The Court Interprets “Due Date” Under a Premium Service Agreement
January 23, 2018
The tools of statutory construction are powerful. In interpreting statutory language, words are generally given their common and ordinary meaning. The cardinal rule is to ascertain and effectuate the intention of the legislature while considering the language of the statute as a whole.
The United States District Court for South Carolina recently demonstrated the power of words with its interpretation of S.C. Code §38-39-90. James N. Evans, individually and as owner/agent of Club Ro-Za Bar & Grill, et al v. Nautilus Insurance Company. 2018 WL 398487. Briefly, Evans owns and operates Club Ro-Za and purchased a commercial general liability insurance policy from Nautilus. Evans entered into a finance agreement with IPFS Corporation to finance the policy, the effective dates of which were February 2, 2012 to February 2, 2013. Evans failed to make the payment due in August, 2012 following which Nautilus provided notice of intent to cancel the policy. On September 2, 2012, a drunken patron of Club Ro-Za shot and injured another. Evans requested a defense and indemnity from Nautilus in response to which Nautilus contended there was no coverage. The court agreed.
S.C. Code §38-39-90(a) provides, in pertinent part, if a premium service agreement includes a power of attorney that enables the company to cancel coverage, as in Evans, the policy may be cancelled only in accordance with the statute. 38-39-90(b) requires the financing company give at least ten days’ written notice of its intent to cancel the policy and that notice must be mailed or delivered no more than ten days before the due date. Critically, the court interpreted the phrase “due date” as the original due date of the premium. The court interpreted the statute as stating a premium insurance company may deliver a notice of its intent to cancel a policy in advance of an actual default by the insured, but that notice cannot be sent more than ten days in advance of the due date for payment of the premium on which the insured might default. The “due date” is not altered by any grace period granted by the financing company.
Following its interpretation of the statute, the court found Nautilus followed the proper cancellation procedure as a result of which there was no policy in effect at the time of the shooting.
Evans clearly establishes the importance of statutory interpretation. Interpretation of the applicable statute could have been influenced by the outcome; a potentially at-fault party with no coverage and an injured party facing the possibility of no recovery. The court once again demonstrates it will not stray from the cardinal rule.
Cheryl D. Shoun is a trial attorney and certified mediator whose experience includes construction law, insurance defense, personal injury defense, employment litigation and medical malpractice. As a frequent writer, she serves as editor for Nexsen Pruet's TIPS: Torts, Insurance and Products Blog.