Lawrence Miller bought a 1987 Chevrolet Monte Carlo from Marketview Motors and then procured an auto policy from Colonial Insurance. He failed to pay the policy premium; and on March 17, 1994, Colonial mailed Marketview, as the holder of the lien on the car, a notice of cancellation as required by statute. That notice, however, showed the policy would be canceled at 12:01 a.m. on March 28. An accident occurred involving the Monte Carlo, but the record showed that the parties disagreed as to whether it occurred at about 5:15 a.m. on March 28 or March 29.

Marketview, as the loss payee under the policy, sustained a loss of $4,427.08. Colonial denied liability since it had canceled its policy for nonpayment of premium.

The trial court found that the policy had been canceled by the company on March 28, 1994, and entered summary judgment in favor of Colonial.

The Illinois Code provided, in part, that all cancellation notices must be mailed 30 days prior to the effective date of the cancellation; but when that cancellation was for nonpayment of premium, at least 10 days' notice of cancellation must be given.

Marketview argued that the statute required 10 days' actual notice of cancellation must be given to all parties, in order for them to arrange for protection of their interest in the property. It said that notice was required in order for Marketview to arrange for the purchaser to pay the premium or secure other coverage, or for Marketview to pay the premium itself and charge it to Miller, as it was authorized to do in the sales contract.

On appeal, the court ruled that 10 days' actual notice is required before the company can cancel a policy for nonpayment of insurance premium, and simply mailing the notice 10 days before cancellation was not sufficient.

The judgment entered in the trial court in favor of Colonial was reversed and remanded, with instructions to the trial court to ascertain the actual date and time of the accident, for further proceedings to ascertain when the policy was effectively canceled.

Marketview Motors, Inc., an Illinois corporation, Appellant v. Colonial Insurance Company of California-No. 4-95-0379-Appellate Court of Illinois, Fourth District-January 31, 1996-660 North Eastern Reporter 2d 1337.