David and Virginia Blurton (Blurtons) owned a home in Tennessee that they insured with a homeowners policy issued by Grange Insurance & Casualty Company (Grange). The first annual term policy was written on June 6, 1991 and was renewed each year. The premium was always paid in five monthly installments, due in June, August, October, December and February. In June, 1994, the insured received the renewal policy and installment billing, which they paid promptly. In July 1994, a regular premium notice was sent, due August 5, 1994. That notice listed the remaining installment schedule, with amounts and due dates. No subsequent premium notices were sent.

The Insured wrote a check for the August installment on August 10, 1994, drawn on the bank account of the business that they owned and operated. The Insured had a photocopy of that check but the copy was not signed. They claimed sending it to Grange but Grange denied receiving it, and this was confirmed by their computer records. The check never cleared the business account and the Blurtons were aware of that fact but they never discovered why the check didn't clear. On August 16, 1994, Grange generated a cancellation notice (effective August 29, 1994) to the Blurtons and their agent. On August 29, 2004, Grange sent a final notice to the Blurtons, their agent and the policy's first and second mortgagees.

On February 25, 1995, a fire broke out at the Blurtons' home. They contacted their agent, who told them that the policy had been cancelled and that the loss was not covered. In February, 1996, the Blurtons filed for a declaratory judgment, seeking recovery for the fire loss. They alleged that Grange did not follow policy cancellation procedures. They also claimed that their agent failed his duty to notify them about the cancellation. The trial court entered a finding in favor of the Blurtons. It awarded them $270,000 plus interest, stating that Grange did not properly cancel the policy. Grange appealed.

A number of cases and case laws were examined by the higher court and it paid particular attention Grange's automated notice system. That court addressed three issues, proof of mailing to the insured, proof of mailing to the mortgagees and proof of mailing to the agent and his duty to notify. In the end, the court found that Grange's notification system and procedures were accurate and acceptable, especially since state law did not require any special confirmation that a notice has been received. Further, the court found no duty that the Blurtons' agent had to make separate contact about the cancellation. Finally, the court found that Grange's mailing of just the confirmation of cancellation to the policy's mortgagees was proper (the Blurton's claimed that they should have also received the initial cancel notice).

The conclusion of the trial court was reversed on appeal. The preponderance of evidence was that the Insured did not make the August, 1994 premium payment to Grange and Grange mailed the cancellation notices to the Insured in an appropriate manner. In addition, lack of sufficient notice to the mortgagees does not protect the Insured, and Grange was not estopped from canceling the policy based on Freeman's failure to notify the Insured of the cancellation notice. The costs of the appeal were taxed to the appellees.

David BLURTON and wife, Virginia Blurton, Appellees, v. GRANGE INSURANCE & CASUALTY COMPANY, Appellant. Tennessee Court of Appeals at Jackson. No.W2003-01177-COA-R3-CV. Filed July 2, 2004. Reversed. 2004 CCH Personal and Commercial Liability Cases. Paragraph 1034.