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Commercial General
Liability |
Notice Of Cancellation |
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Non-Payment Of Premium |
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On September 6, 2002, Anchor
Enterprises (Anchor), a carpentry business owned by Gordon Harvey, submitted an
application and an initial premium payment of $200 to Pekin Insurance Company
(Pekin) for a commercial liability insurance policy. The policy had an
effective date of September 6, 2002, an expiration date of September 6, 2003,
and an annual premium of $474.
On December 9, 2002, Pekin
sent Anchor an invoice for $10.34, the next premium installment due on the
policy. The due date was December 22, 2002. Anchor did not pay this premium
installment. As a result, Pekin mailed Anchor a notice of cancellation for
non-payment of premium on January 7, 2003. The notice stated that the policy
would terminate on January 17, 2003, at 12:01 a.m. standard time.
Tracy L. Wallace was injured
in June 2003 while working for a drywall contractor at an Anchor worksite. He
filed a negligence action against Anchor. Anchor tendered defense of the
negligence action to Pekin. Pekin refused to defend Anchor, claiming that
Anchor's insurance policy had been terminated for non-payment of premium. Pekin
filed a declaratory judgment action in September 2005, asking the court to
determine whether it had a duty to defend Anchor. Wallace and Anchor responded
by arguing that the policy had not been properly terminated because the
termination notice had not been mailed a full 10 days prior to the effective
date and hour of cancellation.
The lower court found in
favor of Wallace and Anchor, holding that Pekin failed to provide a proper
notice of cancellation and that there was coverage under the policy. Pekin
appealed.
On appeal, the Appellate
Court of Illinois, Fifth District, found in favor of Pekin. It noted that the
time provision under the policy began to run on the day the notice was mailed. Peking
provided proof that the notice was mailed on January 7, 2003. The effective
date of the cancellation was January 17, 2003 at 12:01 a.m. According to the
court, notice was in fact mailed on the 10th day prior to the effective date of
cancellation. It did not matter, as Wallace and Anchor argued, that Pekin
provided 9 2/3 days' notice, rather than a 10 full days' notice. There was
nothing in the language of the policy or the Illinois Insurance Code that
required the cancellation notice to "state the fixed hour and minute when
the cancellation bec[ame] effective." The court also emphasized that
Anchor's policy terminated more than five months before the date of the
accident. The court stated: "As a general rule, the law will not recognize
fractions of a day unless that recognition is deemed important to the interests
of justice or necessary to a decision regarding conflicting interests. The case
at bar does not present such a situation." The court concluded that the
lower court erred in finding in favor of Wallace and Anchor.
The lower court's decision
was reversed and judgment entered in favor of Pekin.
Pekin Insurance Company vs.
Harvey-No. 5-06-0655-Appellate Court of Illinois, Fifth District-December 26,
2007-879 North Eastern Reporter 2d 540