Opinion
Docket No. 93677.
Decided February 3, 1988. Leave to appeal applied for.
John R. Brakora, for plaintiff.
Menmuir, Zimmerman, Rollert Kuhn (by Charles H. Menmuir), for defendant.
This case arises out of an automobile insurance policy issued by defendant, Michigan Mutual Insurance Company, to plaintiff, Robert Venne. The policy period was July 22, 1984, to July 22, 1985. An installment payment plan was arranged. On September 12, 1984, defendant was mailed a written cancellation notice stating that the amount due was $176. Defendant was advised that payment in full by September 24, 1984, would void the cancellation notice and coverage would be continued.
Plaintiff made a partial payment of $115.50. Defendant accepted the $115.50 and mailed plaintiff a partial payment notice showing a remaining balance of $60.50. This notice included the following language:
If the remaining amount is received in our office within six days after the effective date of cancellation (September 24, 1984), your protection will continue without interruption.
On September 29, 1984, plaintiff secured a postal money order at the post office in Manistee, Michigan, in the amount of $60.50 and deposited it in the mail. The money order was received by defendant at its Detroit office on October 6, 1984. On October 10, 1984, defendant sent another notice to plaintiff advising him that the payment of $60.50 was not received in time to reinstate the policy. Plaintiff was further advised to contact his agent regarding new coverage. Plaintiff did not contact an agent. On October 21, 1984, plaintiff was involved in an automobile accident.
Plaintiff made a claim against defendant for insurance benefits arguing that the policy never lapsed since he mailed the balance of the premium within the six-day period ending September 30, 1984. Defendant denied coverage alleging cancellation for nonpayment effective on September 30, 1984. In January of 1985 defendant tendered a refund of a portion of the premiums paid by plaintiff. In April of 1985 plaintiff brought suit against defendant seeking benefits pursuant to the policy. Motions for summary disposition were filed by both sides. The trial court granted plaintiff's motion.
The issue is whether, in the absence of an express agreement on the matter, an insured is deemed to have effectively paid a premium when he does no more than deposit it in the mail.
We are unaware of any Michigan decisions which particularly address this issue. However, in Continental Life Ins Co v Willets, 24 Mich. 268, 273 (1872), the Court held that, where the insurance company requires an express stipulation by the applicant for insurance that the policy should not have force until the full amount of the premium is actually received, the insured cannot claim effective coverage by making a partial payment. Other jurisdictions have specifically held that mere mailing of a premium is insufficient to reinstate coverage and that the premium is not "paid" until it is received by the insurer unless, by a prior course of dealing, the insurer has acquiesced in the use of the mails and has thereby adopted the postal authorities as its agents. Thomason v Schnor, 41 Colo. App. 546; 587 P.2d 1205 (1978); Minnick v State Farm Mutual Automobile Ins Co, 54 Del. 125; 174 A.2d 706 (1961); Bankers Nat'l Life Ins Co v Cooper, 111 N.J. Super. 264, 268; 268 A.2d 78 (1970). In Federal Kemper Life Ins Co v Preston, 520 F. Supp. 24, 27 (ED Tenn, 1981), the court affirmed this premise in holding that, where the insurance company expressly states that payment must be received before coverage is renewed, the controlling event giving rise to coverage is receipt by the company of the payment rather than the mailing of it by the insured.
In the instant case, three of four notices sent by defendant expressly stated that payment would have to be received before coverage would be reinstated. While defendant acquiesced in and previously relied on the use of the mails as its method of receiving premium payments from all its clientele, stating that payment must be received as a prerequisite to coverage, the postal authorities could not be considered as the agents of this defendant. Under these circumstances, we find the risk of postal loss was on plaintiff and, in view of the stipulation that the premium payment was not received by defendant before the expiration of the six-day period (September 30, 1984), the plaintiff did not have effective coverage at the time of his accident on October 21, 1984. The trial court's summary judgment in favor of plaintiff was therefore improper.
Reversed and remanded for entry of judgment for the defendant.