not cancel the policy because a 10-day grace period is built into the state statute, according to a ruling Monday by the Ninth District Court of Appeals.
A car owned by Paulette Henry and insured by Victoria Automobile Insurance Company was involved in an accident with a vehicle driven by Robert Vietzen on September 6, 2009. Victoria Insurance mailed a billing statement to Henry on August 24, 2009 that included a notice that her policy would be canceled at 12:01 a.m. on September 6, 2009 if she didn’t pay $198.39 by September 5, 2009. After Vietzen obtained a judgment against Henry in Lorain County Common Pleas Court, Victoria Insurance refused to pay, claiming it had canceled Henry’s policy for nonpayment of the premium. Vietzen filed a supplemental complaint against Victoria Insurance, and the trial court ruled in Victoria Insurance’s favor. Vietzen appealed to the Ninth District.
The appeals court’s unanimous decision was authored by Judge Donna J. Carr.
“The issue before the trial court was whether the cancellation notice sent to Ms. Henry by Victoria Insurance complied with the requirements of R.C. 3937.32,” Judge Carr wrote. “In other words, the trial court had to determine whether a notice of cancellation sent in advance of the premium due date, and therefore in advance of any failure to timely pay the premium, was effective to cancel the policy on the cancellation date identified in the billing statement.”
Judge Carr also noted the uniqueness of the case.
“This case presents an issue of first impression for this Court,” she wrote. “Moreover, our research reveals that no other Ohio appellate court has had the opportunity to address the efficacy of a notice of cancellation based on nonpayment of the premium where the insured’s payment is not yet delinquent.”
Judge Carr pointed to the 10-day cancellation notice grace period contained in R.C. 3937.32 as central to the case.
“Given the legislature’s clear intent to protect the public from the burden of compensating for injuries sustained as a result of uninsured drivers, the reasonable interpretation of the notice requirements in R.C. 3937.32 is that the legislature intended to include a grace period of ten days in which an insured may pay a past-due premium before the insurance company may cancel the policy,” she wrote.
Judge Carr concluded that the timing of the notice was too soon.
“As Ms. Henry could only have failed to timely pay her premium as of September 6, 2009, Victoria Insurance could only assert nonpayment grounds at that time,” she wrote. “The insurance company’s notice of cancellation mailed on August 24, 2009, was ineffective to give Ms. Henry the requisite notice of cancellation pursuant to R.C. 3937.32. Accordingly, the trial court erred by granting summary judgment in favor of Victoria Insurance and by denying Mr. Vietzen’s motion for summary judgment.”
Judge Beth Whitmore concurred in the majority opinion, while Judge Eve V. Belfance concurred in judgment only.
In her concurring opinion, Judge Belfance wrote that Victoria Insurance mistakenly relied upon former R.C. 3937.31 in isolation instead of also considering R.C. 3937.32.
“It (Victoria Insurance) asserts that it did so because it notified Ms. Henry in late August that her policy would be cancelled if she failed to make her payment on or before September 5, 2009,” she wrote. “However, only cancellation of the policy when due is permissible. Thus, cancellation is permissible for nonpayment of the policy when there is nonpayment of the premium on September 5th. Cancellation is not permissible prior to that. Moreover, cancellation is not effective for 10 days from the date of the notice of the cancellation. Victoria Insurance’s argument that it could provide for preemptive notification of cancellation for nonpayment before cancellation is actually permissible under the statutes does not comport with the language of former R.C. 3937.31 and 3937.32, nor a common sense reading of the statutes in pari materia.”
Vietzen v. Victoria Auto. Ins. Co., 2014-Ohio-749
Civil Appeal From: Lorain County Common Pleas Court
Judgment Appealed From Is: Reversed and Remanded
Date of Judgment Entry on Appeal: March 3, 2014
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