Unsigned Cancellation Effective When Mailed

Hearing the matter by consent of the parties under 28 USC§636(c)(1), the Richmond U.S. District Court magistrate judge grants summary judgment for a life insurer that mailed unsigned notices according to the policy terms cancelling a “key man” insurance policy for nonpayment of premium.

Insured business maintained a “key man” life insurance policy on an employee after he resigned in October 2007, and continued paying premiums through April 2008.  Insurer offered to continue the policy through December 2009 using its cash value to pay premiums.  The former employee died March 24, 2010.  The policy terms provided a grace period for the later of 61 days after the required premium due date or “until 31 days after notice of the amount due has been mailed.”  Insurer mailed three automated notices to insured between December 30, 2009, and March 1, 2010: two stated the policy would lapse for nonpayment of premium on February 25, 2010; the last stated the policy had lapsed.  Insured denied receiving the notices, although its agent did receive them. Insured’s president was informed the policy had lapsed when he inquired about making a claim.  Insured did not file a claim.  Insured’s state court action was removed on diversity grounds.

The magistrate judge held the policy terms made the mailing of the notice sufficient to effect cancellation regardless of receipt.  Insured’s failure to submit a claim is not a basis for granting summary judgment under The Aetna Cas. And Sur. Co. v. Harris, 239 S.E.2d 84 (Va. 1977): A jury could find insurer’s communication to insured’s president effected a waiver of the claim requirements as a denial of liability or refusal to process the claim.  Virginia and 4^th Circuit precedent recognize the binding effect of policy terms providing that mere mailing is sufficient, including Brant v. Parsio, 27 Va. Cir. Ct. 339 (1999), decided after the 1991 enactment of the statutory notice requirement in Va. Code § 38.2-232.  Russell v. Nationwide Ins. Co., No. 4:07cv130 (E.D.Va. Nov. 17, 2008), aff’d 401 Fed. App’x 763 (4^th Cir. 2010), and Villwock v. Ins. Co. of N. Am./Cigna, 468 S.E.2d 130 (Va. App. 1996), are distinguishable as involving policies that lacked policy language making mailing sufficient.  When the parties agree that mailing a notice is sufficient, proof of receipt is not required.  Under State Farm Mut. Auto. Ins. Co. v. Pederson, 41 S.E.2d 64 (Va. 1947), the unsigned notices were sufficient to give notice of cancellation despite the policy language that notice “takes effect when signed.”  The lack of physical signature is a technical mishap that does not render the notice ineffective.  Nothing in the policy required the insurance agent to communicate notice the policy lapsed; insured’s agency claims fail as a matter of law.

Auxo Medical LLC v. Ohio Nat’l Life Assurance Corp. (Dohnal) No. 3:11cv259, Nov. 15, 2011; USDC at Richmond, Va. VLW 012-3-631, 19 pp.