What Happens if the Insurance Company Cancels My Policy
A car insurance company telling you that your auto policy has been cancelled is a scary event. A discussion like this after a serious car wreck can be catastrophic, resulting in massive unpaid medical bills, mounting lost wages and other costs.
Over the past few years, car insurers in Michigan have become extremely aggressive in trying to wiggle out of paying claims. One such maneuver has been to preemptively cancel auto insurance after a car wreck has occurred and a claim has been made. They claim the policy has been cancelled due to non-payment. Cure Insurance and Progressive Insurance are two of the most egregious carriers using this tactic.
However, there are very specific rules insurance companies must follow when cancelling a policy.
What is Michigan’s Auto Cancellation for Non-Payment Law?
Under Michigan law, there are specific rules for when and how car insurance carriers can cancel an auto insurance policy. One of the main reasons why they cancel insurance is due to a non-payment of the premium. Non-payment can result in a cancellation of the policy and the forfeiting of all no-fault PIP benefits available under the law.
According to Michigan law regarding car insurance cancellation for non-payment, an insurer must provide a 10-day notice of cancellation after the nonpayment has occurred. If the carrier fails to do this, it cannot lawfully cancel a person’s policy until (1) you pay the premium or (2) the insurer issues a proper notice.
Under MCL 500.3020, an auto insurance policy may be canceled at any time by an insurer by “mailing to the insured at the insured’s address last known to the insurer or an authorized agent of the insurer, with postage fully prepaid, a not less than 10 days’ written notice of cancellation with or without tender of the excess of paid premium …”
There are specific rules about the information that must be included in the notice. For example, under MCL 500.3020(6), a notice of cancellation, must “be accompanied by a statement that the insured shall not operate or permit the operation of the vehicle to which notice of cancellation is applicable, or operate any other vehicle, unless the vehicle is insured as required by law.”
Failing to have this language in a cancellation notice can make the cancellation ineffective.
How Does this Law Affect Me If I Did Not Make an Insurance Payment
If an individual fails to make a payment on time, the car insurance can issue a notice of cancellation for non-payment. However, Michigan law has specific rules insurance carriers must follow to make sure a cancellation notice is proper, in particular there is a 10-day notice period. The Michigan Court of Appeals ruled on this issue when it held that Everest National Insurance was on the hook for paying no-fault benefits following a Wayne County car crash.
In Yang v. Everest National Insurance Co., Wesley Yang and his wife purchased auto insurance through Everest National Insurance. Mr. Yang made an initial payment on September 26, 2017. On October 9, 2017, Everest mailed him a bill for the second premium payment which also contained a notice of cancellation stating if he didn’t make this second payment by October 26, 2017, the policy cancelled the next day.
Having not received payment, on October 30, 2017, Everest informed Mr. Yang that his insurance was cancelled as of October 27, 2017, but that it would reinstate the policy with a lapse in coverage if it received payment by November 26, 2017.
On November 15, 2017, Mr. Yang and a friend were involved in a car crash resulting in personal injuries. Mr. Yang sent a payment on November 17, 2017, and Everest reinstated the policy effective that day, but said there was a lapse of coverage from October 27, 2017 to November 17, 2017.
Mr. Yang turned to Everest National for the payment of no-fault benefits. Everest denied payment, claiming it had cancelled his policy due to the non-payment, and sought to have the case against it dismissed.
The Michigan Supreme Court disagreed, ruling that MCL 500.3020 imposes a duty on the insurance carrier to comply with the notice requirements found in the statute. The Court found that for a cancellation of auto insurance to take place, the event triggering the right to cancel must have taken place first. In this case, it would have been the non-payment of the car insurance premium by Mr. Yang. Therefore, only after the nonpayment by Mr. Yang can the insurer properly notify the insured of cancellation.
The Court went on to say that it is not enough for auto insurance company to warn the insured that a future failure to pay a premium will result in cancellation. Instead, the auto insurance company must tell the insured that, because of an already-occurred failure to pay, the policy will be cancelled in ten days.
In this case, Everest did not wait the required ten days. It mailed the notice of cancellation with bill for the second premium payment. Under the law, it is only after Mr. Yang failed to make the payment on time that Everest National can mail a notice of cancellation, giving him the required 10 days-notice period to cure the reason for cancellation.
Michigan Car Accident Injury Lawyers – Call For Help Now
If you or a friend have been involved in a Michigan auto crash, and the insurance company is claiming the policy has been cancelled, please reach out to our office at 1-800-LEE-FREE (1-800-533-3733). We can answer your questions and see if we can assist you in obtaining benefits and compensation.
