Thursday, February 18, 2010

Receipt Of Funds By Insurer's Bank Binds Policy Even When Not Yet Credited To Insurer

In Nationwide Mutual Fire Insurance Company v. Smith (1D08-4761), the First District applied the “tipsy coachman” rule to affirm a summary judgment against Nationwide.  Nationwide provided a grace period for the payment of overdue premiums, in this case until 12:01 a.m. on Sunday, September 25, 2005.  The trial court concluded that since the deadline fell on a Sunday it was automatically extended until Monday "by operation of Florida Rule of Civil Procedure 1.090(a)."  The First District stated:
The only applicable statute in this case is section 627.728(3)(a), Florida Statutes (2005), which requires an insurer to give its insured 10 days’ notice before cancelling a policy for nonpayment of premium. Because the statute does not require the insurer to allow the insured to make an overdue premium payment before the cancellation date in order to avoid cancellation of the policy for nonpayment of premium, the time computation provisions of rule 1.090(a) are not applicable in this case.
By extending the payment deadline to the next business day, the trial court stacked “grace” upon “grace,” which cannot be done by implication under contract law.
However, the trial court's decision was still affirmed.  While the opinion does not provide the facts, it appears prior to the deadline the insured had transferred funds from its bank account to the bank of the insurer. Apparently, the insurer's bank had not credited the funds to the insurer by the deadline.  The court stated:
even if the payment deadline was not extended, the trial court properly entered summary judgment for the insured because appellant’s bank received the insured’s electronic payment file before the cancellation date and the delay in the deposit of the payment into appellant’s bank account was due to processing delays by appellant’s bank.
It would be interesting to know how the transfer was made and when it was made.  If it was an online payment, there are usually terms and conditions when you make the payment and, usually, those terms and conditions would prevent a result based upon a delay in crediting the funds.


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