Background
Casey Smith obtained a CURE automobile insurance policy covering February 25 through August 25, 2022, with the premium payable in three installments. CURE advised Smith that his second installment was due April 24, 2022. On that same date, before the payment deadline had passed, CURE mailed a notice stating that the policy would be canceled effective May 9 for nonpayment unless Smith paid the amount due before then. Smith made no payment by May 9.
Smith was injured in a June 21, 2022 automobile accident involving Bashar Almarisi and Levan Burgen. He paid CURE two days later, and CURE reinstated the policy effective June 23. CURE denied Smith’s claim for personal protection insurance benefits because it considered the policy canceled on the accident date. The Wayne Circuit Court agreed that the cancellation was valid and granted summary disposition to CURE under MCR 2.116(C)(10).
The Court’s Holding
The Court of Appeals held that CURE’s cancellation notice did not comply with MCL 500.3020(1)(b). Under the Michigan Supreme Court’s decision in Yang v Everest National Insurance Co, a cancellation notice based on nonpayment must be issued after nonpayment has occurred and must be peremptory, explicit, and unconditional. When CURE mailed its notice on April 24, Smith still had the remainder of that day to pay, so the asserted ground for cancellation had not yet arisen.
Smith’s later failure to pay by May 9 did not cure the defective notice. The court distinguished Jackson v Doe, where the insurer mailed its notice the day after the premium became overdue. Because CURE’s premature notice was ineffective, Smith’s policy remained in force on the accident date. The court reversed the order granting CURE summary disposition and remanded for further proceedings.
Key Takeaways
- An insurer cannot validly cancel a Michigan no-fault policy for nonpayment by mailing the cancellation notice before the payment deadline has passed.
- A later failure to pay does not rehabilitate a cancellation notice that was ineffective when issued.
- Because CURE’s notice was sent on the premium’s due date, the policy remained effective when Smith’s accident occurred.
Why It Matters
The decision reinforces that strict compliance with Michigan’s statutory cancellation requirements is necessary to terminate automobile coverage. Even when an insured ultimately fails to pay, the insurer must wait until nonpayment has occurred before issuing a cancellation notice based on that ground.
For no-fault litigants and insurers, the precise timing of a cancellation notice can determine whether a policy remained in force and whether PIP coverage was available on the accident date.