Posted By William Plyler on March 1, 2011
The procedure for cancellation of an auto insurance policy by an insurance premium finance company is governed by statute (N.C.G.S. 58-35-85), not by the language of the insurance policy. This is the holding of today’s decision by the North Carolina Court of Appeals in Universal Insurance Company v. Patterson, (No. COA10-896, filed March 1, 2011).
The insureds (Mr. and Mrs. Patterson) failed to make an auto insurance premium payment. On March 24, 2008, the finance company mailed the Request of Cancellation to the insurance company and to the Pattersons. On March 25, Mrs. Patterson was involved in a car wreck. On March 28, the insurance company received the Request of Cancellation.
The insurance company filed a declaratory judgment action seeking an order that the effective date of cancellation was March 24, due to the power of attorney granted to the financing company in the insurance contract. The Court of Appeals rejected this argument and relied on the language of N.C.G.S. 58-35-85(3), which states that the cancellation is effectuated “upon receipt of a copy of the request for cancellation notice by the insurer…”
The Court of Appeals reaffirmed the rules of construction relating to insurance policies in the following quote from page 7 on the opinion.
“First, an insurance policy is a contract, and is to be construed and enforced in accordance with its terms insofar as they are not in conflict with pertinent statutes and court decisions. As to the effect of any statute on an insurance policy, the law is clear that a statutory requirement or limitation applicable to a policy of insurance is to be read into the policy as if written therein and controls a contrary provision actually written into the policy.” South Carolina Ins. Co. v. Smith, 67 N.C. App. 632, 638, 313 S.E. 2d 856 (1984).
The Court of Appeals opinion does not address the blatant misrepresentation Mr. Patterson made to the insurance company. On March 28, Mr. Patterson paid the premium and signed a Statement of No Losses which specifically stated that no losses had occurred between March 24 and March 28, even though he knew his wife had been in the March 25 accident and had been injured in the accident.
The Court apparently accepted the argument of the appellee (a third party intervenor injured in the accident) that Mr. Patterson’s March 28 misrepresentation was irrelevant to the issue of coverage on March 25, since liability coverage was in full force and effect until March 28. Though the Court’s decision is on solid legal ground, it is bound to chafe the insurance carrier to see Mr. Patterson’s fraud go unpunished.
Category: Court Opinions, Insurance |
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Tags: cancellation of auto insurance, intervenor, N.C.G.S. 58-35-85, premium finance company