The Hawaii Insurance Code provides that a cancellation notice sent by the insurer shall not be deemed valid unless evidence of mailing is provided. Haw. Rev. Stat. §431:10-226.5. What if the insurer sends the notice by certified mail, but the notice is returned as undelivered? Although never addressed by the Hawaii Supreme Court, this issue was recently before the Ninth Circuit when it interpreted a Washington statute in Cornhusker Casualty Ins. Co. v. Kachman, No. 06-35106 (9th Cir., Jan. 30, 2008).
In Cornhusker, the insurer provided commercial auto insurance to the insured. In prior years, the insured rarely paid premium installments on time. On all but two occasions, however, the insured paid the premium before cancellation of the policy. On these two occasions, the insurer did not cancel the policy.
After the insured failed to pay the premium installment due on September 2, 2004, the insurer sent via certified mail a letter notifying the insurer that the policy would be cancelled if payment was not received by October 19, 2004. When payment was not received, the policy was cancelled on October 19, 2004. On October 22, 2004, an employee of the insured was involved in an automobile accident in which the other driver was fatally injured. The insured then sent its premium installment, which was received by the insurer on October 28, 2004. The insured had never received the cancellation letter sent by certified mail and the letter was returned to the insurer on November 1, 2004.
The insurer brought an action for declaratory relief, seeking judgment that it had cancelled the policy due to nonpayment of premiums prior to the accident and therefore had no obligation to provide a defense or assume any liability in the underlying wrongful death action. The district court held that the notice sent by certified mail was “mailed” under the Washington statute and that a cancellation letter sent by certified mail provided sufficient notice of cancellation to comply with the statute even if the letter was never actually received by the insured. The district court also held the insurer was not estopped from canceling the policy even though it had accepted late payment on prior occasions.
Applying Washington law, the Ninth Circuit agreed the insurer was not equitably estopped from canceling the policy. The Ninth Circuit, however, certified to the Washington State Supreme Court the issue of whether a cancellation notice sent by certified mail provides sufficient notice of cancellation to comply with the Washington statute even if the letter was never received by the insured.
The Ninth Circuit’s decision does not quote the language of the Washington statute. Under Haw. Rev. Stat. §431:10-226.5, however, it appears that mailing the certified notice would comply with the statute, even if never received by the insured. The statute says nothing about receipt, but merely states, “Cancellation . . . shall not be deemed valid unless evidence of mailing is provided.”
Thanks to our colleague, Robert Thomas, for giving us notice of this case. Robert is a long-time blogger at inversecomdemnation.com.
