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Court of Appeal:
Additional Insured Must Be Notified of Policy Cancellation
Failure to Alert Policyholder’s Adult Daughter That Coverage Was About to Be Ended Means That Policy Remained in Effect, Opinion Says, Reversing Summary Judgment in Favor of Insurer
By a MetNews Staff Writer
Div. One of the Fourth District Court of Appeal has reversed a summary judgment in favor of an insurer that disclaimed liability under a policy it had cancelled for nonpayment of premiums, holding that it was obliged to give notice of the forthcoming cancellation not only to the policyholders but also to their adult daughter who was listed as an additional insured.
“Because the insurer did not give advance notice of cancellation to the adult daughter,” Justice Martin Buchanan said in the opinion, filed Monday, “the policy was still legally in effect when she got into an accident driving her covered vehicle without knowledge of the purported cancellation.”
That accident occurred four days after the policy was cancelled, on May 1, 2017. A warning of the imminent cancellation was sent to the policyholders, Silvia Escarcega and Alberto Molinar—who insisted they were unaware of the communication—and the adult daughter, Tania Molinar, had a practice of not opening her parents’ mail.
The nonpayment stemmed from a bank having issued Alberto Molinar a new debit card and an automatic charge to the old card being dishonored.
Insurance Code §662
Buchanan’s opinion was grounded on an interpretation of Insurance Code §662(a) which provides:
“A notice of cancellation of a policy shall not be effective unless mailed or delivered by the insurer to the named insured, lienholder, or additional interest at least 20 days prior to the effective date of cancellation; provided, however, that where cancellation is for nonpayment of premium, at least 10 days’ notice of cancellation accompanied by the reason for the cancellation shall be given.”
The justice disagreed with the conclusion reached by San Diego Superior Court Judge Carolyn M. Caietti, in granting summary judgment in favor of defendant 21st Century Insurance Company, that the adult child, Tania Molinar, is not a “named insured, lienholder or additional interest” under the policy taken out by her parents, Silvia Escarcega and Alberto Molinar.
Status as ‘Insured’
An “additional insured” who is named in a policy, Buchanan declared, is a “named insured,” rejecting the position of the insurer that only the policyholders can be so denominated. He wrote:
“21st Century admits that Tania was an ‘insured’ under the policy. There is also no dispute that Tania was identified by name on the declarations page, and 21st Century knew she was the registered owner of the covered Mazda….[S]he qualifies as an ‘insured[] named in the policy’ who was entitled to notice of cancellation under the statute.”
The insurer refers to a person who is added to a policy and is in the same household as a policyholder (with an increase in a policyholder’s premium) as a “rated driver.” That wording, Buchannan said, “does not alter” Tania Molinar’s “status as an ‘insured’ who was covered and specifically ‘named in the policy.’ ”
2000 Decision
He noted the decision is in line with the conclusion reached by Div. Seven of this district’s Court of Appeal in its 2000 opinion in Kotlar v. Hartford Fire Insurance Co.
There, a tenant was required under a lease to maintain an insurance policy in favor of the lessor, who was listed as an additional insured; the policy was cancelled due to nonpayment of premiums; the lessor was sued by a customer who slipped and fell on the tenant’s premises; the insurer declined to provide a defense; the lessor sued the insurer on the ground that he had received no notice from the insurer of the intended cancellation. Los Angeles Superior Court Judge James Dunn (who died Friday) sustained a demurrer without leave to amend.
Reversing the ensuing judgment of dismissal, Div. Seven said, in an opinion by then-Justice Earl Johnson Jr., that the duty to give notice “applies to all insureds named in the policy.”
Buchanan found unpersuasive efforts by 21st Century to differentiate that case. Although the plaintiff there sued under a different Insurance Code section, he declared that “the reasoning of Kotlar applies here,” saying:
“We discern no reason the statutory phrase ‘the named insured’ would carry differing meanings for these two parallel Insurance Code provisions governing notice of cancellation.”
Public Policy
Citing public policy considerations, Buchanan said:
“The purpose of requiring advance notice of cancellation is to protect the insured against unintended termination of coverage based on a missed premium payment, and to provide an opportunity for the insured to make the payment or obtain other insurance….California’s financial responsibility laws also reflect a strong public policy against having uninsured drivers on the roads.”
He added:
“It is particularly important that the insurer give notice to all named insureds known to have an ownership interest in any covered vehicle, so that they do not continue to put themselves and others at risk by driving the vehicle without the required coverage.”
The jurist pointed out:
“Tania was covered as an insured under the 21st Century policy; 21st Century issued an insurance identification card in her name for the Mazda; and 21st Century knew she was the registered owner of the covered Mazda. Because she never received notice of the cancellation, however, Tania became uninsured without her knowledge. Tania continued driving the Mazda unaware of her uninsured status, leaving herself exposed to calamitous consequences.”
Insured Teenagers
Buchanan remarked in a footnote:
“Because Tania was an adult, we need not and do not decide whether an insurer would have to provide notice of cancellation to a minor who is covered as an insured driver on her parents’ policy and lives in the same household. Specifically, we do not decide whether notice to the parent may be imputed to the minor child in such circumstances.”
Although the opinion declares that “the policy was still legally in effect” after the “purported cancellation,” Buchanan did not address the implication that coverage would still have existed had either of the policyholders, to whom notice had been delivered in conformity with statute, been purportedly at fault in an accident occurring after May 1, 2017 and within the policy period.
The case is Molinar v. 21st Century Insurance Co., 2024 S.O.S. 735.
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