Insurance--automobile liability--cancellation by premium finance
company
Plaintiff's automobile liability policy was effectively
canceled by defendant premium finance company for nonpayment of
premiums in compliance with N.C.G.S. § 58-35-85 and regulatory
requirements. Defendant was given an 18-day period in which to
make his past-due premium payment; furthermore, assuming that the
notice of cancellation should not have been mailed until after
the end of the 18-day period (30 December) as plaintiff contends,
there was no prejudice because the Notice of Intent to Cancel and
the Notice of Cancellation state the effective date as 30
December, and the policy was not canceled until the North
Carolina agent for the insurance company received the notice on 2
January. Moreover, it appears from the record that a copy of the
Notice of Intent to Cancel was forwarded to plaintiff's insurance
agent, as required by regulations.
Barber & Associates, P.A., by Timothy C. Barber and Eric J.
Howland, for Agency Services, Inc. and Agency Premium
Services, Inc., third-party defendant appellants; and Walker,
Clark, Allen, Herrin & Morano, by Mickey A. Herrin, for Canal
Insurance Company defendant appellant.
Irvine Law Firm, PC, by David J. Irvine, Jr., for Carlton
Joedy Cahoon, plaintiff appellee.
Rodman, Holscher, Francisco & Peck, P.A., by R. Brantley Peck,
Jr., for Christy Yvonne Ange, defendant appellee.
The Wells Firm, PLLC, by J. Warner Wells, II, for Henry
Reynolds Snell, Jr., defendant appellee.
HORTON, Judge.
Appellants contend that they complied with the provisions of
N.C. Gen. Stat. § 58-35-85 in cancelling the policy issued to
plaintiff Cahoon, and argue that the trial court erred in ruling
otherwise. We agree, and grant summary judgment in favor of the
appellants, Agency and Canal.
N.C. Gen. Stat. § 58-35-85 sets out the procedure for
cancellation of an insurance policy by an insurance premium financecompany:
When an insurance premium finance
agreement contains a power of attorney or
other authority enabling the insurance premium
finance company to cancel any insurance
contract or contracts listed in the agreement,
the insurance contract or contracts shall not
be cancelled unless the cancellation is
effectuated in accordance with the following
provisions:
(1) Not less than 10 days' written
notice is sent by personal delivery,
first-class mail, electronic mail,
or facsimile transmission to the
last known address of the insured or
insureds shown on the insurance
premium finance agreement of the
intent of the insurance premium
finance company to cancel his or
their insurance contract or
contracts unless the defaulted
installment payment is received.
Notification thereof shall also be
provided to the insurance agent.
(2) After expiration of the 10-day
period, the insurance premium
finance company shall send the
insurer a request for cancellation
and shall send notice of the
requested cancellation to the
insured by personal delivery, first-
class mail, electronic mail,
electronic transmission, or
facsimile transmission at his last
known address as shown on the
records of the insurance premium
finance company and to the agent.
Upon written request of the
insurance company, the premium
finance company shall furnish a copy
of the power of attorney to the
insurance company. The written
request shall be sent by mail,
personal delivery, electronic mail,
or facsimile transmission.
(3) Upon receipt of a copy of the
request for cancellation notice bythe insurer, the insurance contract
shall be cancelled with the same
force and effect as if the request
for cancellation had been submitted
by the insured, without requiring
the return of the insurance contract
or contracts.
N.C. Gen. Stat. § 58-35-85 (1999). Thus, written notice of the
intent to cancel a policy must be given to the insured at least ten
days before cancellation of the policy, giving the insured an
opportunity to pay the past-due premium and retain insurance
coverage. Plaintiff does not contest receipt of the Notice of
Intent to Cancel dated 12 December 1996. Nor does he contend that
he tendered the past-due premium prior to 30 December 1996, the
effective date of cancellation. He argues, however, that there
were several defects in the purported cancellation of his policy.
Plaintiff contends, and we agree, that the burden of proving
compliance with N.C. Gen. Stat. § 58-35-85 is on the insurance
company. We have repeatedly held that "the burden is upon the
insurance company to show that all statutory requirements have been
complied with, including the ten days written notice by the premium
finance company to the insured together with said notice to the
insurance agent, prior to the premium financing company requesting
cancellation of the policy." Grant v. Insurance Co., 1 N.C. App.
76, 80, 159 S.E.2d 368, 371, cert. denied, 273 N.C. 657 (1968).
"[T]he burden of proving cancellation by the insured or his agent
[is] on the insurance company." Ingram v. Insurance Co., 5 N.C.
App. 255, 258, 168 S.E.2d 224, 227, cert. denied, 275 N.C. 595
(1969). "In order to cancel a policy the carrier must comply withthe procedural requirements of the statute or the attempt at
cancellation fails and the policy will continue in effect despite
the insured's failure to pay in full the required premium."
Pearson v. Nationwide Mutual Ins. Co., 325 N.C. 246, 254, 382
S.E.2d 745, 748 (1989). The policy is considered cancelled as of
the date the insurance company receives the request for
cancellation. Unisun Ins. Co. v. Goodman, 117 N.C. App. 454, 457,
451 S.E.2d 4, 6 (1994), disc. review denied, 339 N.C. 742, 454
S.E.2d 662 (1995); N.C. Gen. Stat. § 58-35-85(3).
Plaintiff first argues that the defendants violated the
express terms of the policy in their cancellation effort.
Plaintiff's insurance policy stated, however, that "[t]his policy
may be cancelled by the named insured by surrender thereof to the
company or any of its authorized agents or by mailing to the
company written notice stating when thereafter the cancellation
shall be effective." Agency Services, Inc. (Agency), the premium
finance company, used a Finance Agreement throughout its dealings
with plaintiff. The Finance Agreement appointed Agency as
plaintiff's "attorney in fact" and allowed Agency "in the event of
nonpayment of the installments . . . to authorize and give notice
of the cancellation of the insurance policy[] . . . ."
Furthermore, "[i]n the event the insured defaults under these
conditions, and after notice is given under applicable state law
[Agency] may request cancellation of any policy . . . ." If a
default occurred, Agency was to send written notice of default to
plaintiff Cahoon; if the default was not rectified, Agency was tothen send written Notice of Cancellation to Canal and give
plaintiff a copy of that Notice. We hold that Agency complied with
the cancellation provisions of the Finance Agreement, which
provisions track the language of N.C. Gen. Stat. § 58-35-85.
On 12 December 1996, following plaintiff's failure to pay his
December premium, Agency sent him a Notice of Intent to Cancel his
policy effective 30 December 1996. On 26 December 1996, Agency
mailed plaintiff a Notice of Cancellation, again advising him that
his policy would be cancelled effective 30 December 1996. Finally,
on 30 December 1996, Agency mailed to Canal and its agent,
Piedmont, a Request for Cancellation of plaintiff's policy.
In summary, N.C. Gen. Stat. § 58-35-85 requires that an
insured be given at least ten days in which to make any past-due
premium payments and retain insurance coverage. Here, the
uncontradicted evidence is that plaintiff Cahoon was given more
than 10 days' notice before his policy was cancelled. Thus, the
statutory notice requirement was satisfied and this assignment of
error is overruled.
Next, plaintiff argues that Agency failed to comply with
several other mandatory requirements of N.C. Gen. Stat. § 58-35-85.
Specifically, plaintiff contends that Agency did not ensure that
Canal received a copy of the power of attorney executed by him,
either prior to or together with the "Request for Cancellation."
Plaintiff ignores the explicit language of N.C. Gen. Stat. § 58-35-
85(2), however, which provides that "[u]pon written request of the
insurance company, the premium finance company shall furnish a copyof the power of attorney to the insurance company." (Emphasis
added.) Nothing in this record indicates that either Canal or its
agent Piedmont made a request, written or otherwise, for a copy of
the power of attorney.
Plaintiff also argues that Agency prematurely sent the Notice
of Cancellation to Piedmont. The original Notice of Intent to
Cancel was dated 12 December 1996 and informed plaintiff that his
policy would be cancelled effective 30 December 1996 for non-
payment of premium. The Notice of Cancellation was dated 26
December 1996 and requested that the insurance policy issued to
plaintiff be cancelled effective 30 December 1996. Plaintiff argues
that the Notice of Cancellation should have been mailed after 30
December 1996, the period of time within which he could make
payment of his past-due premium. Plaintiff's argument centers
around the language of N.C. Gen. Stat. § 58-35-85(2), which
provides that "[a]fter expiration of the 10-day period, the
insurance premium finance company shall send the insurer a request
for cancellation . . . ." (Emphasis added.) After careful
consideration, we disagree with plaintiff's contention.
The requirement that an insured have a full ten days' notice
has been examined and upheld in several of our decisions. See
Paris v. Woolard, 128 N.C. App. 416, 497 S.E.2d 283, disc. review
denied, 348 N.C. 283, 502 S.E.2d 843 (1998) (seven days' notice
held insufficient); Graves v. ABC Roofing Co., 55 N.C. App. 252,
284 S.E.2d 718 (1981) (five days' notice held insufficient); Grant,
1 N.C. App. at 80, 159 S.E.2d at 371 (premium finance company'srequest "that subject policy be cancelled effective as soon after
this date as statutory requirements permit" deemed an ineffective
cancellation because of vagueness and because less than ten days
elapsed between Notice of Cancellation and Request for
Cancellation).
Here, Agency gave plaintiff an 18-day period -- from 12
December 1996 to 30 December 1996 -- within which to make his past-
due premium payment. Plaintiff argues that Agency should not have
mailed the Notice of Cancellation sooner than 31 December 1996,
after the end of that 18-day period. Assuming for the sake of
argument that the Notice of Cancellation was prematurely mailed to
plaintiff, we fail to discern any prejudice to him. Both the
Notice of Intent to Cancel and the Notice of Cancellation state the
effective date of cancellation as 30 December 1996. Further, the
Notice of Cancellation was mailed by Agency to Piedmont, as agent
for Canal, on 30 December 1996 and received by Piedmont on 2
January 1997. The applicable statute provides for cancellation of
the insurance contract "[u]pon receipt of a copy of the request for
cancellation notice by the insurer . . . ." N.C. Gen. Stat.
§ 58-35-85(3). Thus, the policy in question was not cancelled
until Piedmont, as agent for Canal, received the Notice of
Cancellation on 2 January 1997. See Unisun, 117 N.C. App. at 457,
451 S.E.2d at 6 (stating that an insurance policy is deemed
cancelled as of the date the insurance company receives the Request
for Cancellation).
Finally, plaintiff argues that the purported cancellation ofhis policy violates regulations promulgated pursuant to
N.C. Gen.
Stat. § 58-35-85. North Carolina Administrative Code title 11, r.
13.0317 requires "ten-day written notice of intent to cancel as
described in G.S. § 58-35-85(1)," and requires that a copy of the
Notice of Intent to Cancel must be "sent to the insurance agent
shown on the premium finance agreement at the same time notice is
given to the insured." N.C. Admin. Code tit. 11, r. 13.0317 (June
1998). It appears from the record that a copy of the Notice of
Intent to Cancel was forwarded to plaintiff's insurance agent. An
affidavit prepared by Barbara Thomas, the Customer Service Manager
at Agency Premium Services, Inc., states in pertinent part:
6. That based on her review of her file,
a Notice of Intent to Cancel was mailed on
December 12, 1996 to Carlton Joedy Cahoon to
the last known address of Carlton Joedy Cahoon
shown on the Premium Finance Agreement;
further, that a Notice of the intent to cancel
was also mailed to SIA Tideland, the insurance
agent.
(Emphasis added.)
It appears from Ms. Thomas's affidavit that the Notice of
Intent to Cancel was mailed to SIA Tideland, the insurance agent,
and plaintiff Cahoon, as required by the regulations. Ms. Thomas's
affidavit is neither impeached nor contradicted by evidence for
plaintiff. This assignment of error is also overruled.
While we agree with the trial court that there are no genuine
issues of material fact with regard to the circumstances
surrounding the cancellation of plaintiff's policy, we hold that
Agency complied with the statutory and regulatory scheme for thecancellation of plaintiff's insurance policy and that the trial
court erred in entering summary judgment for plaintiff. Instead,
summary judgment should be entered for defendant appellants Canal
and Agency.
Therefore, the trial court's grant of summary judgment in
favor of plaintiff is hereby reversed and the case is remanded to
the trial court with directions that summary judgment be entered in
favor of Canal Insurance Company, Agency Services, Inc., and Agency
Premium Services, Inc.
Reversed and remanded with directions.
Judges WALKER and McGEE concur.
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