Denial Due To Late Payment

Tarrant County insurance lawyers need to know the circumstances that will allow coverage when a late payment of premiums is in the picture and times when the late payment does not make a difference. A 2005, Amarillo Court of Appeals case is a good opinion to read. The style of the case is, Avila v. Loya. Here are some facts.
Avila brought this appeal from a take-nothing summary judgment in favor of Loya. In her appeal, she asserts the trial court erred in granting its summary judgment because 1) issues of fact exist with regard to her claim of misrepresentations made under the Texas Insurance Code, and 2) issues of fact exist as to misrepresentations under 17.46(b)(12) of the Texas Business and Commerce Code.
Avila procured an auto insurance policy from Home State acting through the Agency, covering a policy period ending September 25, 2001, unless extended by the payment of a monthly premium. The policy contained a provision calling for the automatic termination of the policy if the insured failed to pay the continuation premium when it was due. Although a renewal notice was sent, the continuation premium was not paid by its due date. On September 28, 2001, Avila was involved in an automobile accident. On that same day, Avila’s daughter tendered a payment premium check to the Agency, the local agent of Home State. The check was accepted by the Agency which gave the daughter a liability insurance card that showed the period of Avila’s coverage with the effective date as 09/28/01 and the expiration date as 10/28/01.
In her affidavit attached to her response to Loyas’summary judgment motion, Avila averred that at the time of the accident, she believed herself to be covered by her insurance policy. She also averred that “well before the accident of Sept. 28 that I was in,” she had sent her daughter in to make the payment to renew her policy coverage. She admitted the payment was not made until September 28, 2001. She also admitted that “she did not tell her daughter about the auto accident before she made the payment,” and “she was only able to tell her about the accident I was in that night, after she had already made the payment.” She further averred: “After the accident, the agency took my payment premium check. They cashed it and issued me a new card showing me to be covered again after the accident took place.” Avila also averred that on the Monday following the wreck she called in to the Agency and was told “there was no problem with her insurance, that everything was being taken care of” and that she was not notified that she was not covered until October 11 or 12, 2001. She further stated:
I had made late payments to Home State County Mutual through the Maverick Agency before. I was about two days late on renewing my insurance twice before. This had taken place a couple of times without my insurance coverage being canceled . . . .
She explicated that she had never been given a refund check for “the lapse of insurance the insurance company and agency are claiming took place.”
The court first noted the general rule that an insured’s failure to pay premiums when they become due causes the insurance policy to lapse and become ineffective. Under this record, it is undisputed that the monthly renewal premium due on the policy here was not paid by its due date. It is also undisputed that at the time the renewal premium was accepted by the Agency, it had no knowledge that an accident had occurred.
The question, then, first presented for decision was whether Loya, by accepting the post-forfeiture premium and reinstating coverage, violated either of the referenced statutes by declining coverage for a claim for indemnification of damages that occurred before the acceptance of the premium and the reinstatement of the policy. In that connection, evidence that establishes only a bona fide coverage dispute does not demonstrate bad faith. Plainly put, if an insurer has a reasonable basis for a denial of coverage, it retains the right to deny questionable claims without being exposed to extra-contractual tort claims which require the same predicate for recovery as bad faith claims.
Thus, an insurer who establishes a reasonable basis for denying a claim, even if that basis is shown to be erroneous, enjoys immunity from statutory bad faith under the Texas Insurance Code and the DTPA.
As evidence sufficient to raise a fact question in that regard, Avila contends that the Agency waived the forfeiture provision by accepting a check and issuing a certificate of insurance soon after the accident and she has never been given a refund of the premium she paid. Waiver occurs when a party either intentionally relinquishes a known right or engages in intentional conduct inconsistent with claiming that right.
With regard to Avila’s course of dealing theory, her pertinent averments were:
I had made late payments to Home State County Mutual through the Maverick Agency before. I was about two days late in renewing my insurance twice before. This had taken place a couple of times without my insurance coverage being cancelled. Once before, for example, I was unable to make it in to the local agency office and pay on a Saturday, and they told me I could pay on Monday without my insurance being cancelled.
This court explicated that a custom or usage with respect to the acceptance of late payments of insurance premiums only exists when that has occurred over a substantial period of time. Accepting Avila’s averments at their face value, they fall far short of showing an acceptance of late payments over a substantial period of time and thus are not sufficient to raise a fact question about a waiver of Loyas’ right to assert the forfeiture of coverage of the accident in question. This court has held that a previous history of accepting late payments was not sufficient to show a waiver by a course of dealing because the insurer had never accepted a late payment after an accident. Additionally, the fact that no refund of the late premium payment has been made is not sufficient to show a fact question because the record shows it was accepted without knowledge of the accident, as well as the undisputed fact that the insurance certificate showed that it covered a one-month prospective period.
Avila also argues that fact questions exist concerning whether post-loss misrepresentations made to her by an Agency employee gave rise to appellees’ liability under 17.46(b)(12) of the Business and Commerce Code. Again in pertinent part, that statute provides that representation “that an agreement confers or involves rights, remedies, or obligations which it does not have or involve, or which are prohibited by law” are included in the term “false, misleading, or deceptive acts or practices” as used in the DTPA.
In final summary, Avila was overruled, and the judgment of the trial court was affirmed.

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