Insurance Coverage and Bad Faith

Third DCA Holds that Insurer and Insured Can Agree to Alternative Means of Policy Cancellation

Third DCA Holds that Insurer and Insured Can Agree to Alternative Means of Policy Cancellation

On April 10, 2024, Florida’s Third District Court of Appeal held that an insurer and its insured can mutually agree on an alternative method of canceling an insurance policy, notwithstanding policy language providing otherwise.

In Ascendant Commercial Ins., Inc. v. Veres, 2024 WL 1543575 (Fla. 3d DCA April 10, 2024), an insured sought to cancel his insurance policy with  Ascendant Commercial Insurance. The policy provided that, “The first Named Insured shown in the Declarations may cancel this policy by mailing or delivering to us advance written notice of cancellation,” meaning, cancellation won’t occur until the insurer receives the written notice. Nevertheless, on June 30, 2017, the insured filled out and signed a Cancellation Request, which requested a cancellation date of June 29, 2017. The insurer, Ascendant, received this cancellation request on July 5, 2017.

On July 4, 2017, the day before Ascendant received the cancellation request, the insured was involved in a car accident with the plaintiffs. The plaintiffs subsequently sent Ascendant a request for insurance information.  This request prompted Ascendant on July 13, 2017 to investigate coverage. The next day–July 14–Ascendant mailed the insured a notice of cancellation, stating that the cancellation effective date was June 30, 2017. Ascendant also refunded the unearned policy premium.

When plaintiffs sued the insured, Ascendant denied a defense and coverage stemming based on the cancellation. The insured entered into an agreement with plaintiff for binding arbitration and assigned his rights to indemnification from Ascendant to the plaintiffs. A final judgment on the arbitration award was entered against the insured.

The plaintiffs then sued Ascendant for breach of contract, claiming that Ascendant breached its duties by refusing to defend or indemnify the insured against plaintiffs’ claim while the policy was in full force and effect. The plaintiffs moved for summary judgment on the issue, arguing that because Ascendant’s policy contained the “advance written notice” clause, the policy was effective until July 5, the date Ascendant received cancellation. The trial court agreed, and granted the plaintiffs’ motion for summary judgment. Ascendant appealed.

On appeal, the Third District Court of Appeal reversed the trial court ruling. The court held that when a policy provision states that an insured may cancel by providing advance written notice of cancellation, the insurer also has the option to “honor the insured’s requested date of cancellation.” In so concluding, the court explained that since the policy language was for the benefit of the insurer, the insurer was empowered to choose to stand by it, or honor the insured’s chosen cancellation date. 

In sum, under this case, when an insurance policy prescribes a certain method of cancellation, the insurer and insured can nevertheless agree to an alternative means of cancellation.