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Yang v. Everest National Ins. Co., et al. (COA – UNP 8/27/2019; RB #3961)

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Michigan Court of Appeals; Docket # 344987; Published
Judges Letica, Kelly, and Boonstra; per curiam
Official Michigan Reporter Citation: Not Applicable; Link to Opinion; Link to Concurrence


STATUTORY INDEXING:
Not Applicable

TOPICAL INDEXING:
Cancellation and Rescission of Insurance Policies
Cancellation of Auto Liability Policies (MCL 500.3204, Et Seq.)


SUMMARY:
In this unanimous unpublished per curiam decision regarding the requirements for cancelling an auto insurance policy under MCL 500.3020, the Court of Appeals affirmed the trial court’s denial of the defendant’s motion for summary disposition.  MCL 500.3020(b) requires that an insurer provide its insured with a written notice of cancellation of his or her auto insurance policy at least 10 days before cancellation is set to occur.  In this case, the defendant, Everest National Insurance Company, sent a letter to its insured, Wesley Zoo Yang, 17 days before his premium payment due date, informing him that if he failed to pay his premium by the due date, the policy would be cancelled the following day.  The Court of Appeals determined, however, that in order to cancel an insurance policy for nonpayment of the premium, MCL 500.3020 requires that nonpayment must occur before the insurance company sends the required 10-day written notice of cancellation. Everest, therefore, could not cancel Yang’s policy the day after his premium due date, in reliance on its notice letter sent 18 days prior, because the cancellation triggering event—nonpayment of the premium—had not yet occurred at the time the letter was sent.

Wesley Zoo Yang procured an auto insurance policy from Everest, the term of which was to run from September 26, 2017 to March 26, 2017.  Yang made his first premium payment on September 26, 2017, and on October 9, 2017, 17 days before the second premium payment was due, Everest mailed Yang a bill that contained a notice of cancellation for nonpayment of the premium.  The notice informed Yang that if he failed to pay the second premium payment by the due date, Everest would cancel his policy the following day, October 27, 2017.  Yang did not pay by the due date, and on October 30, 2017, Everest mailed Yang a letter notifying him that his policy was cancelled as of October 27, 2017, and offering him to reinstate the policy with a lapse in coverage if Everest received payment by November 26, 2017.

On November 15, 2017, Yang was injured in a motor vehicle collision, and on November 17, 2017, he made his second premium payment.  Yang filed this action to recover no-fault PIP benefits from Everest, and Everest moved for summary disposition, arguing that Yang’s policy was lapsed at the time of the collision.  Everest argued that the policy’s cancellation provision was not inconsistent with MCL 500.3020, and that it was entitled to cancel the policy upon 10-days’ notice for nonpayment of the premium, which it sent on October 9, 2017, even before nonpayment had occurred.  That policy cancellation provision reads, in pertinent part:

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 10 days notice by first class mail, if cancellation is for nonpayment of premium[.] [Bolding removed.]

The insurer of the driver that struck Yang then filed an answer to Everest’s motion for summary disposition, arguing that the 10-days’ notice of cancellation cannot be provided to an insured before nonpayment has occurred.  Rather, Everest had to wait until Yang defaulted to mail such a notice.  The trial court agreed, and denied Everest’s motion.

The Court of Appeals affirmed the trial court’s denial, and interpreted MCL 500.3020 to require that an insurer wait until nonpayment actually occurs before providing its insured with a notice of cancellation for that reason.  Everest further argued that its offer to reinstate the policy functioned as a valid notice, and that Yang’s policy was still properly cancelled.  The Court of Appeals again disagreed, finding that that offer was not presented as a notice of cancellation, nor did it contain the statutorily required warning that Yang may not operate an uninsured vehicle, per MCL 500.3020(6).  Without such a warning, the cancellation notice is invalid.

We find this reasoning persuasive. For a cancellation to take place, the event triggering the right to cancel must have taken place first. In this case, the event that allowed for cancellation occurred on the date of nonpayment. Therefore, it is only after the nonpayment that the insurer may properly notify the insured of cancellation. In other words, it is not sufficient that the insurer warn the insured that a future failure to pay the premium will result in cancellation; rather, it must advise the insured that, because of an already-occurred failure to pay, the policy will be cancelled in ten days. This reasoning is consistent with the Michigan Supreme Court’s understanding of MCL 500.3020. The Court has explained that

[t]he obvious objective of [MCL 500.3020] 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. [Lease Car of America, Inc v Rahn, 419 Mich 48, 54; 347 NW2d 444 (1984) (emphasis added).]

Significantly, the Court did not refer to “concerns that could or would prompt cancellation” at some future date, but to concerns that “have prompted cancellation.” And in this case, the concern that prompted cancellation was not the fact that the premium was shortly coming due, but the actual failure to pay it when it was due. It was only at that point that the insured could be afforded the required ten days’ notice to cure the reason for cancellation.

We must also construe statutes reasonably, “keeping in mind the purpose of the act, and to avoid absurd results.” Rogers v Wcisel, 312 Mich App 79, 87; 877 NW2d 169 (2015). Taken to its logical conclusion, Everest’s position would allow insurance companies to give a notice of cancellation far in advance of premium payment dates. For instance, after the policy is issued the insurance company could send a cancellation notice stating that failure to make timely premium payments by the listed due dates will result in next-day cancellation of the policy. This would be at odds with the statute’s purpose to allow a post-notice opportunity to address the reason for cancellation, and could readily lead to absurd results.

Everest also argues that its offer to reinstate the policy functioned as a valid notice, and therefore plaintiffs’ coverage was still properly cancelled. On October 30, 2017, Everest sent Yang an offer to reinstate a policy. But this offer was not presented as a notice of cancellation, nor does it contain the statutorily required warning that a person may not operate an uninsured vehicle. See MCL 500.3020(6). And the lack of that warning renders a cancellation notice ineffective. Depyper, 232 Mich App at 441. For those reasons, Everest’s offer to reinstate the policy is insufficient to constitute a notice of cancellation.

Justice Swartzle concurred, arguing only that he would have affirmed the trial court’s denial of Everest’s motion for summary disposition on narrower grounds.  First, he highlighted the fact that the notice of cancellation at issue was conditional, not unconditional.  Everest offered that if Yang paid the second premium payment by November 26, 2017, his policy would not be cancelled, and under existing case law, a notice of cancellation must be unconditional.  Second, Justice Swartzle argued that the language of the policy’s cancellation provision did not necessarily indicate that nonpayment would automatically result in cancellation, but rather that nonpayment would give rise to the possibility of cancellation.  Therefore, Everest could not “do by notice what the mutually agreed-upon language of the contract did not anticipate”—automatic cancellation.


Lansing car accident lawyer Stephen Sinas is the lead editor of the appellate case summaries published on this site regarding the Michigan auto insurance law. To learn more about how Stephen Sinas and how the Sinas Dramis Law Firm can help you if you have been injured in a Michigan auto accident, visit SinasDramis.com.

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