Background
Casey Smith obtained a CURE automobile insurance policy effective from February 25 through August 25, 2022, and elected to pay the premium in installments. CURE advised Smith that his second installment was due by April 24, 2022. On April 24—the payment’s due date—CURE mailed a notice stating that the policy would be canceled for nonpayment effective May 9 unless Smith paid the amount due before then.
Smith did not pay before May 9 and was injured in a June 21, 2022 automobile accident. After he made a payment two days later, CURE reinstated his policy effective June 23 but denied PIP benefits for the accident, asserting that the policy had been canceled on May 9. The Wayne Circuit Court agreed that the cancellation was valid and granted summary disposition to CURE.
The Court’s Holding
The Court of Appeals held that CURE’s cancellation notice did not comply with MCL 500.3020(1)(b) because CURE mailed it before Smith’s payment deadline had passed. When the notice was sent, Smith still had the remainder of April 24 to make a timely payment, so the stated basis for cancellation—nonpayment—had not yet occurred.
Applying the Michigan Supreme Court’s decision in Yang v. Everest National Insurance Co., the court concluded that the notice was not peremptory, explicit, and unconditional as required. Smith’s subsequent failure to pay did not cure the defective notice. Because the attempted cancellation was ineffective, the policy remained in force on the accident date. The court reversed summary disposition and remanded for further proceedings.
Key Takeaways
- An insurer may not validly issue a cancellation notice for nonpayment before the insured’s payment deadline has expired.
- A cancellation notice under MCL 500.3020(1)(b) must be peremptory, explicit, and unconditional.
- An insured’s later failure to pay does not retroactively validate a premature cancellation notice.
Why It Matters
The decision reinforces that strict compliance with Michigan’s statutory cancellation requirements is necessary to terminate automobile insurance coverage. A notice sent even on the premium’s due date is premature if the insured still has time to pay.
For no-fault litigants and insurers, the timing of the cancellation notice can determine whether a policy remained effective on the accident date, regardless of whether the premium ultimately went unpaid.