Cancellation of No-Fault Policy Under MCL 500.3020(1)(b) Clarified by Michigan Supreme Court

A notice of cancellation for a no-fault policy under MCL 500.3020(1)(b) must be “preemptory, explicit, and unconditional,” according to a recent Michigan Supreme Court ruling. In the case reviewed, the insurance company sent the cancellation notice before the premium was due.  

A Wayne County married couple bought a six-month no-fault insurance policy from defendant insurance company. The insureds paid the initial premium for the policy to take effect on September 26, 2017. Two weeks later the carrier mailed the insured a letter titled “Premium Billing and Cancellation Notice for Non-Payment,” stating that the policy would be cancelled if the premium was not paid on time. When this letter was sent, no premiums were due. The insured did not make the second premium payment, and the carrier cancelled the policy on October 27, 2017. Three days later the carrier sent the insured a letter stating that the policy would be reinstated with a lapse in coverage if the premium was paid by November 27, 2017. On November 15, 2017, the insureds/claimants were struck by a car while walking down the street. They paid the insurance premium two days later, then filed a claim for PIP benefits. The PIP carrier denied the claim on the basis that there was no policy in effect at the time of the accident.  

 Plaintiffs sued the insurance carrier, and the defendant insurer moved for summary disposition. Plaintiffs argued that a genuine issue of material fact existed as to whether their payment reinstated the policy. The trial court denied the insurer’s motion after determining that the policy had not been properly cancelled. Defendant insurer appealed the case, and the Court of Appeals ruled in favor of the plaintiffs in a split opinion. The Michigan Supreme Court affirmed the appellate court ruling. The cancellation letter sent to insureds before any premium was due was not a valid cancellation notice because it was conditioned on the insured’s failure to pay the premium.  

The case is Zoo Yang v. Everest Nat'l Ins. Co., 943 N.W.2d 94 (Mich. 2020).  

Click on the link to read the full Michigan Supreme Court Opinion.  

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