Thursday, April 27, 2006

consumer - insurance - cancellation - mailbox rule - intent to cancel

Russock v. AAA Mid-Atlantic Insurance Co. and Citizens Bank - Superior Court- April 17, 2006

Premium payments were to be made, according to insurer's instructions, through an on-line remittance service of the bank. Payment renewal date was June 13. Insured electronically requested the bank to issue payment on June 3. Bank issued and mailed the check on June 10. Check arrived at insurer's office on June 17, 4 days after the due date of June 13. Insurer issued a notice of cancellation on June 17 but nonetheless cashed insured's check. On June 20, insured had an accident on June 20 and submitted a claim, which was rejected.

Insurer's claim that the payment was late was rejected based on application of the mailbox rule, which holds that payment is deemed received when mailed, "[w]here the use of the mails as a means of acceptance is a;uthorized or implied from the surrounding circumstances...Here the use of the mails to submit premiums was not merely authorized, but required."

Insurer's affirmative defense that insured intended to cancel the policy was rejected. In order to prove that defense, the insurer has the burden to prove insured "had a clear and precise intent to cancel the policy prior to the loss....i.e., knowledge of payment due and refusal to pay." Those condition "do not exist where.... arrangements for payment are made, the payment itself is placed in transit to the payee who has dictated the method of transport, and the check is cashed."