by: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law
randolphp@umkc.edu

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?

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