Sometimes the only thing between you and your insurance benefits after an auto accident is a piece of paper. Insurance companies will try anything to avoid paying benefits to injured motorists, but a recent Michigan Court of Appeals decision says they went too far by sending out preemptive cancellation notices with their bills instead of waiting for customers to actually be late with their payments.
Michigan No-Fault Act Demands that Insurance Companies Pay Benefits to Auto Accident Victims
It seems obvious that once you buy an auto insurance policy you should expect to receive benefits when you suffer an auto accident injury. That is how the policies work. The Michigan No-Fault Act lays out your insurance company’s obligations to you, to your spouse and family members who live with you, and to others involved in your auto accident. It requires your insurance company to pay 100% of your reasonably necessary medical costs (until 2020 when customers will be able to choose different policy caps), as well as up to 3 years of lost wages and replacement costs.
Missed Payments Trigger Cancellation Notices and Auto Accident Defenses
Of course, to be entitled to benefits, you need to pay the insurance premiums. Every auto insurance contract includes a cancellation policy that gives the insurance company the right to cut off your benefits, or even rescind the policy from the start.
But the good news is that even if you fall behind on your payments, your insurance company can’t just cancel your policy without telling you. The law requires them to provide you a written cancellation notice and an opportunity to fix the problem before they cut you off. The timing of that cancellation notice was the topic of the recent Michigan Court of Appeals decision, Yang v Everest Nat’l Ins Co.
Court Says Insurance Company Can’t Skip Cancellation Notice
On November 15, 2017, Wesley Yang and his wife Viengkham Moualor were struck by a car while they were walking. They had purchased an insurance policy through Everest National Insurance Company two months earlier, but they hadn’t made the payment due on October 26. When they filed their claims for no-fault benefits under the policy, the insurance company claimed an auto accident defense – that the policy had been canceled for non-payment.
Yang had bought the policy on September 26, 2017, planning to pay monthly installment payments over the course of the 6-month policy. When the first bill was sent on October 9, 2017, it included a “cancellation notice” warning that if the payment was not made by October 26, 2017, the policy would automatically be cancelled the next day. That was the only warning Yang got that waiting to pay could put his benefits at risk.
The insurance company raised its auto accident defense claiming that the October 9 cancelation was good enough to terminate the policy when Yang didn’t pay later that month. That meant that Yang and his wife weren’t insured when they were injured in November. The Court of Appeals disagreed. The judges said the order of events mattered:
“For a cancellation to take place, the event triggering the right to cancel must have taken place first. In this case, the event that allowed for cancelation occurred on the date of nonpayment. Therefore, it is only after the nonpayment that the insurer may properly notify the insured of cancellation.”
Cancellation Notices are Consumer Protection Tools, Not Just Paperwork
The court was clear that a preemptive cancellation notice was not enough. If the insurance company had wanted to cancel the policy, it would have needed to send a separate notice after the payment was overdue. The court emphasized that the cancellation notice was a form of consumer protection. It was designed to notify Michigan drivers about the consequences when they fell behind. If insurance companies were allowed to send out preemptive cancellation notices, it would strip the consumers of that important protection and let the insurance companies dodge paying benefits to auto accident victims who thought they were still covered by their policies.
Dani K. Liblang is a personal injury attorney at The Liblang Law Firm, PC, in Birmingham, Michigan. She represents the victims of pedestrian and car accidents against the insurance companies’ auto accident defenses. If you have been seriously injured in a crash, contact The Liblang Law Firm, PC, today for a free consultation.