A Binder is an Insurance Contract: Once Coverage is Bound Cancellation Requires Compliance with Statutory Requirements.

• Author: Zalma, Barry
• Position: [ON MY RADAR]

* Insurance agents and brokers like to write insurance business. They will often bend over backwards to collect a premium and place a policy. When an insured is offered coverage, accepts the coverage, even without payment, a binder (evidence of insurance to be issued in the future) is evidence that a contract of insurance has been formed. The agent might try to say there is no coverage until the premium is paid but to do so it must make sure the binder issued says it is not effective until the premium is collected.

In James Allen Insurance Brokers And Certain Underwriters At Lloyd's, London, Subscribing To Certificate No. Fro-100944 v. First Financial Bank, NO. 2018-IA-00307-SCT, Supreme Court of Mississippi (April 18, 2019) James Allen Insurance Brokers (JAIB) and Certain Underwriters at Lloyd's, London, Subscribing to Certificate No. FRO-100944 (Lloyd's) petitioned the Supreme Court of Mississippi for review of the trial court order granting partial summary judgment in favor of First Financial Bank (FFB). The trial court held that FFB is entitled to insurance proceeds from a fire loss that occurred at Luther and Freda Feazell's poultry farm, because JAIB and Lloyd's failed to comply with Mississippi law requiring notice of cancellation of property insurance.

FACTS

The Feazells borrowed money from FFB secured by, among other things, four poultry houses on the Feazells' farm, valued at $231,750, $231,750, $150,000, and $150,000 that became the subject of insurance with Lloyd's.

The Underwriters advised the Feazells that they required before they would issue the policy they must provide the premium, among other things, within 10 days. Feazells were advised that if all items are not received they will cancel the policy flat with no coverage afforded at anytime and all premium, less the policy fee will be returned. In so saying the Underwriters did not believe the statutory requirements of 30 days notice for cancellation of an insurance policy.

On January 5, 2014, three days after the final premium payment deadline, the Feazells' poultry farm caught fire. All four of the chicken houses used to secure FFB's loan to the Feazells were either destroyed or rendered inoperable. According to FFB, due to the extensive fire damage, the Feazells' poultry operation came to a halt, effectively resulting in complete casualty loss.

The actual binder that was issued with effective dates of coverage from December 13, 2013 through December 13, 2014 contained...