Auto Insurer Cannot Retain Premium Paid to Reinstate After Non-Payment Cancellation and Deny Coverage for Accident Occurring during Cancellation Period

Even if an insurer maintains right to deny coverage or to rescind a policy or its reinstatement, it cannot have its cake and eat it too. When an insured reinstates a policy after cancellation for non-payment, the insurer cannot deny coverage and retain premium paid for the time period covering the loss event.

Florida law is clear that “an insurer can forfeit its right of rescission.” See Laboss Transp. Servs., Inc. v. Global Liberty Ins. Co. of N.Y., 188 F.Supp.3d 1320 (S.D. Fla. 2016). Court in Laboss provided the following analysis, 

“While, ordinarily, the insurer is not deemed to have waived its rights unless it is shown that it has acted with the full knowledge of the facts, the intention to waive such rights may be inferred from a deliberate disregard of information sufficient to excite attention and call for inquiry as to the existence of facts by reason of which a forfeiture could be declared.” Johnson , 52 So.2d at 815. “The acceptance and collection of the premiums with constructive notice of the facts here relied on as a defense is certainly an unequivocal act which recognizes the continued existence of the policy and which is wholly inconsistent with a forfeiture.” Id. (citation and internal quotation marks omitted). (Emphasis added.)

Florida State Courts have likewise held the retention of a delinquent premium payment is a waiver of the right to cancel a policy or to refuse reinstatement. See Progressive Express Ins. Co. v. Camillo, 80 So.3d 394 (Fla. 4th DCA 2010), citing Meeks v. State Farm Mut. Auto. Ins. Co., 460 F.2d 776, 778 n. 3 (5th Cir.1972) (applying Florida law). 

In Progressive Express Ins. Co. v. Camillo, 80 So.3d 394, (Fla. 4th DCA 2012), a clear distinction is made between retaining premium paid to reinstate an existing policy after cancellation for non-payment and retaining premium on a renewed policy following a lapse in coverage. The Court in Camillo held, that “[w]e find there to be a valid distinction between an insurer that retains a late premium following a policy cancellation for non-payment of premiums, and an insurer that accepts a renewal payment after the expiration of a policy period and reinstates the policy prospectively.” Id. at 401.

In the latter case, Florida Courts “hold that where a policy expires without the insured making a renewal payment, and a loss occurs after the expiration of the policy period, the insurer may subsequently accept premium payments and reinstate the policy prospectively without waiving the right to deny coverage for the loss.” Id. at 401. While the former, (reinstatement after cancellation for non-payment) as is the case here, “[a]n insurer cannot retain a past-due premium and at the same time claim that a forfeiture of the policy has occurred.” Id. at 400, citing Mixson v. Allstate Insurance Co., 388 So.2d 608 (Fla. 3d DCA 1980).