The Supreme Court of Texas adopted a strict interpretation of the Texas Insurance Code and held a premium finance company that failed to provide an insured the statutorily-required ten-day notice before requesting cancellation of an insurance policy was not entitled to summary judgment for a fire loss that occurred days after the policy was cancelled. BankDirect Capital Finance, LLC v. Plasma Fab, LLC, 2017 WL 1968024 (Tex. May 12, 2017).

The insured obtained a CGL policy and financed the policy through a premium finance company. The premium finance agreement gave the company authority to cancel the policy if the insured defaulted on its monthly premium payments. The premium finance company gave the insured nine-days’ notice of cancellation. Under the Texas Insurance Code, a premium finance company is required to provide the insured ten-days’ notice of intent to cancel the policy in order to allow an insured the opportunity to cure any deficiency.

After the policy was cancelled, a loss occurred and the insurer denied the claim due to the cancellation. In the insured’s subsequent suit against the premium finance company, the trial court granted summary judgment in favor of the company, which the insured appealed. Ultimately, the Supreme Court rejected the premium finance company’s argument that it had “substantially complied” with the ten-day notice requirement under the Premium Finance Act. The Court recognized that while the premium finance company’s approach was rational, it “[found] no home in the statute.”