Sending a letter, in the context of other indications, is a sufficient cancellation – NC High Court

Simply mailing a cancellation notice to a policyholder, when viewed in the context of other indicators, was sufficient to comply with state law and cancel a homeowner’s insurance policy shortly before a fire to destroy a house, the North Carolina Supreme Court ruled in a Nationwide. The general insurance case last week.

“Abundant evidence shows that plaintiffs had effective notice of cancellation well in advance of the fire. Because Nationwide gave the plaintiffs the timely warning required by subsection 58-44-16(f)(10), it properly canceled their policy,” Judge Anita Earls wrote in the Aug. 23 opinion, which upheld a 2022 decision by a divided state court. of Calls.

The question of what constitutes a proper cancellation notice, or whether a notice can be lost in the mail—as the plaintiffs in this case argued—has arisen repeatedly in many states. Some jurisdictions have held that merely sending a letter is sufficient. Others argued that receipt of certified mail is required.

The judges in this case, Ha vs. Nationwide, were careful to note that their decision is not intended to be a blanket endorsement of simply mailing a notice.

“We decline to opine pro bono whether filing notice by mail counts as “giving” written notice under subsection 58-44-16(f)(10),” the court wrote. “… Most importantly, it affirms our longstanding recognition that “it is fact of observation, which is important.”

However, the notice gives insurers and insureds some guidance on how and when cancellations can void policies and bar claims.

The case dates back to 2015. Nung Ha and Nhiem Tran had moved from Vietnam to Wake County, North Carolina and found a home near Raleigh. AAA Insurance wrote the HO policy that year, but soon canceled it, noting several hazards, including rotting wood and an unfenced pool.

The claimants then turned to Nationwide through an online policy application. Nationwide wrote the coverage, subject to a property inspection, and set up monthly bank drafts to cover the premiums, the court explained. A few weeks later, after an inspection by an underwriter, the insurer said it sent a cancellation letter to the homeowners, citing the same dangers AAA had pointed out.

The letter provided 15 days’ notice, with a cancellation date of June 6, 2015. Less than three weeks later, the house burned to the ground. The family filed a claim and it was denied. Nationwide explained that the policy was not in effect.

The owners said they never received the notice in the mail. They filed suit against Nationwide.

After ups and downs in the appeals courts, the Supreme Court said Friday that Nationwide showed it sent the letter in compliance with state law, which allows insurers to cancel within the first 60 days with 15 days’ notice.

The opinion pointed to a 1965 decision by the state’s Industrial Commission, which held that a workers’ compensation insurance company did not give adequate notice of cancellation because it did not send the notice by certified mail. But the Supreme Court in 1965 found that the idea was wrong and that the statutes did not require certified mail or other proof of receipt. The commission impermissibly “was paramount on mode of giving notice rather than of fact of notice.”

The 2024 court went on to explain that Ha and Tran had other indications that their policy was voided: they knew about the high perils, as previously cited by AAA; but instead of fixing the problems they sought new coverage from Nationwide.

“So when plaintiffs contracted with Nationwide, they didn’t do so in a vacuum — they signed that policy knowing and yet refusing to address the dangers that caused another insurance carrier to end their coverage just weeks before “, noted the judges.

Perhaps most importantly, two days after Nationwide said it had canceled the policy, it sent a refund check to the family for the extra premium they had paid. The check showed the policy number and the owners signed the check and cashed it. Nationwide also stopped the monthly bank drafts that had been paying the premiums.

“Keeping our focus on substance over form, we hold that plaintiffs received advance warning of cancellation and were armed with ‘information necessary for (their) protection,'” the court wrote, citing previous court decisions.

Stephen Feldman, Travis Hinman and Garrett Steadman represented Nationwide on appeal. The North Carolina Rate Bureau, which represents insurers on rate claims, filed an amicus curiae brief in the case. The Supreme Court opinion can be seen here.

TOPICS
North Carolina