Insurance is, by definition, a contract whereby the insurer, for consideration, agrees to defend or indemnify another against a contingent or unknown risk. For an insurance policy to exist, therefore, the person insured must pay the premium (the consideration) charged by the insurer. States, like Florida, to protect the consumer have enacted laws that require insurers to give adequate notice to the insured before cancelling or non-renewing a policy of insurance.
In Luis Alfredo Rodriguez, etc. vs. Security National Insurance Co., Inc., 2014 Fla. App. LEXIS 6255 (April 30, 2014), [enhanced version available to lexis.com subscribers], the Florida Court of Appeal dealt with a claim denied because a policy lapsed before the accident. The trial court granted summary judgment to the insurer.
Luis Alfredo Rodriguez, individually and as personal representative of the Estate of Alfred Rodriguez, and as assignee of Eduardo Olivera, appeals a final summary judgment entered in favor of Security National Insurance Company (“SNIC”).
On January 31, 2009, Alfred Rodriguez (“Alfred”) was killed while riding his motorcycle when he was struck by a vehicle owned by Eduardo Olivera. Alfred’s father, Luis Rodriguez (“Rodriguez”) was appointed personal representative of his son’s estate, and sued Olivera for wrongful death. Olivera entered into a Coblentz v. Am. Surety Co. of New York, 416 F. 2d 1059 (5th Cir. 1969), [enhanced version available to lexis.com subscribers], agreement with Rodriguez and agreed to a consent judgment of $2.5 million, in exchange for assigning his rights to a claim against his insurance company, SNIC. SNIC refused coverage for the accident because Olivera’s policy expired on December 6, 2008, almost two months before the accident.
Rodriguez amended the complaint to add SNIC as a party, and added claims against SNIC for breach of contract, enforcement of judgment and bad faith in denying coverage to Olivera. Rodriguez alleged SNIC was required to place Olivera on notice that his policy was about to expire, and that SNIC failed to do so. Therefore, Rodriguez alleged, the policy was in full force and effect on the date of the accident, and SNIC breached the insurance contract and acted in bad faith in denying coverage.
In response, SNIC asserted it did mail expiration notices to Olivera twice before his policy expired, and also that it mailed him a notice of expiration after the policy expired. The notices had all been sent to the address listed on Olivera’s insurance application and on the policy declarations sheet-5005 Collins Avenue, Miami Beach, Florida 33140. However, according to Olivera, the address was missing his apartment number, and therefore, Rodriguez asserted, Olivera did not receive any of the notices mailed by SNIC.
On November 2, 2008, more than a month before the last day of the policy period (December 6, 2008), SNIC sent a renewal offer to Olivera at 5005 Collins Avenue, Miami Beach, Florida, 33140-the very address listed on Olivera’s policy. It sent a “renewal reminder” to Olivera on November 24, 2008, to the same address. Ten days after the policy lapsed, SNIC sent Olivera a notice of policy expiration, once again to the same address.
SNIC also filed a counterclaim for declaratory judgment, seeking a determination that no coverage existed under Olivera’s policy on the date of the accident. After a hearing, the trial court granted SNIC’s motion for summary judgment, finding the policy had lapsed prior to the accident, and therefore, there was no coverage and SNIC did not act in bad faith in handling the claim and had no duty to pay the consent judgment, attorney’s fees or costs.
Rodriguez claims SNIC was required to provide notice to Olivera, prior to the policy lapse date, that a premium was due. A Florida statute provides: “No insurer shall fail to renew a policy unless it mails or delivers to the first-named insured, at the address shown in the policy, and to the first-named insured’s insurance agent at her or his business address, at least 45 days’ advance notice of its intention not to renew; and the reasons for refusal to renew must accompany such notice.” The subsection does not apply to cases of nonpayment of premium.
Rodriguez argued that the failure to provide notice of payment due negates the nonpayment of premium exception for the notice requirement.
The Court of Appeal reasoned that even if SNIC was statutorily required to provide reasonable notice of payment due in advance of the due date, the undisputed facts established that SNIC did in fact send notice to Olivera prior to the policy lapse date, advising that a renewal premium was due in order to maintain his policy in force.
Florida Statutes also provide, reasonably, that: “United States proof of mailing or certified or registered mailing of notice of cancellation, of intention not to renew, or of reasons for cancellation, or of the intention of the insurer to issue a policy by an insurer under the same ownership or management, to the first-named insured at the address shown in the policy shall be sufficient proof of service.”
Rodriguez does not dispute that SNIC established proof of mailing of these notices to the address listed in the policy; he claims, however, that the notice was defective because the address did not contain Olivera’s apartment number. However, Olivera did not include any apartment number in his insurance application. No apartment number appears on his policy declarations page. SNIC, therefore had no way to know that Olivera lived in an apartment.
SNIC, therefore, provided sufficient proof of notice by mailing the renewal offers and notice of policy lapse to the address provided by Olivera in his application, which was the very same address contained in the policy and on the declarations page. The law is clear that an insurer’s proof of mailing of a notice of cancellation to the insured prevails as a matter of law over the insured’s denial as to its receipt.
The plaintiff, apparently convinced that Olivera had no assets to collect a $2.5 million judgment, agreed to take a chance on convincing a court that his insurance company should pay the full judgment for wrongfully refusing to defend and indemnify Olivera. For $2.5 million it was probably worth the attempt as weak as it was.
What this teaches insurance companies is to comply with each state law that requires appropriate notice of cancellation, non-renewal, and lapse of insurance policies; keep proof of mailing of each notice; and be ready to provide that proof to a court. Failure to keep the appropriate records can cause an insurer to pay a claim on a policy for which no premium was paid and that it believed did not exist.
Insureds who live in apartments, and their agents and brokers, should be careful to give the insurer a complete address, including apartment numbers to make sure they receive all of the notices and communications from the insurer.
By Barry Zalma, Attorney and Consultant
Reprinted with Permission from Zalma on Insurance, (c) 2014, Barry Zalma.
Barry Zalma, Esq., CFE, is a California attorney who limits his practice to consultation regarding insurance coverage, insurance claims handling, insurance bad faith and fraud and acting as a mediator or arbitrator on insurance disputes. Mr. Zalma serves as a consultant and expert almost equally for insurers and policyholders. He founded Zalma Insurance Consultants in 2001 and serves as its only consultant. He recently published the e-books, "Zalma on Rescission in California - 2013"; "Random Thoughts on Insurance" containing posts from this blog; "Zalma on Insurance;" "Murder and Insurance Don't Mix;" “Heads I Win, Tails You Lose — 2011,” “Zalma on Diminution in Value Damages,” “Arson for Profit” and “Zalma on California Claims Regulations,” and others that are available at Zalma Books.
Mr. Zalma can be contacted at Barry Zalma or email@example.com, and you can access his free "Zalma on Insurance Fraud" newsletter at Zalma’s Insurance Fraud Letter.
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