In Twin City Acceptance Corp. v. Allstate Ins. Co., 2008 WL 3399407 (La.App. 2 Cir.), Twin City financed a vehicle owned by Virgil Reed. The lien was for less than $10,000. Allstate provided coverage to Reed that was to be effective from November 2006 through May 2007, and Twin City was listed as the lienholder on the policy. Allstate cancelled the policy on January 11, 2007 after Reed's first check for partial payment of the premium was returned because of insufficient funds, and he made no other payments. On January 16, 2007, the vehicle was involved in an accident with a vehicle driven by Brock Hummel.

 

Twin City filed suit against Allstate claiming that it had not received notice of cancellation, and if it had, it would have placed Single Interest Coverage on the vehicle. Allstate filed an answer to the suit, as well as a third-party demand against Hummel and his liability insurer, Unitrin Auto and Home Insurance Company, alleging that the accident was caused by Hummel.

 

Allstate contended that it had mailed notice of cancellation to both Reed and Twin City on December 22, 2006, with the cancellation effective on January 11, 2007. Allstate also contended that, in the alternative, if Twin City was entitled to judgment against Allstate then, via subrogation, Allstate should receive indemnification from Hummel and Unitrin.

 

Hummel and Unitrin argued that the third-party demand was premature because Allstate and Unitrin were bound by an arbitration agreement, and Allstate had not first submitted its claim to arbitration. They further argued that because the policy issued to Reed had been cancelled by nonpayment, and the lien was for less than $10,000, Allstate was barred by the “No Pay, No Play” statute from seeking to recover the amount it may have been obligated to pay Twin City.

 

The trial court granted the exception of no cause of action and dismissed the third-party demand and Allstate appealed.

 

The Court of Appeal first held that Twin City had no rights against Hummel and Unitrin to which Unitrin could be subrogated because Twin City was not an insured under the policy, but rather was listed on the policy only in its capacity as the lienholder.

 

Further, the court held that the “No Pay, No Play” statute, which precluded recovery for the first $10,000 of property damage incurred by a vehicle's owner when the owner failed to maintain insurance, precluded Reed from bringing a claim against Hummel and Unitrin. Thus, Allstate was barred from bringing a subrogation claim. The notice of cancellation was effective as to Reed before the accident, and Allstate, as the insurer, could not have any rights greater than that of Reed, the insured.