Godoy v. Farmers Insurance Group

Citations: 759 P.2d 1173; 90 Utah Adv. Rep. 28; 1988 Utah App. LEXIS 132; 1988 WL 85815Docket: No. 870390-CA

Court: Court of Appeals of Utah; August 12, 1988; Utah; State Appellate Court

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Godoy appealed the grant of summary judgment in favor of Mid-Century Insurance Company regarding an automobile liability insurance policy. Godoy had entered into the insurance contract effective from November 7, 1983, with premium payments due monthly. He made an initial overpayment to cover potential nonpayment but failed to submit the premium for April 1984, which was covered by his initial deposit. Mid-Century allegedly sent a cancellation notice stating the policy would terminate on May 15, 1984, if payment was not received. Godoy’s wife sent a money order for the premium, but Mid-Century claimed it never received it.

After Godoy was involved in an accident on May 17, 1984, he applied for benefits, which Mid-Century initially paid for three months. However, on September 18, 1984, Mid-Century realized the policy had expired due to nonpayment and ceased payments, ultimately denying Godoy’s claim on October 18, 1984, and demanding repayment for previously disbursed funds. Godoy filed a lawsuit alleging breach of contract and bad faith denial of his claim.

The trial court granted Mid-Century's summary judgment motion, concluding that the policy had expired on May 15, 1984. Godoy argued on appeal that material factual issues existed regarding his coverage at the accident time, specifically contending that he should have received notice of cancellation. Mid-Century contended that the lack of payment constituted an automatic termination of the policy without notice, treating the late payment as a renewal payment. The court needed to determine if the undisputed facts established that Godoy was uninsured at the time of the accident, referencing prior legal distinctions concerning premium and renewal payments.

To cancel an insurance policy due to nonpayment of premium before the policy's term ends, an insurer must provide at least ten days' notice, along with the reason for cancellation, as per Utah Code Ann. 31-41-16(1). This requirement does not apply to nonrenewal of policies that have automatically expired at the end of their term (Utah Code Ann. 31-41-16(3)). The policy in question, effective from November 7, 1983, to May 15, 1984, was invalid under the law at that time, which mandated that policies have a minimum term of one year. Consequently, the policy was treated as having an expiration date of November 7, 1984, meaning it could not automatically terminate for nonpayment of a premium installment due on May 15.

Mid-Century, the insurer, argued it mailed a cancellation notice to the insured, Godoy, indicating cancellation for nonpayment would occur if the premium was not received by May 15, 1984. However, the exact date of mailing was not established, and reliance on general practices of mailing notices was deemed insufficient. The vague reference to “the first few days” of May raised doubts about whether the notice was sent in compliance with statutory requirements, as notices sent on May 6, 7, or 8 would not have allowed for proper cancellation by May 15.

Due to the lack of clarity regarding the mailing date of the cancellation notice, there remains a genuine issue of material fact, necessitating the reversal of the summary judgment and remanding the case for trial. The discussion also references the need for accurate record-keeping in trial proceedings, emphasizing its importance for appellate review. The legal framework involved is based on the statutory provisions effective prior to the recodification of the insurance code in 1985.