Hartland v. Progressive County Mutual Ins Co., No. 14-07-00955 (Tex. App.- Houston [14th Dist.] April 23, 2009), see Hartland Decision
With this case, we review the throw-of-the-dice rule under Texas law governing when an insurer's acceptance of a late premium payment commits the insurer to paying a claim that arose before it accepted payment. Simply put, if the risk being covered has already occurred when the policyholder hurriedly licks the stamp to send in the overdue insurance premium, the insurer will be excused from covering the loss, even if it cashes the check and reinstates the policy. Texas cases follow this rule faithfully.
Charles Hartland had an auto liability policy that expired on May 9, 2004 at 12:01 am. Hartland received a renewal notice stating that the new premium was due by the time of expiration. Hartland claimed that he mailed the premium on May 8, but a jury found otherwise. Progressive received the renewal premium on May 16, and issued a renewal policy beginning May 12. Unfortunately, Mrs. Hartland was in a car accident at about 8 a.m. on May 9, 2009. Progressive denied the claim.
Hartland argued on appeal that, even if the premium was submitted after May 9, Progressive accepted the check and should be prevented from denying coverage (the legal jargon is "estopped to deny coverage"). Hartland relied for support on the venerable decision in Bailey v. Sovereign Camp, W.O.W., 286 S.W. 456 (Tex. 1926), in which Bailey was several days late in renewing his premium on a life insurance policy. Late payment would reinstate the policy but only with a new good-health certificate. Bailey, alas, sickened the day the late premium was submitted and died within 2 weeks after that. However, the insurer's agent accepted the late payment without asking for proof of good health. Upon receiving the death certificate and claim for benefits, the insurer denied coverage for breach of the good health requirement.
The Texas Supreme Court held testily that the insurer, having retained the late premium, couldn't deny coverage:
The time has not come in this State when an insurance company ... can, with knowledge that a policyholder has forfeited his right of protection, voluntarily accept and retain the premium which the insured has paid ... without also keeping [the policy] in full force and effect. One who places his bets after the dice are thrown is sure to win. ... Insurance companies cannot so gamble on the lives of their policyholders. Having accepted the wager in accepting the premiums, the [insurer] was bound by the consequences. [Emphasis added].
However, the Hartland court held that in this case it was the policyholder trying to place his bet after the dice are thrown. Bailey submitted the late premium before the triggering event (death). Hartland, by contrast, didn't send the premium until after the event (car crash). If the car crash occurred after Hartland mailed the payment, then the reasoning in Bailey would apply, and Progressive would be held to have placed its bet when it accepted the check, even if the crash had already occurred.
As a footnote, Bailey may in fact have bestirred himself to send in the late premium because he fell ill, which appears to violate the dice rule. But the risk under a life policy is death, not health, and the Bailey Court estopped the insurer on two grounds: (1) accepting the premium without asking for a good-health certificate, and (2) cashing and retaining the check. So the insurer had only itself to blame.
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