Opinion ID: 2976755
Heading Depth: 3
Heading Rank: 2

Heading: Policy Cancellation

Text: Likewise, the contract permitted Medical Savings’s later cancellation of the LoCocos’ policy for failure to pay premiums. Because it is undisputed that the LoCocos did not pay their January 2003 premium and because Medical Savings had no legal duty to notify them prior to cancellation for non-payment, the district court properly granted summary judgment to Medical Savings on this claim as well. Under the terms of the LoCocos’ policy, their coverage was to terminate automatically if their premiums remained unpaid for more than 31 days: GRACE PERIOD: The primary insured has 31 days from each premium due date (except the first) in which to pay the premium then due. The primary insured’s coverage under the policy will stay in force during this grace period. If premiums are not paid within this grace period, coverage under this policy will then be terminated . . . In any case, the primary insured must pay us all unpaid premiums, including [the] premium for the grace period. ... TERMINATION OF SERVICE For All Covered Persons: A covered person’s insurance will automatically stop on the earlier of: (A) the date the policy is terminated; (B) the end of the grace period after a primary insured fails to pay any required premium when due. Plaintiff does not deny that her January 2003 premium payment failed for insufficient funds, that this premium remained unpaid through the relevant grace period, or that the terms of the policy permitted automatic termination for such non-payment. She contends, however, that Medical Savings had a duty of “fair dealing” that independently obligated it to notify the LoCocos before terminating the policy. According to plaintiff, the LoCocos never received any form of pretermination notification from Medical Savings. Plaintiff’s argument is without merit. Under Ohio law, Medical Savings was not required to notify the LoCocos before canceling their policy. Although automatic forfeiture provisions in insurance contracts are not favored, they are generally permitted.2 See Ohio Farmers’ Ins. Co. v. Wilson, 71 N.E. 715, 716 (Ohio 1904); Murphy v. N. Am. Equitable Life Assurance Co., 1987 WL 19482, at  (Ohio Ct. App. Oct. 30, 1987); Shank v. United Life & Accident Ins. Co., 1981 WL 5126, at  (Ohio Ct. App. June 3, 1981); Miraldi v. Life Ins. Co. of Va., 356 N.E.2d 1234, 1235-36 (Ohio Ct. App. 1971). “In the absence of a statute, the cancellation of an insurance contract is governed by the contract.” Palte v. United Ohio Ins. Co., 2007 WL 1731603, at  (Ohio Ct. App. June 18, 2007). Following from this principle, “[a]utomatic forfeiture provisions in . . . insurance policies are enforceable if the language is clear and unambiguous.” Murphy, 1987 WL 19482, at . 2 There is an explicit statutory exception to this common law rule for the cancellation of automobile insurance. Pursuant to Ohio Rev. Code §3937.32, the cancellation of automobile insurance is effective only upon written notification to the insured. No. 07-3973 LoCoco v. Medical Savings Ins. Co. Page 8 Thus, where a policy provides unambiguously that it will automatically terminate upon the occurrence of a condition, such as the non-payment of premiums, the insurer need not notify the insured before canceling coverage. Id.; Shank, 1981 WL 5126, at -. Ohio courts do not appear to have addressed whether this common law rule applies to automatic forfeiture provisions in health insurance contracts. Nonetheless, the logic of the above cases, which primarily construed language in life insurance policies, counsels in favor of its applicability here. Because these cases based their holdings on general principles of the freedom of contract, there is no indication that Ohio courts would treat health insurance policies differently. Here, the forfeiture clause in Mr. LoCoco’s policy clearly and unambiguously provides for automatic termination upon non-payment, and is thus enforceable. The policy first states that if “premiums are not paid within [the] grace period, coverage under the policy will then be terminated.” While this language is arguably ambiguous, the following provision removes any doubt as to whether the policy provides for automatic forfeiture. Under the heading “Termination of Services,” the policy goes on to state that insurance coverage “will automatically stop” at “the end of the grace period after [the insured] fails to pay any required premium when due” (emphasis added). Because Medical Savings had no duty to inform the LoCocos of its intent to cancel their policy for non-payment, it is irrelevant whether any such notice was actually given. Thus, any factual dispute as to whether Medical Savings actually sent the LoCocos a notification letter, as Medical Savings claims but the LoCocos deny, is not sufficient to preclude summary judgment.