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Court Finds Insurance Company Properly Cancelled Policy of Insurance for Non-Payment of Premiums

By on March 2, 2018 in Court Rulings with 0 Comments

Selective Insurance Company (“Selective”) was sued by the plaintiffs Car Craft Auto Corp. and the Estate of Jesus Santiago t/a Car Craft Auto due to Selective’s cancellation of Jesus Santiago’s (“Santiago”) commercial insurance policy.  Santiago had been insured from February 19, 2011 through February 19, 2012.  Selective prepared and sent to Santiago an invoice for the renewal of the policy for the next policy period, which Santiago did not pay.  The issue on appeal in Nowakowski v. Selective Way Insurance Co., 2017 N.J. Super. Unpub. LEXIS 3054 (App. Div. Dec. 12, 2017) was whether Selective’s failure to produce proper documentation that the insured had received the cancellation notice would void the cancellation of the policy when the insured admitted receipt of the cancellation notice.

This case was brought by Deborah Koeppel a/k/a Deborah Nowakowski (“Koeppel”) as the Executor of the Estate of Jesus Santiago who passed away prior to the suit being filed.  Koeppel acted as Santiago’s operation’s manager and was responsible for Car Craft’s insurance needs.  She testified in this matter that she knew a new premium payment was due but payment was not made on purpose.

Car Craft had been insured from February 19, 2011 through February 19, 2012.  On or about February 28, 2012, Selective prepared an invoice for the renewal of the policy for an additional year and notified the plaintiffs that a renewal premium was due on March 19, 2012.  Koeppel testified that Santiago knew the premium was due on that date.

When the premium payment was not received, on March 24, 2012, Selective issued a cancellation notice to plaintiffs.  The notice indicated that coverage would continue without lapse if full payment was received prior to April 10, 2012.  Koeppel testified that she and Santiago received the cancellation notice and intended not to make the payment.  She was candid in her deposition that “we were letting all policies lapse.”  Selective thereafter cancelled the policy when the requisite premium payment was not made.  On April 14, 2012, a fire occurred at Car Craft.  Not surprisingly, Selective declined insurance coverage on the fire loss due to non-payment of premiums.

Plaintiffs sued Selective, claiming improper cancellation of the policy, as well as some other grounds, which the Appellate Division rejected, without any discussion on appeal.

Plaintiffs argued that Selective failed to strictly comply with the applicable statutory and regulatory provisions as to the cancellation of the policy.  The Appellate Division noted that the cancellation of an insurance policy must strictly comply with the statutory requirements of N.J.S.A. 17:29C-10.  However, under New Jersey case law, an insured need not actually receive a cancellation notice for it to be effective, provided that the statutory proof of mailing has been satisfied.  As the Court noted, “the determinative factor is the mailing of a notice, not its receipt.”  Plaintiffs argued that Selective did not produce a certified mail return receipt card and, hence, there was not strict statutory compliance.

For purposes of this appeal, the Appellate Division accepted that contention in reaching its decision.  However, the Appellate Division pointed out that courts have not required such compliance when the insured admits receipt of the cancellation notice.  In this case, the plaintiffs did admit they purposely declined to pay the premiums.  Koeppel conceded that the failure to pay the premiums meant Santiago and Car Craft were out of insurance and that she understood the policy was no longer paid.  Koeppel candidly admitted that plaintiffs deliberately decided not to pay the premium and let the policy lapse.

The Appellate Division found that, based upon this testimony, that plaintiffs were uninsured on the date of the loss because they intentionally let the policy lapse.  Hence, the Court affirmed the trial court’s decision, granting Selective Insurance Company summary judgment, dismissing the Complaint.

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Betsy G. Ramos

About the Author

About the Author:

Ms. Ramos is an Executive Committee Member and Co-Chair of the Litigation Department at Capehart Scatchard, P.A. located in Mount Laurel, New Jersey. She is an experienced litigator with over 25 years experience handling diverse matters. Practice areas include tort defense, business litigation, estate litigation, tort claims and civil rights defense, construction litigation, insurance coverage, employment litigation, shareholder disputes, and general litigation.

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