Background
Casey Smith obtained a CURE auto insurance policy effective from February 25 through August 25, 2022, and elected to pay the premium 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 for nonpayment effective May 9 unless Smith paid the amount due.
Smith did not pay before May 9 and was injured in a June 21, 2022 automobile accident involving Bashar Almarisi and Levan Burgen. CURE reinstated the policy effective June 23 after Smith made a payment, but denied PIP benefits for the accident on the ground that the policy had been canceled before it occurred. Smith sued, and Pioneer Lab Houston, LP intervened as a plaintiff. The Wayne Circuit Court granted summary disposition to CURE after finding that the cancellation was valid.
The Court’s Holding
The Michigan Court of Appeals held that CURE’s cancellation notice was ineffective under MCL 500.3020(1)(b). Under the Michigan Supreme Court’s decision in Yang v. Everest National Insurance Co., a cancellation notice must be peremptory, explicit, and unconditional. A notice based on nonpayment cannot satisfy that standard when it is mailed before nonpayment has occurred.
Because Smith still had the remainder of April 24 to make a timely payment when CURE sent the notice, the stated ground for cancellation had not yet arisen. Smith’s subsequent failure to pay did not cure the defective notice. The policy therefore remained in effect on the accident date, and the trial court erred by granting CURE summary disposition.
Key Takeaways
- An insurer may not effectively cancel a Michigan automobile policy for nonpayment by sending the cancellation notice before the premium-payment deadline has passed.
- A later failure to pay does not retroactively validate a cancellation notice that was ineffective when issued.
- The Court of Appeals reversed the insurer’s summary disposition and remanded for further proceedings.
Why It Matters
The decision reinforces that strict compliance with Michigan’s statutory cancellation-notice requirements is necessary to terminate automobile coverage. Even when an insured ultimately fails to pay the overdue premium, a notice sent too early leaves the policy in force.
For insurers and coverage counsel, the timing of the notice is therefore critical: a nonpayment-based cancellation notice must follow, rather than anticipate, the missed-payment deadline.