The Supreme Court of Washington recently held, in response to a certified question from the Ninth Circuit Court of Appeals, that an insurer failed to comply with a policy cancelation statute by mailing the notice by certified mail instead of by regular mail. In Cornhusker Cas. Ins. Co. v. Kachman, the insurer, Cornhusker, sought a declaration that it properly canceled a commercial auto policy for non-payment of premium by the sending notice by certified mail.
The notice indicated that the policy would be canceled if no payment was made by October 19, 2004. On October 22, 2004, an employee of the insured was involved in a fatal automobile accident, allegedly caused by the employee’s negligence. The insured notified Cornhusker of the occurrence on October 25, 2004, and attempted to make its overdue premium payment, which Cornhusker received on October 28, 2004. The cancelation notice was returned to Cornhusker marked “undelivered” on November 1, 2004. Cornhusker returned the overdue premium payment to the insured and declined coverage for the claim based on the policy cancelation.
Cornhusker argued that the cancelation notice was effective under the statute requiring such notice to be “mailed” to the insured at its last known address. The Washington Supreme Court disagreed, holding that the notice was not “mailed” as the term is used in the statute, because certified mailing creates an additional duty on the part of the insured to either be at home or travel to the post office during business hours to receive the mailing. The Court stated that the statute did not impose such additional duties on policyholders.