Summary
finding that statute requiring notice of cancellation does not require insurer to give notice when policy expired for failure to pay premiums
Summary of this case from Moody v. Fireman's Fund Insurance CompanyOpinion
Docket No. 63937.
Decided September 6, 1983. Leave to appeal denied, 419 Mich ___.
Harvey, Kruse, Westen Milan, P.C. (by Gary A. Maximiuk), for Farmers Insurance Exchange.
Highland Currier, P.C. (by Gene M. Currier), for Lumbermens Mutual Casualty Company.
On March 17, 1982, the trial court granted defendant Lumbermens Mutual Casualty Company's motion for summary judgment and denied defendant Farmers Insurance Exchange's motion for summary judgment. On June 4, 1982, the trial court, upon reconsideration, set aside its order granting Lumbermens Mutual a summary judgment. Defendant Farmers Insurance Exchange appeals by leave granted. Defendant Lumbermens cross-appeals.
On November 5, 1980, plaintiff Dale Grable applied for "30/60" no-fault insurance for a Dodge van and a Ford Torino from defendant Farmers Insurance and made the required $57 deposit. However, Farmers Insurance rejected the application on November 17, 1980, and sent a full refund to Dale Grable because the Grables did not qualify for the low rate "30/60" coverage.
On December 19, 1980, Farmers Insurance issued Dale Grable two standard no-fault policies effective from November 5, 1980, through May 5, 1981. Because on January 1, 1981, Dale Grable became eligible for "30/60" coverage on one of the policies, he had a form filled out for him on January 6, 1981, for the lower "30/60" coverage. This policy was issued on January 9, 1981, effective January 6 through May 5, 1981. However, the declaration sheet contained a notice that the premium must be received by January 24, 1981. In the meantime, apparently realizing that Dale Grable had failed to send in the premiums on either policy, defendant Farmers Insurance mailed cancellation notices on both policies on January 5, 1981, effective January 18, 1981. Dale Grable never made a payment on either policy.
On February 16, 1981, plaintiff Kenneth D. Grable, Dale Grable's son, a pedestrian, was injured when struck by a car. The car striking him was insured by defendant Lumbermens Mutual.
All the parties agree that plaintiffs should recover. The question on appeal is whether Farmers Insurance or Lumbermens Mutual is liable.
Lumbermens Mutual argues that Dale Grable did not receive actual notice of the cancellation until after his son was injured. Apparently, he received but did not open the letter. MCL 500.3020; MSA 24.13020 requires notice of cancellation to effectively cancel a policy. However, if the policy expires on its own, the insurance company need not give notice of cancellation. Wynn v Farmers Ins Group, 98 Mich. App. 93; 296 N.W.2d 197 (1980).
Eghotz v Creech, 365 Mich. 527; 113 N.W.2d 815 (1962), and Bek v Zimmerman, 285 Mich. 224; 280 N.W. 741 (1938), are controlling in this case. In Eghotz, the defendant paid his insurance company $10 on May 14, 1956, and agreed to make monthly payments after that until the total premium of $50 was paid. The policy stated that if he did not pay the installments when due, it would expire. The defendant paid only one $10 payment and on July 18, 1956, he was injured. The Supreme Court held that the policy had lapsed before the injury because the defendant had not kept his premiums current under the contract. It rejected the claim that § 3020 was the exclusive remedy for cancellation. Because the contract had an automatic lapse clause, § 3020 did not apply.
In Bek, the parties entered into a policy that ran from March 25, 1936, through March 25, 1937. The policy specifically stated that if the insured did not pay it would automatically terminate. It also required the plaintiff to pay on April 25, 1936, May 25, 1936, and June 25, 1936. Although the plaintiff did pay the first premium on time, he paid the second premium on June 16 and did not pay the third premium. He was injured on June 27. The Supreme Court held that the statute then in effect, the predecessor to § 3020, did not apply where the policy automatically ends when the insured fails to pay the premiums. The section applies only where the insured or the insurer seeks to cancel. See also Hauser v Michigan Mutual Liability Co, 276 Mich. 624; 268 N.W. 759 (1936).
Lumbermens Mutual relies on DeHaan v Marvin, 331 Mich. 231; 49 N.W.2d 148 (1951). There, the insurance company was found to be liable on the contract, even though the defendant did not pay anything at all, because the contract contained no cancellation provision. Therefore, that insurance policy was effective until the insurance company gave the insured notice of cancellation as required by the statute then in effect. In the present case, the contracts did have a cancellation provision.
The parties may contract to whatever they wish as long as it does not violate the law or public policy:
"Parties have the right to contract as to the terms of an insurance policy and so long as the terms do not contravene statutory requirements of public policy, the courts will enforce an insurance contract as it would any other contract." Weisberg v Detroit Automobile Inter-Ins Exchange, 36 Mich. App. 513, 519; 194 N.W.2d 193 (1971).
Therefore, we hold that Farmers Insurance Exchange is not liable under its policies with Dale Grable. Hence, we need not consider whether or not Farmers Insurance effectively cancelled the policies.
Reversed and remanded.