Background
Casey Smith obtained a no-fault automobile insurance policy from Citizens United Reciprocal Exchange, operating as CURE Auto Insurance, for the period from February 25 through August 25, 2022. After paying the first of three premium installments, Smith received notice that his second installment was due April 24, 2022. CURE mailed a cancellation notice on that same date, stating that the policy would be canceled effective May 9 for nonpayment unless Smith paid the amount due before then. Smith did not make the payment.
Smith was injured in an automobile accident on June 21, 2022. He paid CURE two days later, and the policy was reinstated effective June 23. CURE denied his claim for personal protection insurance benefits because it considered the policy canceled as of May 9. The Wayne Circuit Court agreed that the cancellation was valid and granted summary disposition to CURE.
The Court’s Holding
The Michigan Court of Appeals held that CURE’s cancellation notice was ineffective under MCL 500.3020(1)(b). When CURE mailed the notice on April 24, Smith still had the remainder of that day to make a timely payment. Because nonpayment had not yet occurred, the notice was not the peremptory, explicit, and unconditional notice of cancellation required by Michigan law.
Applying the Michigan Supreme Court’s decision in Yang v. Everest National Insurance Co., the court explained that a cancellation notice based on nonpayment cannot validly issue before the payment becomes overdue. Smith’s later failure to pay by May 9 did not cure the defective notice. The policy therefore remained in effect on the date of the accident, and the trial court erred by granting summary disposition to CURE. The court reversed and remanded for further proceedings.
Key Takeaways
- An insurer cannot effectively cancel a Michigan no-fault policy for nonpayment before the premium-payment deadline has passed.
- A cancellation notice mailed on the payment’s due date is premature when the insured still has time that day to pay.
- The insured’s continued failure to pay after an ineffective notice does not retroactively validate the attempted cancellation.
Why It Matters
The decision reinforces strict compliance with Michigan’s statutory cancellation requirements. For a cancellation based on nonpayment, the insurer must wait until nonpayment has actually occurred before sending the required notice.
The timing defect had a decisive coverage consequence here: because CURE’s notice was ineffective, Smith’s no-fault policy remained in force when the accident occurred, permitting his PIP claim to proceed on remand.