Daily Development for
Friday, September 29, 1995

by: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law

WORDS AND PHRASES; "CANCELLATION" VS. "TERMINATION" OF AN INSURANCE POLICY: A mobile home insurance policy provision entitling mortgagee to 10 days notice of "cancellation" of such policy does not entitle mortgagee to notice that coverage was terminating by expiration of the policy's term - which is properly defined as a "termination" and not a "cancellation." First Nat'l Bank of Annapolis, N.A. v. Jefferson Insurance Co., 891 S.W.2d 140 (Mo. App. S.D. 1995).

The language, appearing in what the court characterized as the "standard" or "union" mortgage clause, provided that the policy could not be "cancelled" with respect to the mortgagee without prior notice. In this case, the policy terminated of its own terms, and was not renewed. The insurance company did not notify the mortgagee of such termination.

The court found "cancellation," as used in insurance law, to mean termination of a policy prior to the end of the policy period by act of one or all of the parties, and determined that "termination" refers to the expiration of the policy by lapse of the policy period.

Note that the court points to other cases in which the mortgage clause did require notice prior to "termination or cancellation."

Comment: Although a bitter lesson, probably not too surprising. Words in an insurance policy have distinct contractual meaning, and we have a mortgagee, not a "consumer" homeowner making the argument.

Practice Tip: It may be worth checking your own policies to see what the notice provisions say. They may differ from policy to policy. There may some room to deal with the insurer next renewal time to make sure you get notice to the mortgagee prior to termination. DIRT readers - has anyone had experience in obtaining such a provision?

Items in the Daily Development section generally are extracted from the Quarterly Report on Developments in Real Estate Law, published by the ABA Section on Real Property, Probate & Trust Law. Subscriptions to the Quarterly Report are available to Section members only. The cost is nominal. For the last five years, these Reports annually have been collated, updated, indexed and bound into the Annual Survey of Developments in Real Estate Law, volumes 1-5, published by the ABA Press. The Annual Survey volumes are available for sale to the public. Contact Shawn Kaminsky at the ABA. (312) 988 5260.

Items reported here and in the ABA publications are for general information purposes only and should not be relied upon in the course of representation or in the forming of decisions in legal matters. Accuracy of data and opinions expressed are the sole responsibility of the DIRT editor and are in no sense the publication of the ABA.