Pay Before Accident to Reinstate Cancelled Policy; No Excuse for Failure to Timely Pay Premium

Insurance premiums are hard to pay. Anyone who owns a car would prefer to only pay insurance premiums until after they have a loss so that they can collect and pass the expense on to the insurer. That, of course, defeats the purpose of insurance to spread the risk to all insureds. When insurers issue auto policies with a monthly premium, the failure to pay the monthly installment results in the cancellation of the policy. When the policy premium is paid late the policy is reinstated with no coverage for the period from the cancellation date to the reinstatement date.

In Starr ex rel. Starr-Haller v. State Farm Mut. Auto. Ins. Co., Court of Appeals of Indiana, — N.E.3d —-2016 WL 4945398 (Sept. 16, 2016), the Indiana Court of Appeals was faced with the question of whether the insurer must pay for losses during a cancellation period because of the late—after an accident–payment of premium.

Heather Starr-Haller, on behalf of herself and her minor son, Bradley, appealed the trial court’s entry of summary judgment for State Farm Mutual Automobile Insurance Company (“State Farm”) on Starr-Haller’s complaint.

FACTS

 Between December of 2011 and September of 2014, Starr-Haller had an automobile insurance policy through State Farm for her 1998 Chevy Blazer. State Farm provided Starr-Haller’s coverage in six-month terms. However, State Farm billed Starr-Haller for her coverage on a monthly basis.

On three occasions between October 2012 and June 2014, Starr-Haller failed to timely pay the monthly installment due on her premium. Following each missed installment payment, State Farm mailed Starr-Haller a “Cancellation Notice” that stated both the amount due and a coverage “Cancel Date.” If Starr-Haller failed to pay her premium by the Cancel Date, the Cancellation Notices explained that the following would occur: “Payment prior to the date and time of cancellation will reinstate your policies. If paid after that date and time, you will be informed whether your policies have been reinstated and, if so, the exact date and time of reinstatement. There is no coverage between the date and time of cancellation and the date and time of reinstatement.” (Emphasis added.)

Starr-Haller failed to timely pay premium. Following each late installment payment, State Farm mailed Starr-Haller a “Reinstatement Notice.” Those notices stated again that, because Starr-Haller had made her installment payments after the relevant Cancel Dates, “there [wa]s no coverage between the date and time of Cancellation and the date and time of Reinstatement.”

According to the terms of Starr-Haller’s insurance agreement with State Farm, “[i]f [State Farm] cancel[s] this policy, then premium will be earned on a pro rata basis. [ ]Any unearned premium may be returned within a reasonable time after cancellation. Delay in the return of any unearned premium does not affect the cancellation date.”

In August of 2014, Starr-Haller again failed to pay her automobile insurance installment premium. Accordingly, on September 3rd State Farm mailed Starr-Haller another Cancellation Notice.

Seven weeks after cancellation, on October 30, Starr-Haller dropped a check off at her State Farm agent’s place of business, after business hours, in the amount of $350. That evening, Starr-Haller’s minor son, Bradley, was involved in a one-car accident in the Chevy Blazer that resulted in injuries to him and totaled the vehicle. Sometime after the accident Starr-Haller paid the remaining $80 due. Upon receiving the total balance due, State Farm reinstated Starr-Haller’s automobile insurance coverage.

Starr-Haller filed a claim with State Farm for coverage relating to the October 30 accident. State Farm denied the claim on the ground that it had cancelled Starr-Haller’s coverage, which had not been reinstated as of the accident date.

DISCUSSION AND DECISION

Starr-Haller contended that State Farm “waived” its right to deny, and “is estopped from denying[,] coverage for the October 30, 2014[,] accident because of its pattern of repeatedly accepting late and non-conforming [installment] payments…and reinstating the policy.”

It is well settled that contractual provisions of an insurance policy may be waived or that the insurer may be estopped from asserting such provisions. Where there are no disputed facts and the undisputed facts establish a party is entitled to judgment as a matter of law, however, summary judgment is proper. The term “estoppel” has a meaning distinct from “waiver” but the terms are often used synonymously with respect to insurance matters. The conduct of an insurer inconsistent with an intention to rely on the requirements of the policy that leads the insured to believe that those requirements will not be insisted upon is sufficient to constitute waiver.

Equitable estoppel is available if one party through his course of conduct knowingly misleads or induces another party to believe and act upon his conduct in good faith and without knowledge of the facts. On the other hand waiver is an intentional relinquishment of a known right involving both knowledge of the existence of the right and the intent to relinquish it. The elements of estoppel are the misleading of a party entitled to rely on the acts or statements in question and a consequent change of position to that party’s detriment.

Before the October 30 accident, State Farm informed Starr-Haller that the untimely payment of her premium installment would result in State Farm cancelling her coverage until she had paid that installment and State Farm had affirmatively reinstated her coverage.

The language in the Cancellation Notice was consistent with three such prior notices State Farm had sent to Starr-Haller. In reinstating Starr-Haller’s coverage on each of those three prior occasions, State Farm had expressly informed Starr-Haller that it had cancelled her coverage between the relevant Cancel Dates and Reinstatement Dates. State Farm, by its policy, reserved the right to accept late installment payments and to reinstate the policy and coverage prospectively but not to reinstate coverage retroactively during the period in which coverage had been cancelled due to nonpayment of the premium.

State Farm’s actions with respect to the dates that encompassed the October 30 accident were identical to its actions during the three prior occasions in which State Farm had also cancelled Starr-Haller’s coverage. That undisputed evidence plainly shows that State Farm did not intend to relinquish its right to deny Starr-Haller coverage during the period in which those cancellations of coverage had occurred. Likewise, that evidence demonstrates that State Farm’s course of conduct did not knowingly mislead or induce Starr-Haller to believe that she would have retroactive coverage if she did not pay her premium installment when due.

There is nothing in State Farm’s conduct that would have given Starr-Haller a right to rely upon anything other than the express terms of her insurance contract. Indeed, Starr-Haller’s argument that her unrefunded payments entitle her to coverage contravenes her contract with State Farm. Again, in the contract State Farm expressly reserved the right to accept late installment payments without reinstating coverage retroactively, declaring that any “[d]elay [by State Farm] in the return of any unearned premium does not affect the cancellation date.” At best, Starr-Haller has demonstrated that she is entitled to a refund from State Farm for those unearned premium payments, but she has not demonstrated that she is entitled to coverage.

State Farm did not waive its right to deny Starr-Haller the coverage she now claims. Likewise the evidence shows that State Farm is not estopped from denying her that coverage. Accordingly, State Farm met its burden to demonstrate that it is entitled to judgment as a matter of law, and Starr-Haller has failed to designate evidence to create a genuine issue of material fact on her claims against State Farm. As a result the summary judgment was affirmed.

ZALMA OPINION

This, in my opinion, is a frivolous suit. Starr-Haller, when she dropped off $350 on the date of the accident after hours at her agent’s office, was still $80 short of the premium owed and that was not paid until well after the accident. I suspect the $350 was delivered after the accident although no evidence presented as to the time of the payment vis a vis the accident.