When Does The Policy Go Into Effect?

The above is a reasonable question for someone in Grand Prairie, Weatherford, Arlington, Fort Worth, Dallas, or anywhere else in Texas to ask. When does a policy go into effect? Sometimes a claim arises immediately.
The Corpus Christi Court of Appeals had this issue come up in the case styled, Mark A. Becerra v. Maria Elena Ball A/K/A Nena Ball D/B/A Ball Insurance Agency, National Lloyds Insurance Company, and Ruth Cantu. This opinion was issued in August 2011.
This appeal involves National Lloyds denial of Becerra’s insurance claim. Becerra asserted that Rudy Cantu , an employee of Ball Insurance Agency was allegedly negligent in obtaining an insurance policy on Becerra’s behalf. The trial court granted summary judgment on National Lloyds behalf as it relates to the breach of contract claim and negligence claim. We will discuss the breach of contract claim only.
Here is some background.
Becerra is a contractor who builds homes. On July 19, 2007, Becerra met with Cantu about obtaining insurance for a home Becerra was planning to build. Cantu gave Becerra a binder, on behalf of National Lloyds, that provided coverage up to $79,000, had an effective date of July 20, 2007, and had an expiration date of January 19, 2008. The insurance binder also stated that it was subject to the conditions of the actual insurance policy that would later replace the binder. Becerra never paid the premium.
On October 17, 2007, a fire damaged the home, Becerra made a claim, the claim was denied, this lawsuit was filed.
Becerra argued on appeal that the trial court erred in granting the summary judgment because a fact issue existed as to when the payment was due under the terms of the insurance binder. Becerra argued that the contract was ambiguous.
In citing Texas law, part of which is from the Texas Supreme Court, this court stated “In an insurance breach of contract claim, the claimant must establish that the insurance contract was in full force at the time it suffered the loss. The payment of the premium in accordance with provisions of the insurance policy is a condition precedent to establishment of liability against the insurer.” Therefore, the claimant must show that the premium was paid in accordance with the terms of the policy in order to show that the contract was in force at the time the claimant suffered a loss.
Here, Becerra did not challenge the fact that he did not pay the premium. Instead, Becerrra argued that the insurance binder he was given was ambiguous about when the payment of the premium was due. The court stated, a contract is ambiguous when the meaning is subject to “two or more reasonable interpretations after applying the pertinent rules of construction.”
Becerra contended that because the binder did not provide a payment date, the binder became effective as soon as it was handed to him. He pointed to the following language from the binder: “If this binder is not replaced by a policy, the Company is entitled to charge a premium for the binder according to the Rules and Rates in use by the Company.” Becerra argued that the only way to interpret this statement was that the payment was due after the new policy was issued.
The court pointed out that the complained of language was not relevant to the challenged ambiguity regarding payment. Rather, the following are the relevant provisions of the policy, and they are not ambiguous. The binder clearly states that “the Insurance is subject to the terms, conditions, and limitations of the policies in current use by the Company.” Furthermore, the policy indicated that “in return for the payment of the premium … we agree with you to provide the Insurance as stated in this policy.” So, contrary to Becerra’s assertions, the terms of the binder were clear, and under those terms, payment was necessary for the binder to go into effect.
This case dealt with making the primary target of the insurance dispute, the agent, rather than the insurance company. The claim against the agent is often times a hard one to make successfully and is why someone wants to make sure they have an experienced Insurance Law Attorney involved in helping with the claim.