Two 2017 US cases illustrate the importance of a notice cancelling a policy complying strictly with the requirements of the policy and the law.
In Las Vegas Inc v Oregon Mutual Insurance Co, the notice of cancellation became effective on a stated future date if the policyholder did not pay the premium by a required date. The notice did not comply strictly with the statutory requirements relating to a pre-cancellation notice given to an insured. The court rejected the insurer’s submission that the notice substantially complied with the law and held that strict compliance with statutory notice requirements serves to protect individuals from cancellation without adequate notice. The insured restaurant burnt down a day after the policy would otherwise have been cancelled.
In Greenwood v J.J. Hooligan’s LLC, the cancellation notice required mailing by certified mail. The insurer failed to produce proof of such mailing. The court explained that an insurer may prove that it has mailed an item by direct proof of actual posting or by proof of a course of office practice for sending notices through the mail and proof that such procedure was actually followed on the date of the alleged mailing. All the insurer produced was a tracking number which did not establish certified mail service. The policy which would have been cancelled on 2 November 2011 remained in effect till an employee injury claim arose on 14 January 2012.
Insurers must comply strictly with statutory requirements (such as Rule 19 of the Policyholder Protection Rules), the common law and the terms of the policy. Days of grace must also be respected.