The Texas Supreme Court has held that a premium finance company’s failure to strictly comply with a notice of intent to cancel provision in the Texas Premium Finance Act rendered invalid a notice of intent to cancel. BankDirect Cap. Fin. v. Plasma Fab., LLC,519 S.W.3d 76 (Tex. 2017).
The insured financed premium payments for a policy through a premium finance agreement, which allowed the premium finance company to cancel the policy and to collect unearned premiums in the event of default by the insured after proper notice has been mailed as required under section 651.161 of the Texas Premium Finance Act. This section requires the mailing of notice of intent to cancel that states the time by which the default must be cured no earlier than the 10th day after the notice is mailed. The premium finance company sent a notice of intent to cancel the policy effective December 4. The notice was dated November 24, ten days before the cancellation date, but was not mailed until November 25, nine days before the cancellation date. The insured did not pay the past due premium by December 4, and the premium finance company sent a notice of cancellation that same day. After suffering a loss four days later, the insured attempted to reinstate the policy and to seek coverage. The insurer refused, citing the fact that the policy had been cancelled. The insured sued the insurer and premium finance company. The trial court granted summary judgment to the insurer and the premium finance company. The court of appeals affirmed the judgment in the insurer’s favor but reversed the judgment in favor of the premium finance company.
The sole issue on appeal was whether the premium finance company’s failure to strictly comply with the ten-day notice provision could be excused under the “substantial compliance” doctrine, which excuses a party’s failure to comply strictly with statutory requirements. The Texas Supreme Court held that it could not be excused, under the reasoning that, unlike other statutes, section 651.161 did not contain “substantial compliance” language. It also reasoned that deadlines such as those found in section 651.161 cannot be “substantially complied” with, and that the party either satisfies the deadline or it does not.