Okosa v. Hall

315 N.J. Super. 437, 718 A.2d 1223 (App. Div. 1998)
  • Opinion Date: October 23, 1998

CONTRACTS; NOTICE; MAILBOX RULE—When an insurance carrier authorizes premium payments by mail, the postal authorities become the carrier’s agent and acceptance occurs when payment is mailed.

An automobile insurance policy required a quarterly premium payment to be made on February 28, 1994. The carrier mailed a February 28 letter on March 1, 1994 advising its insureds that the February 28 premium installment was not paid and that the policy would automatically be canceled at 12:01 a.m. on March 16, 1994 unless payment was made by that date. The insureds also received a letter that advised: “[i]f we receive payment on or before the cancellation date, we will continue your policy with no interruption in the protection it affords. If you’ve recently mailed your payment, please disregard this notice.”

On March 15, 1994, the insureds, by certified mail, sent a check for the required payment. The carrier deposited and “cashed” the check on March 22, 1994. On March 16, 1994, one of the insureds was involved in an automobile accident. The other driver was uninsured. The insured sought PIP benefits. The insureds sued the insurance carrier and the other driver. The insurance carrier moved for summary judgment which was granted on the basis that, because the carrier had not received the premium until after the cancellation date the insureds had failed to renew the policy. The insureds contended that the premium should have been considered as paid when it was mailed.

On appeal, the Appellate Division addressed the issue of whether the mail box rule was applicable. It found in favor of the insureds, reasoning that because the insurance carrier sent its notice through the mails, the mails were the proper forum for acceptance of the offer. The Court concluded that, when the carrier authorized payment of premiums by mail, the postal authorities became the insurance carrier’s agent and that acceptance occurred when its insureds mailed the payment.