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Homeowner
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Certificate of
Insurance
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Cancellation
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Subrogation
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CANCELLED POLICY TRIGGERS COVERAGE DISPUTE
Michelle and Kevin Leville purchased a homeowners policy from Prudential
Property and Casualty Company covering their residence in New Canaan, Connecticut.
In 1999, the Levilles hired Scott Anderson and
Anderson Company, Inc., to add a second story to their home. Anderson presented the Levilles
with a certificate of insurance, issued by the William F. Malloy Agency, Inc.,
and dated November 9, 1999.
The certificate contained
the following language relevant to this case: "This certificate is issued
as a matter of information only and confers no rights upon the certificate
holder. This certificate does not amend, extend or alter the coverage afforded
by the policies below." Also, "[t]he policies of insurance listed
below have been issued to the insured named above for the policy period
indicated. Notwithstanding any requirement, term or condition of any contract
or other document with respect to which this certificate may be issued or may
pertain, the insurance afforded by the policies described herein is subject to
all the terms, exclusions and conditions of such policies."
The certificate addressed
cancellation with the following language: "[s]hould
any of the above described policies be cancelled before the expiration date
thereof, the issuing insurer will endeavor to mail [ten] days written notice to
the certificate holder named to the left, but failure to do so shall impose no
obligation or liability of any kind upon the insurer, its agents or
representatives." Kevin Leville was the
certificate holder named.
On November 10, 1999, a
storm caused extensive water damage to the home because Anderson did not adequately cover the roof.
Prudential paid the Levilles $199,385.37 pursuant to
the homeowners policy, then brought a subrogation
action against Anderson.
According to Prudential's claim, "Anderson
induced the [Levilles] to engage in a contract by
giving a certificate of insurance regarding [insurance] coverage when
[Anderson] knew or should have know that, in fact . . . coverage may well not
have been in effect."
Anderson claimed that Zurich American Insurance Company had
issued it a contract of insurance covering the period from January 1999 through
January 2000. However, Zurich claimed it had
canceled the policy on October 19, 1999, because Anderson failed to pay his premiums. Although
Kevin Leville was the named certificate holder,
neither of the Levilles was notified that Anderson's policy had been
cancelled.
Anderson and Prudential eventually stipulated to $199,385.37
as the judgment amount. Prudential then amended its complaint to assert a claim
against Zurich.
Prudential claimed that Zurich had in effect
induced the Levilles to enter into an agreement with Anderson by allowing its
agents to issue a certificate when the policy was not in effect. Zurich argued it properly
cancelled the policy. The lower court found in favor of Zurich; Prudential appealed.
On appeal, Prudential argued
that Anderson was justified in believing that it
was covered by a policy of insurance simply because Zurich issued the certificate on its behalf.
According to Prudential, the parties had a lengthy history. That history
included several instances of nonpayment of premiums due to dishonored checks
as well as correspondence and representations made by the Malloy Agency that
created a pattern of maintaining coverage despite partial or late payments.
Prudential argued that because Zurich had not
cancelled coverage in the past under these circumstances, Anderson could reasonably believe the
coverage would not be cancelled in the future under similar circumstances. The
Appellate Court of Connecticut disagreed with Prudential: it found that the
undisputed facts supported a finding that the policy was properly cancelled
when Anderson
failed to pay the premium due.
Prudential also argued that
the court should not have found in favor of Zurich
because Zurich never notified the Levilles that the policy had been cancelled, and because Zurich had no mechanism
for informing certificate holders when insurance had been cancelled. Again, the
court disagreed. According to the court, Zurich
owed no duty to the Levilles or to Prudential to
notify them that the policy had been cancelled. Anderson knew that the policy was to be
cancelled if the premium due was not paid. Anderson made partial payments, and some of
its checks bounced because of insufficient funds. It knew it was not on solid
ground. Prudential, standing in the shoes of Anderson, was imputed the same knowledge, and
therefore could not claim lack of knowledge.
Furthermore, the language of
the certificate clearly disclaimed liability in the event notice was not
mailed. According to the court, "Troublesome as it may be that Zurich permits its agents to issue certificates when it
knows prior to the certificate's being issued that coverage was cancelled and
lacks an identifiable procedure for notifying certificate holders that coverage
has been cancelled, the allegations in the plaintiff's complaint do not state a
cause of action against Zurich."
The judgment of the lower
court in favor of Zurich
was affirmed.
Prudential
Property and Casualty Insurance Company vs. Anderson-No. 27470-Appellate Court of Connecticut-May 29, 2007-922
<I>Atlantic Reporter<I> 2d 236