A Missouri appeals court held that a notice of cancellation of the policy, stating that the cancellation was immediately effective, was not nullified by the policy terms. The case is Stone v. Farm Bureau Town & Country Ins. Co. of Missouri, Nos. 26965, 26979, 2006 WL 2915680 (Mo. App. S.D. Oct. 11, 2006).
On December 23, 2002, Arlene Bateman was driving a truck and hit another vehicle occupied by Albert and Nadine Stone. Nadine was killed in the accident, and Albert was seriously injured. The Bateman's insurer, Farm Bureau, said their auto liability policy had been canceled on October 9, 2002, for nonpayment of premium.
Following trial, Albert obtained judgments against Bateman for his own personal injury claim and for a claim for Nadine's wrongful death. Bateman assigned her claims against Farm Bureau to Stone and his daughter.
A lengthy history of the Batemans' insurance premium payments showed that they were often late, received a reminder notice when they were late, and if payment was not received following the reminder notice, a cancellation notice was issued.
The reminder notice Farm Bureau sent contained an expiration date for the policy and the statement, “If you wish to keep your policies and/or membership from cancelling, we must receive your payment for the amount due prior to the expiration date.”
The cancellation notice that followed if no payment was received stated, “As no payment of premium has been received, this is your final notice that your policy(ies) was/were cancelled on the date listed above.”
The Batemans' auto policy authorized Farm Bureau to cancel the policy for nonpayment of premium by sending a cancellation notice at least ten days prior to the cancellation date. Farm Bureau argued that it complied with this provision by sending the Batemans a reminder notice on August 26, 2002. The court, though, said that the notice provided intent of cancellation, but “it is not sufficient to inform the insured the policy will be canceled; instead, he must be told that his policy is being canceled.”
Farm Bureau also asserted that the cancellation notice mailed on October 10, 2002, stating that the policy had been cancelled as of October 9, 2006, should have been immediately effective. The court, however, said this did not comply with the policy provision that the insured would receive at least ten days notice of cancellation.
Alternately, Farm Bureau said that the cancellation should take effect ten days after mailing. The Stones countered that “the specification of an erroneous date of cancellation in the notice rendered it wholly ineffectual.” This time, the court accepted the argument of the insurer; the court found Farm Bureau's the “better-reasoned and correct view.”
The court said its decision was directed by the Missouri Supreme Court's decision in Blair v. Perry County Mut. Ins. Co., 118 S.W. 605 (Mo. Banc 2003), which “instructs us that a notice of cancellation which purports to be immediately effective, in violation of the terms of the policy, is not a nullity; rather, the notice becomes effective after the lapse of the time period prescribed by the policy.”
Thus, the policy was effectively cancelled long before the December 23, 2002, accident.