A tardy online payment did not save one policyholder in New Jersey when a location of the business was by a fire loss.

The old problem with paying bills used to be the famous line of “the check is in the mail.” Now, we can have insurance or other bills placed on auto-pay or, we can log in and pay almost anything with a few clicks.

Auto-pay can be troublesome when your card expires or you make a bank change but it can also save you any worry that your policy will be non-renewed or canceled for lack of payment. If you pay your bills online, you know that some payments can post quickly and others seem to take a few days—especially if you use your bank as the portal.

In a recent case, we hear the story of what happened when an online payment was tendered during the fire loss.

As way of caution, this is an unpublished decision1 and applies to this case only but the lesson is one to share.

The online payment and later premium invoice for further insurance did not estop an insurance company from its prior cancellation.

An insurance payment from Megna Bathroom & Tile Imports, a commercial bathroom and tile business, was due on May 28, 2013.

A payment was not made on May 28, 2013, but the insurance company said that the policy would be cancelled effective June 13, 2013, if no payment was received, but said the cancellation could be avoided if the premium was paid.

The policy of insurance started on Feb 13, 2013, and end on Feb 13, 2014. The May payment was an installment.

On June 13, 2013, the insurance company did not have record of payment and sent out a notice of cancellation.

On June 14, 2013, a fire caused damage to the property. At 4:05pm while the fire was burning and fire crews were on the scene, the plaintiff made a payment on the policy. This was an electronic payment made through the carrier’s web portal.

On June 17, 2013, the insurance company was notified of the loss.

On June 18, 2013, another insurance premium payment was made by the insureds. Again, this was done online via the same web portal.

The insurance company said that they would reinstate the policy if a list of losses from June 13 was provided by June 24. The insurance company did not receive the list and attempted to refund all the premiums paid electronically.

But soon after, the insurance company also sent the policyholders a bill for the next installment of insurance due on an August invoice. The policyholder refused to take the refund checks and paid the August invoice.

The Plaintiff argued that the insurance was in effect at the time of the fire. The argument raised was that defendant waived the cancellation by accepting premium payments after the loss and defendant should be compelled to cover the losses for the fire damage. You can’t act like the insurance is in place sending bills and act like the policy was cancelled by sending refunds. This inconsistent position was the basis for the argument the policy was in place and not canceled.

Defendant argued the policy was canceled effective June 13, 2013, end of story.

The trial court agreed with the insurance company and the case was appealed.

On appeal, the court explained why it did not find the waiver Plaintiff was seeking even though the company sent an invoice for an allegedly canceled policy.

The court said no evidence could be inferred that defendant intended to reinstate the policy by retaining plaintiff’s post-cancellation payments or otherwise.

Unlike the case cited by the insured, Englishtown Auction Sales, Inc., v. Mount Vernon Fire Insurance Company,2 no payments were made prior to the policy’s lapse and cancellation.

The court found no material facts were in dispute on the waiver issue, and defendant was entitled to summary judgment determining that because they effectively cancelled the policy prior to the fire, they were not obligated to cover plaintiff’s loss.

Now, in this case the facts showed that the payment was made while the fire was still burning and that is an important fact. But we must also consider what could happen should the payment have been made by the policyholder prior to the fire but not posted until during the fire.

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1 Megna v. Leading Ins. Services, Inc., No. A-0 (N.J. Super. – App. Div. Jan. 30, 2017).
2 Englishtown Auction Sales, Inc. v. Mount Vernon Fire Ins. Co., 112 N.J. Super. 332, 335-36 (N.J. Super. – App. Div. 1970) (insurer’s receipt and retention of insured’s partial payment constituted a waiver of the previously issued cancellation notice).