8/19/2011
46 Lounge v. Founders Insurance Company
In 46 Lounge v. Founders Insurance Company, a declaratory judgment action, 46 Lounge, a defendant in an underlying personal injury action, brought suit against Founders Insurance Company and AFCO Credit Corporation seeking defense and indemnification pursuant to the policy of insurance for an incident that occurred after date of cancellation due to 46 Lounge’s default in its loan repayment under its insurance premium finance agreement with AFCO. 46 Lounge alleged that it mailed the finance payment two days before the due date but that this payment was not delivered until months after the due date and cancellation date as a result of postal error.

Before the close of discovery, Wendy Jennings moved for summary judgment arguing that it was undisputed and admitted that 46 Lounge received the requisite notices pursuant to New Jersey’s Premium Finance Act. 46 Lounge’s failure to pay the finance payment to AFCO by the due date was a breach of the express terms of its contract with AFCO, as the attorney in fact for the insured under the finance agreement, and was a proper basis for AFCO to request Founders to cancel the policy. Furthermore, Ms. Jennings argued that the insured’s mailing of payment prior to the due date was not a basis to find Founder’s subsequent disclaimer of coverage wrongful as the Statute does not make the common law “mailbox” rule applicable to insurance premium finance agreements even though the New Jersey Legislature, through the Department of Banking and Insurance, has amended other insurance statutes to include some variation of the “mailbox” rule.

The Court agreed with all of Ms. Jennings arguments and dismissed the case.