If money is tight, you may be considering putting off paying your auto insurance bill. In short, don’t. Late payments on your auto insurance bill can create problems collecting benefits after an accident, as one couple learned in a recent Court of Appeals decision.
Auto Insurance Contract Cancellation Policies Put a Premium on Paying Premiums
The Michigan No-Fault Act requires every car owner to carry auto insurance covering his or her vehicle. To do that, you will need to sign a contract with an auto insurance company. For most Michigan motorists, that means completing an auto insurance application and paying the annual, semi-annual, or monthly premiums, and then receiving a contract in the mail.
Buried somewhere in those multiple pages of small print are cancellation policies. These are conditions which, when they occur, allow your auto insurer to cancel the policy going forward, or even rescind it from the start. Every insurance contract’s cancellation policy contains a clause that says late payments or non-payment of auto insurance premiums are grounds to cancel your contract.
However, the Michigan No-Fault Act also protects consumers’ right to be informed when their insurance contracts are in danger of being cancelled or rescinded. The law says that every auto insurance policy must contain a notice requirement. Before a policy can be cancelled, the insurer must mail a notice to the insured person’s last-known address at 10 days before the effective date of the cancellation. In other words, before an insurance company can cancel your policy for non-payment, you must be given 10 days’ warning and a chance to fix the problem.
Late Payments of Auto Insurance Causes Problems After Pedestrian Accident
Wesley Yang and his wife Viengkham Moualor didn’t get that warning. They purchased a 6-month auto insurance policy through Everest National Insurance Company on September 26, 2017, and were making monthly payments on the premiums. The first bill on October 9, 2017, included a “cancellation notice” that if the payment was not made by October 26, 2017, the policy would be cancelled the next day. Yang didn’t make that payment.
Then on November 15, 2017, Yang and his wife were struck by a car in a pedestrian accident. Yang made his late payment two days later, and the policy was reinstated on November 17, 2017. But when Yang and his wife tried to collect benefits for treatment from the accident, their claims were denied because the policy had been cancelled at the time.
Michigan Court of Appeals Examines Cancellation Notice
When Yang took the First Party auto accident case to court, Everest said it had properly sent a cancellation notice on October 9, 2017 warning that cancellation would occur if no payment was received by October 26. However, the trial court and the Court of Appeals weren’t convinced. In a recent published Court of Appeals decision, Yang v Everest Nat’l Ins Co, Judge Shapiro wrote:
“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 cancelation 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, Everest’s notice on October 9 jumped the gun. To properly cancel the contract, the series of events needed to be:
- Payment was due
- Payment was not received
- Cancellation notice was sent
- 10 days passed
- Policy was cancelled
To hold otherwise, the court said, would allow the insurance provider to send notice of cancellation far in advance listing all the future due dates avoiding the Michigan No-Fault Act’s protections for consumers who fall behind on their payments.
The good news in the case is that Mr. Yang and his wife were able to keep their policy and file claims for their pedestrian accident. The bad news was that their late payments gave the insurance company a reason to cancel in the first place. Had Everest followed the rules and sent the cancellation notice on October 27, Yang and his wife would have been forced to look elsewhere for their no-fault benefits.
The Macomb Law Group, is a personal injury law firm in Clinton Township, MI. Our attorneys can help you receive the benefits you need from auto insurance companies. If you or a loved one have been seriously injured, contact Macomb Law Group and get our team working for you.