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Cancelled policy not revived

By: dmc-admin//May 28, 2007//

Cancelled policy not revived

By: dmc-admin//May 28, 2007//

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What the court held

Case: Bruchert v. Tokio Marine & Nichido Fire Ins. Co., Ltd., No. 2006AP2113.

Issue: Can an injured party recover from the tortfeasor’s insurer, when the policy was cancelled for nonpayment, but the insurer failed to notify its insured’s lienholder?

Holding: No. The failure does not affect the cancellation of the policy as to the insured and parties seeking coverage through the insured.

Attorneys: For Appellant: Rice, Christine Marie, Milwaukee; For Respondent: Fertl, Jeffrey S., Milwaukee.

An automobile insurer’s failure to notify its insured’s lienholder that cancellation is imminent does not defeat its subsequent cancellation of the policy for nonpayment, the Wisconsin Court of Appeals held on May 22.

Major League Sports, a company owned by Charles T. Monfre, leased a car from Mitsubishi Motors Credit of America. The lease required that the car be insured, and that Mitsubishi be named as an additional insured.

The lease also required Major League Sports to ensure that the policy require that Mitsubishi be notified of any cancellation of coverage 30 days in advance.

Major League Sports insured the car with Acuity, but failed to pay its premiums. After giving the 10-day notice required by sec. 631.36(2)((b) to Monfre, Acuity cancelled the policy. However, Acuity gave no notice to Mitsubishi.

While driving the car with Monfre’s permission, James R. Erickson was involved in an accident that injured Laura C. Bruchert.

Bruchert brought suit against many parties, including Acuity. Acuity moved for summary judgment, relying on its cancellation.

The insurer for Mitsubishi opposed the motion, and the circuit court denied it, holding that the failure of Acuity to give notice of cancellation to Mitsubishi meant that the policy remained in effect and provided liability coverage for Bruchert’s injuries.

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Case Analysis

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Acuity appealed, and the court of appeals reversed, in a decision by Judge Ralph Adam Fine.

The court noted that, while sec. 631.36 requires that written notice be given to a policyholder 10 days before the proposed cancellation, nothing in the statute requires that notice be given to anyone else. The policy required that notice be given to Acuity as the “loss payee” in connection with the “Car Damage Coverage” only.

The court thus concluded that, when Monfre failed to pay the premium and ignored the cancellation notice, he “voluntarily joined the ranks” of the uninsured, and both he and those whose derivative liability coverage flowed through his (Erickson’s) lost liability coverage.

Accordingly, the court reversed.

Click here for Case Analysis.

David Ziemer can be reached by email.

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