Court Opinion

ID: 4694580
Source: CourtListenerOpinion
Date Created: 2021-06-11 09:08:45.126966+00
Date Added: 2024-06-11T08:05:30.313192
License: Public Domain

Michigan Supreme Court
                                                                                         Lansing, Michigan
                                                             Chief Justice:              Justices:

Syllabus                                                      Bridget M. McCormack       Brian K. Zahra
                                                                                         David F. Viviano
                                                                                         Richard H. Bernstein
                                                                                         Elizabeth T. Clement
                                                                                         Megan K. Cavanagh
                                                                                         Elizabeth M. Welch

This syllabus constitutes no part of the opinion of the Court but has been               Reporter of Decisions:
prepared by the Reporter of Decisions for the convenience of the reader.                 Kathryn L. Loomis

                        YANG v EVEREST NATIONAL INSURANCE COMPANY

             Docket No. 160578. Argued on application for leave to appeal March 3, 2021. Decided
      June 10, 2021.

              Wesley Zoo Yang and his wife, Viengkham Moualor, brought an action in the Wayne
      Circuit Court against Everest National Insurance Company (Everest) and Motorist Mutual
      Insurance Company (Motorist), seeking to recover personal protection insurance (PIP) benefits
      under a no-fault insurance policy issued by Everest to plaintiffs. Everest issued Yang a six-month
      no-fault insurance policy, the term of which ran from September 26, 2017, through March 26,
      2018. The policy required Yang to pay a monthly premium and provided that the policy could be
      canceled during the policy period by Everest sending at least 10 days’ notice by first-class mail if
      the cancellation was for nonpayment of the premium. On October 9, 2017, Everest mailed Yang
      a bill for the second monthly payment, stating that if Yang failed to pay the amount due by
      October 26, 2017, the policy would be canceled, effective October 27, 2017; the policy provided
      that the cancellation notice did not apply if Yang paid the premium on time. Subsequently, Yang
      did not pay the premium on time, and Everest sent Yang an offer to reinstate, explaining that the
      policy was canceled as of October 27, 2017, for nonpayment and that Yang could reinstate the
      policy with a lapse in coverage. On November 15, 2017, plaintiffs were struck by a car when they
      were walking across a street; Motorist insured the driver of the vehicle that struck plaintiffs. Two
      days later, on November 17, 2017, Yang sent the monthly premium payment to Everest; the policy
      was reinstated effective that day, and the notice informed Yang that there had been a lapse in
      coverage from October 27, 2017, through November 17, 2017. Plaintiffs filed this action after
      Everest refused plaintiffs’ request for PIP benefits under the policy. Everest moved for summary
      disposition, arguing that plaintiffs were not entitled to benefits under the policy because it had
      been canceled and was not in effect at the time of the accident and that the policy’s cancellation
      provision was not inconsistent with MCL 500.3020(1)(b); Motorist disagreed with Everest’s
      motion and argued that it was entitled to summary disposition under MCR 2.116(I)(2) because it
      was not the insurer responsible for the payment of PIP benefits. The court, Susan L. Hubbard, J.,
      denied Everest’s motion and granted summary disposition in favor of Motorist, reasoning that
      Everest’s notice of cancellation was not valid because it was sent before the nonpayment occurred
      and that Everest was therefore responsible for the payment of PIP benefits; the court dismissed
      Motorist from the action. Everest appealed. In a published opinion, the Court of Appeals,
      SHAPIRO, P.J., and GLEICHER, J. (SWARTZLE, J., concurring), affirmed the trial court’s order,
      concluding that the cancellation notice was not valid under MCL 500.3020(1)(b) because Everest
sent the notice before the premium was due and that the notice did not satisfy the terms of
plaintiffs’ no-fault policy itself. 329 Mich App 461 (2019). The Supreme Court ordered and heard
oral argument on whether to grant Everest’s application for leave to appeal or take other action.
505 Mich 1068 (2020).

       In a unanimous opinion by Justice BERNSTEIN, the Supreme Court, in lieu of granting leave
to appeal, held:

        Under MCL 500.3020(1)(b), a policy of casualty insurance, including all classes of motor
vehicle coverage, may not be delivered in Michigan by an insurer for which a premium or advance
assessment is charged unless the policy provides, in part, that the policy may be canceled at any
time by the insurer mailing to the insured at the insured’s address last known to the insurer or an
authorized agent of the insurer, with postage fully prepaid, a not less than 10 days’ written notice
of cancellation with or without tender of the excess or paid premium or assessment above the pro
rata premium for the expired time. The phrase “notice of cancellation” has a peculiar and
appropriate meaning in the law as reflected in the Supreme Court’s decisions in American Fidelity
Co v R L Ginsburg Sons’ Co, 187 Mich 264 (1915), and Beaumont v Commercial Cas Ins Co, 245
Mich 104 (1928). Those decisions held that a notice of cancellation must be peremptory, explicit,
and unconditional to be effective. Because there is no evidence that the Legislature intended to
abrogate the common-law meaning of this phrase when it enacted MCL 500.3020(1)(b), the
common-law definition of the phrase applies, and a notice of cancellation must be peremptory,
explicit, and unconditional to be effective. An insurance company’s notice of cancellation for
nonpayment of insurance premiums before any nonpayment actually occurs is not peremptory,
explicit, and unconditional, and therefore it is not an effective cancellation for purposes of the
statutory provision. In this case, Everest’s October 9, 2017 letter to plaintiffs was ineffective for
purposes of MCL 500.3020(1)(b) because it provided that cancellation was conditioned on Yang’s
failure to pay his insurance premiums. In other words, because the notice was not peremptory,
explicit, and unconditional, it was not a valid cancellation notice. Accordingly, Yang’s insurance
policy with Everest was still in effect at the time of the accident.

       Affirmed.
                                                                       Michigan Supreme Court
                                                                             Lansing, Michigan
                                              Chief Justice:                 Justices:

OPINION                                        Bridget M. McCormack          Brian K. Zahra
                                                                             David F. Viviano
                                                                             Richard H. Bernstein
                                                                             Elizabeth T. Clement
                                                                             Megan K. Cavanagh
                                                                             Elizabeth M. Welch

                                                               FILED June 10, 2021

                              STATE OF MICHIGAN

                                     SUPREME COURT

 WESLEY ZOO YANG and VIENGKHAM
 MOUALOR,

                 Plaintiffs-Appellees,

 v                                                             No. 160578

 EVEREST NATIONAL INSURANCE
 COMPANY,

                 Defendant-Appellant,

 and
 MOTORIST MUTUAL INSURANCE
 COMPANY,

                 Defendant-Appellee.

 BEFORE THE ENTIRE BENCH

 BERNSTEIN, J.
       This case concerns whether MCL 500.3020(1)(b) of the Insurance Code, MCL

 500.100 et seq., allows an insurance company to cancel an insurance policy when the
company mails its customer a letter purporting to be a notice of cancellation for

nonpayment of insurance premiums before any nonpayment actually occurred. We hold

that MCL 500.3020(1)(b) does not allow cancellation on these grounds. Accordingly, we

affirm the judgment of the Court of Appeals.

                             I. FACTUAL BACKGROUND

       Plaintiffs, Wesley Zoo Yang and Viengkham Moualor, are a married couple who

purchased a six-month no-fault insurance policy from defendant Everest National

Insurance Company (Everest). Yang was the primary insured party on the policy and was

responsible for making the monthly premium payments. The policy went into effect on

September 26, 2017, when he made the first premium payment. On October 9, 2017,

approximately two weeks after Yang made the first payment, Everest mailed him a letter

titled, “PREMIUM BILLING AND CANCELLATION NOTICE FOR NON-

PAYMENT.” The letter informed Yang that his next insurance premium payment was due

October 26, 2017, and that Everest would cancel the policy if he failed to pay by the due

date. Everest maintains that this letter was sent in accordance with the termination

provisions in the no-fault insurance policy, which stated:

               Cancellation - This Policy may be canceled during the policy period
       as follows:

                                           * * *

              2. We may cancel by mailing you at the address last known by us or
       our agent:

            a. at least 10 days notice by first class mail, if cancellation is for non-
       payment of premium[.] [Emphasis omitted.]

                                              2
At the time the cancellation notice was mailed, Yang had made all required payments.

However, Yang failed to make the subsequent payment due on October 26, 2017, and

Everest terminated the policy for nonpayment of the premium on October 27, 2017.

       On October 30, 2017, Everest sent Yang a letter informing him that Everest would

reinstate the policy with a lapse in coverage if he made a premium payment by

November 27, 2017. At that time, Yang did not take any steps to reinstate the policy. On

November 15, 2017, plaintiffs were struck by a car while walking down the street. Two

days later, Yang made a payment to Everest to reinstate the policy. Plaintiffs then filed a

claim for personal protection insurance (PIP) benefits through Everest. Everest denied the

claim, explaining that it was not responsible for PIP benefits because Yang did not have a

valid no-fault insurance policy when the accident occurred.

       Following the denial of the claim for PIP benefits, plaintiffs sued Everest. 1 During

litigation, Everest moved for summary disposition under MCR 2.116(C)(10), arguing that

the policy was lawfully canceled before plaintiffs were injured and that no genuine issue

of material fact existed to show that Everest was responsible for servicing the claim for PIP

benefits. In response, plaintiffs argued that a genuine issue of material fact did exist as to

whether Yang’s payment to Everest on November 17, 2017, reinstated the policy. After

hearing oral argument, the trial court denied Everest’s motion, concluding that the

1
   Defendant Motorist Mutual Insurance Company (Motorist) was also named as a
defendant in the trial court because the unnamed driver of the car that struck plaintiffs had
a no-fault insurance policy through Motorist. All claims against Motorist were disposed
of via summary disposition in the trial court. Although Motorist continues to participate
in this appeal, the central issue in this case solely pertains to the cancellation notice Everest
sent to Yang.

                                               3
cancellation notice had not complied with the terms of the no-fault insurance policy and

therefore the policy had never actually been canceled, rendering Everest first in priority for

payment of PIP benefits to plaintiffs.

       Everest appealed in the Court of Appeals, which affirmed in a split published

opinion. Yang v Everest Nat’l Ins Co, 329 Mich App 461; 942 NW2d 653 (2019). The

Court of Appeals majority ruled in plaintiffs’ favor, holding that the cancellation notice

Everest mailed to Yang did not satisfy MCL 500.3020(1)(b) and, moreover, that it did not

satisfy the terms of plaintiffs’ no-fault policy. Id. at 470-472. The majority explained that

for a cancellation to be valid under MCL 500.3020(1)(b), “the event triggering the right to

cancel must have taken place first.” Id. at 470. Because Yang had not yet failed to pay his

insurance premium when Everest mailed the cancellation notice for nonpayment of the

premium, the majority ruled that the notice was invalid and did not satisfy MCL

500.3020(1)(b). Id. The concurrence provided a different rationale, concluding that the

Court of Appeals could rule in plaintiffs’ favor without reaching the broader question of

whether the cancellation notice failed to satisfy MCL 500.3020(1)(b). Id. at 472-473

(SWARTZLE, J., concurring). The concurrence explained that a cancellation notice must be

unconditional to be effective. Id., citing American Fidelity Co v R L Ginsburg Sons’ Co,

187 Mich 264, 276; 153 NW 709 (1915). Thus, the concurrence reasoned, the cancellation

notice Everest sent Yang was not an effective cancellation of the policy because it was

conditioned on Yang’s failure to pay his insurance premiums. Yang, 329 Mich App at 472

(SWARTZLE, J., concurring).

                                              4
       Everest timely sought leave to appeal in this Court. On May 20, 2020, we directed

the Clerk to schedule oral argument on the application. Yang v Everest Nat’l Ins Co, 505

Mich 1068 (2020).

                             II. STANDARD OF REVIEW

       The trial court denied Everest’s motion for summary disposition, which was brought

under MCR 2.116(C)(10). We review de novo a trial court’s decision on a motion for

summary disposition under MCR 2.116(C)(10). Honigman Miller Schwartz & Cohn LLP

v Detroit, 505 Mich 284, 294; 952 NW2d 358 (2020). When reviewing a motion brought

under MCR 2.116(C)(10), “a trial court considers affidavits, pleadings, depositions,

admissions, and documentary evidence filed in the action or submitted by the parties . . . in

the light most favorable to the party opposing the motion.” Mich Ass’n of Home Builders

v Troy, 504 Mich 204, 211-212; 934 NW2d 713 (2019) (quotation marks and citations

omitted). Summary disposition is appropriate when no genuine issue of material fact

exists. El-Khalil v Oakwood Healthcare, Inc, 504 Mich 152, 160; 934 NW2d 665 (2019).

“A genuine issue of material fact exists when the record leaves open an issue upon which

reasonable minds might differ.” Id. (quotation marks and citation omitted).

                                     III. ANALYSIS

       Everest argues that MCL 500.3020(1)(b) did not preclude it from canceling Yang’s

policy after mailing a letter—which it characterizes as a notice of cancellation for

nonpayment of premium—before he failed to pay his insurance premiums. We disagree

and hold that Everest’s letter was not a valid cancellation notice because it did not satisfy

MCL 500.3020(1)(b).

                                             5
       When interpreting an insurance policy, “ ‘[t]he policy and the statutes relating

thereto must be read and construed together as though the statutes were a part of the

contract,’ ” because the parties are presumed to have contracted with the intention of

executing a policy that complies with the related statutes. Rohlman v Hawkeye-Security

Ins Co, 442 Mich 520, 525 n 3; 502 NW2d 310 (1993), quoting 12A Couch, Insurance, 2d

(rev ed), § 45:694, pp 331-332. See also Bazzi v Sentinel Ins Co, 502 Mich 390, 399; 919

NW2d 20 (2018) (“When a provision in an insurance policy is mandated by a statute, the

policy and the statute must be construed together as though the statute were part of the

policy, and the rights and limitations of the coverage are governed by that statute.”)

(quotation marks and citation omitted). Therefore, the pertinent question here is what

constitutes a valid cancellation notice under MCL 500.3020(1), which states:

              A policy of casualty insurance . . . , including all classes of motor
       vehicle coverage, shall not be issued or delivered in this state by an
       insurer . . . for which a premium or advance assessment is charged, unless
       the policy contains the following provisions:

                                           * * *

              (b) . . . [T]hat the policy may be canceled at any time by the insurer
       by mailing to the insured at the insured’s address last known to the insurer or
       an authorized agent of the insurer, with postage fully prepaid, a not less than
       10 days’ written notice of cancellation with or without tender of the excess
       of paid premium or assessment above the pro rata premium for the expired
       time. [Emphasis added.]

       Our analysis of this issue is governed by the general principles of statutory

interpretation. When interpreting a statute, courts must “ascertain the legislative intent that

may reasonably be inferred from the words expressed in the statute.” Andrie Inc v Dep’t

of Treasury, 496 Mich 161, 167; 853 NW2d 310 (2014) (quotation marks and citation

                                              6
omitted). Undefined words are generally “presumed to have their ordinary meaning,” but

some words and phrases have a “peculiar and appropriate” meaning within the common

law. Clam Lake Twp v Dep’t of Licensing & Regulatory Affairs, 500 Mich 362, 373; 902

NW2d 293 (2017). If a word or phrase has acquired a peculiar or appropriate meaning in

the law, it must be “construed and understood according to such peculiar and appropriate

meaning.” MCL 8.3a.

       When a word “ ‘has been subject to judicial interpretation, the legislature is

presumed to have used particular words in the sense in which they have been interpreted.’ ”

McCormick v Carrier, 487 Mich 180, 192; 795 NW2d 517 (2010) (citation omitted). As

we have previously explained:

               When the Legislature, without indicating an intent to abrogate the
       common law, borrows terms of art in which are accumulated the legal
       tradition and meaning of centuries of practice, it presumably knows and
       adopts the cluster of ideas that were attached to each borrowed word in the
       body of learning from which it was taken and the meaning its use will convey
       to the judicial mind unless otherwise instructed. [Ray v Swager, 501 Mich
       52, 69 n 34; 903 NW2d 366 (2017) (quotation marks and citations omitted).]

       The outcome of this case depends on the meaning of the phrase “notice of

cancellation,” which is not defined by the relevant statute. 2        The phrase “notice of

cancellation” has acquired a peculiar and appropriate meaning in the law, as reflected in

two early rulings of this Court: American Fidelity Co, 187 Mich at 264, and Beaumont v

Commercial Cas Ins Co, 245 Mich 104, 107; 222 NW 100 (1928).

2
  We have recognized that the term “cancellation” has itself acquired a peculiar and
appropriate meaning in this context. See Titan Ins Co v Hyten, 491 Mich 547, 567; 817
NW2d 562 (2012) (“In contract law, ‘cancellation’ has acquired a peculiar and appropriate
meaning in the law.”). This case deals with a closely related issue, i.e., the legal sufficiency
of a notice of cancellation.

                                               7
       In American Fidelity Co, 187 Mich at 266-267, the plaintiff insurance company sent

a cancellation notice to the defendant insured stating that the plaintiff would cancel the

defendant’s liability insurance policy if the defendant did not agree to an increased

premium. When the defendant refused to agree to the rate increase, the plaintiff canceled

the policy. Id. at 267. The trial court ruled that the cancellation notice was valid. Id.

at 269. This Court disagreed, holding that a cancellation notice must “be according to the

terms of the policy, and must also have been peremptory, explicit, and unconditional” in

order to be valid. Id. at 276. Because cancellation of the liability policy was conditioned

on the defendant’s refusal to accept the increased premium, this Court concluded that the

cancellation notice was invalid. Id. at 276-277.

       In Beaumont, 245 Mich at 105, the plaintiff held a property insurance policy with

the defendant insurance company. The plaintiff filed a large number of insurance claims

with the defendant, and in an effort to avoid servicing the claims, the defendant sent the

plaintiff a letter asking the plaintiff to “ ‘kindly endeavor to procure this insurance with

some other company by November 1st, at which time we would like to be relieved.’ ” Id.

at 105-106. The defendant argued that the letter constituted a valid cancellation notice. Id.

at 106. On appeal, this Court reiterated the principle that “[n]otice of cancellation of an

insurance policy must be according to the provisions of the policy and be peremptory,

explicit, and unconditional.” Id. at 106-107, citing American Fidelity Co, 187 Mich 264.

This Court also stated that a cancellation notice “is not sufficient if it is equivocal or merely

states a desire or intention to cancel.” Beaumont, 245 Mich at 107. Taking those principles

into account, this Court concluded that the letter did not constitute a valid cancellation of

the plaintiff’s property insurance policy because the letter never unequivocally stated that

                                               8
the policy was canceled and instead merely informed the plaintiff that the defendant desired

the plaintiff to find a different insurance company. Id.

       MCL 500.3020(1)(b) was enacted well after our decisions in American Fidelity Co

and Beaumont, and the peculiar and appropriate meaning of the phrase “notice of

cancellation” has not been interpreted differently in the insurance context since American

Fidelity Co was decided in 1915. See, e.g., Blekkenk v Allstate Ins Co, 152 Mich App 65,

72; 393 NW2d 883 (1986) (reiterating this Court’s holding in Beaumont, 245 Mich at 106-

107, that a notice of cancellation must be “ ‘peremptory, explicit, and unconditional’ ”). 3

Moreover, there is no evidence that the Legislature intended to abrogate the common-law

meaning of the phrase when it enacted MCL 500.3020(1)(b). “The common law remains

in force unless it is modified.” People v Moreno, 491 Mich 38, 46; 814 NW2d 624 (2012).

The Legislature’s abrogation of the common law “is not lightly presumed,” and we have

required the Legislature to speak in “no uncertain terms” when it exercises its authority to

modify the common law. Id. (quotation marks and citations omitted). Indeed, “[w]e must

presume that the Legislature knows of the existence of the common law when it acts.” Id.

(quotation marks, citation, and brackets omitted). We therefore presume that when the

3
  We note that the phrase “notice of cancellation” has been similarly interpreted outside of
Michigan. See Keys Engineering Co v Boston Ins Co, 192 F Supp 574, 577 (SD Fla, 1961)
(“In order to be effective, a notice of cancellation of a policy of insurance must be
unequivocal and absolute.”); Transamerica Ins Co v Bank of Mantee, 241 So 2d 822, 825
(Miss, 1970) (“Cancellation of an insurance policy must be definite, clear and
unequivocal.”); Stilen v Cavalier Ins Corp, 194 Neb 824, 828; 236 NW2d 178 (1975) (“[A]
notice of cancellation of insurance for nonpayment of premium or a premium installment
must be peremptorily explicit . . . .”); McQuarrie v Waseca Mut Ins Co, 337 NW2d 685,
687 (Minn, 1983) (“In order to constitute notice of cancellation, the notice must be explicit,
unconditional, and use unequivocal language.”).

                                              9
Legislature enacted MCL 500.3020(1)(b), it did so knowing that the phrase “notice of

cancellation” has a peculiar and appropriate meaning in the common law and that it

intended for that meaning to be applied to the statute. See Ray, 501 Mich at 69 n 34;

McCormick, 487 Mich at 192. 4            Accordingly, we interpret the phrase “notice of

cancellation,” as used in MCL 500.3020(1)(b), to require cancellation notices to be

peremptory, explicit, and unconditional. See Beaumont, 245 Mich at 106-107; American

Fidelity Co, 187 Mich at 276. 5

         With this understanding in mind, we hold that the cancellation notice Everest sent

to Yang violated MCL 500.3020(1)(b). The cancellation notice specifically included the

condition that Yang’s no-fault insurance policy would be canceled if he failed to pay his

insurance premiums on time. Given that a cancellation notice must be unconditional to be

effective, the letter that Everest sent Yang did not constitute a valid cancellation notice

under MCL 500.3020(1)(b). Therefore, because Everest did not comply with MCL

4
  We do not believe that the interpretation set forth in American Fidelity and Beaumont
conflicts with the plain language of MCL 500.3020(1)(b). Although the statute provides
that the policy may be canceled “at any time,” MCL 500.3020(1)(b), this does not conflict
with the common-law rule that notice of such cancellation must be “peremptory, explicit,
and unconditional.” See Beaumont, 245 Mich at 106-107; American Fidelity Co, 187 Mich
at 276. In other words, the policy may be canceled “at any time,” as long as the notice of
cancellation is unconditional.
5
    This interpretation is also consistent with the objective of MCL 500.3020(1)(b):

         The obvious objective of [MCL 500.3020] is to make certain that all of those
         who are insured under a policy are afforded a period of time, ten days, either
         to satisfy whatever concerns have prompted cancellation and thus revive the
         policy or to obtain other insurance, or simply to order their affairs so that the
         risks of operating without insurance will not have to be run. [Lease Car of
         America, Inc v Rahn, 419 Mich 48, 54; 347 NW2d 444 (1984).]

                                                10
500.3020(1)(b), Yang’s insurance policy was still in effect at the time of the accident. See

Nowell v Titan Ins Co, 466 Mich 478, 482-483; 648 NW2d 157 (2002) (describing that

notice must be given in accordance with MCL 500.3020(1)(b) for a cancellation of an

insurance policy to be effective). 6

                                       IV. CONCLUSION

       We hold that under MCL 500.3020(1)(b), a cancellation notice is effective only if

it is peremptory, explicit, and unconditional. In this case, because Everest’s letter provided

that cancellation was conditioned on Yang’s failure to pay his insurance premiums, the

letter was ineffective as a notice of cancellation. We affirm the judgment of the Court of

Appeals and remand to the trial court for further proceedings consistent with this opinion.

                                                          Richard H. Bernstein
                                                          Bridget M. McCormack
                                                          Brian K. Zahra
                                                          David F. Viviano
                                                          Elizabeth T. Clement
                                                          Megan K. Cavanagh
                                                          Elizabeth M. Welch

6
   On appeal, Everest presents the alternate argument that the October 30, 2017 letter
offering to reinstate the insurance policy was an effective notice of cancellation. We
disagree. While that letter described an unconditional cancellation, stating that the
“insurance has been cancelled,” that notice did not comply with MCL 500.3020(1)(b) or
our holding in Nowell. MCL 500.3020(1)(b) requires that the insurer send a “not less than
10 days’ written notice of cancellation . . . .” We concluded in Nowell that “the mailing
must be reasonably calculated to be delivered so as to arrive at the insured’s address at least
ten days before the date specified for cancellation for the notice to be effective.” Nowell,
466 Mich at 484. In this case, the October 30 letter did not give that 10-day period; instead,
it declared that the policy had already been cancelled and that the cancellation was already
effective. It was insufficient to serve as a notice of cancellation under MCL
500.3020(1)(b).

                                              11