June 15, 2019

Colorado Court of Appeals: Insurer’s Notice of Cancellation Must Be Accurate or It Is Ineffective

The Colorado Court of Appeals issued its opinion in Brown v. American Standard Ins. Co. of Wisconsin on Thursday, January 31, 2019.

Automobile Insurance Coverage Cancellation Requirements—Accuracy of Reason for Cancellation.

In March 2014, Brown purchased motorcycle insurance from American Standard Insurance Co. (American Standard). In August 2014 American Standard mailed Brown a notice that it was cancelling his policy for lack of a driver’s license. In September 2014, Brown was involved in a motorcycle accident. He made a claim against the American Standard uninsured/underinsured motorist coverage. American Standard denied coverage for the accident, and Brown sued. American Standard moved for summary judgment. Brown filed a response to the motion supported by an affidavit attesting that he had a valid Colorado driver’s license both at the time of cancellation and on the date of the accident. The trial court concluded there were no issues of material fact and granted the motion.

Brown appealed the summary judgment. Colorado law requires insurers to strictly comply with statutory and contractual requirements when canceling an automobile policy. A cancellation notice, other than one for nonpayment, must include either a reason for cancellation or a statement that a reason will be provided upon request. It is implicit in these requirements that the stated reason for cancellation be factually accurate. The court of appeals held, as a matter of first impression, that when an insurer provides a reason for cancellation the reason given must be accurate or the notice of cancellation is ineffective. Here, there is a disputed issue of material fact as to whether Brown had a valid driver’s license at the time of cancellation, and the trial court erred in treating the cancellation notice as dispositive on summary judgment.

American Standard contended that its policy cancellation was effective regardless of whether the cancellation reason was inaccurate because Brown didn’t contest the cancellation until well after the accident and not before filing suit. The fact that Brown did not challenge the cancellation before bringing suit on the policy did not constitute a waiver of his right to sue under the policy or a ratification of the allegedly improper cancellation.

The summary judgment was reversed and the case was remanded.

Summary provided courtesy of Colorado Lawyer.

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