Show Me The Money – Cancellation of No-Fault Policy for Non-Payment of Premium Strictly Enforced by MI Court of Appeals

The Michigan Court of Appeals recently sent a message to no-fault insureds that cancellation of policies will be strictly enforced in the event of non-payment of premium.

In Micou v Progressive Ins Co, Docket No. 311937 (March 13, 2014), the plaintiff appealed summary disposition after his policy was cancelled the same day he was involved in a motor vehicle accident. 

The plaintiff received a notice of cancellation on Sept. 13, 2010, mandating payment of $221.73 in outstanding premium by Sept. 26, 2010 to avoid cancellation of the policy.  In a recorded phone conversation, the plaintiff called defendant insurer, and they agreed to extend the policy until Sept. 27, 2010 when plaintiff indicated he would be able to obtain a check through his church and submit payment through a local agency the same day. 

Plaintiff’s church was closed on Sept. 27, 2010, and he did not call the insurer to advise of the delay and was involved in a motor vehicle accident later that night.  Plaintiff attempted to pay the overdue premium the following day but was informed that the policy was cancelled.

The Michigan Court of Appeals affirmed the trial court's ruling and rejected the plaintiff’s arguments that he had an agreement for coverage through the date of the accident and similarly rejected plaintiff’s attempt to raise equitable estoppel and mutual mistake.  The court found that the plaintiff could not have reasonably believed he was covered on the date of the accident and that even if the insurance agent he spoke with had the authority to extend the policy, such extension was clearly conditioned upon the payment of premium on the day of the accident which was not delivered.

Although mandated by statute, policies of no-fault insurance are still basic contracts for which the most fundamental requirements must be met, including consideration for coverage in the form of timely payment of premium.  Michigan requires insurers to offer perhaps the most extensive no-fault coverage in the country made possible only by consistent payment of premiums and insureds must take care to diligently address any insurer notice of cancellation for overdue payment.

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