104: Something for Nothing, Defined

Stella Case No. 104, Originally Published: 25 January 2006

When Stephanie Michelle Conley took out an insurance policy on her car in 2001 from West Virginia National Auto Insurance Company, she paid her premium by check. The sequence: she wrote the check on Aug. 15; the company issued the policy on Aug. 30; on Aug. 31 Conley was in an accident, resulting in $26,000 in damage; the check was returned by Conley’s bank unpaid — it “bounced” — and the company sent her a letter on Sept. 11 saying her policy was canceled as of its start date.

I’m so flabbergasted that in late 2021 this is the home page of the insurance company, I simply had to use the screencap to illustrate the story. “© 2011” …what the heck? It wasn’t even acceptable then!

That is, of course, how contracts work: when one side doesn’t do their part (like pay the agreed-upon fee), the other side doesn’t have to do theirs.

Yet Conley sued the company because she wasn’t given “adequate notice” of her lack of auto insurance, even though most banks not only will notify account holders of bounced checks, but charge a hefty fee, too.

Incredibly, she won her case in Cabell Circuit Court, and the insurance company appealed it to the West Virginia Supreme Court. Even more incredibly, in 2005 the Supreme Court ruled 4-1 that the insurance company was at fault for not giving Conley 10 days’ notice of her policy’s termination, and that she deserves coverage for her accident even though she never paid the insurance premium.

The ruling is “one of the most outrageous court decisions in the history of American jurisprudence,” said one case participant. No, those aren’t the words of the insurance company, but rather those of Supreme Court Justice Elliott “Spike” Maynard, the one who dissented from the ruling. He called it a “something for nothing” case “where someone, somewhere, somehow must owe them money simply because they have suffered an injury.”

In his written dissent he lectured the other judges, saying they “had to work hard to write an opinion that actually does everything that the law should not do. It punishes the innocent by causing honest, hard-working West Virginians to pay higher auto insurance premiums. At the same time, it rewards the guilty by providing a windfall to those who never paid for insurance coverage.”

I couldn’t have said it better myself.

Source

  • “Car Insurance Ruling Raises Concerns”, Huntington Herald-Dispatch, 10 December 2005.

Case Status

As noted, an award was made.

My 2022 Thoughts on the Case

I still find it hard to believe that the courts ruled against the insurance company, since the contract was legally invalid.

Again as noted previously, several short cases were published “late,” so this really is a 2005 case.

No Letters This Week

Readers didn’t have anything to say about the Netflix class action. Maybe they were starting to get numb….

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9 Comments on “104: Something for Nothing, Defined

  1. In my #1 favourite novel, Five Smooth Stones, the author Ann Fairbairn has an experienced Boston lawyer tell his apprentice New Orleans lawyer (the book’s hero) that he won his case ~ a claim against an insurance company for a vehicle accident in which the driver was clearly at fault ~ because American juries like going for the ‘little guy’ and against big rich corporations. He added,’ Don’t worry ~ they’ll reverse us on appeal!’

    Reply
  2. This is the first True Stella Awards case where I agree with the court. As long as the check was written in “good faith” it seems reasonable to give the customer a chance to “fix” the payment problem. As long as the payment made good within a reasonable time of being informed of the bounced check, she should be covered. Bounced checks can happen for all sorts of reasons, admittedly many (but not all) of them the customer’s fault. To suddenly find out that you haven’t been covered by insurance when you thought you were is, to me, a lot worse than the insurance company’s issues. Again, “good faith” is an important part of this as I would be happy to let a jury decide if a customer who repeatedly went around bouncing checks to insurance companies and getting into accidents should not be covered.

    Reply
    • I agree with this. She had a good-faith belief that she was covered at the time of the accident. Even with the bounced check, it’s incredibly dishonest of the insurance company to retroactively refuse coverage for the accident, after it was too late to obtain replacement coverage through another company and potentially put her at unwitting risk of criminal penalties for being in an accident without insurance. The insurance company had a moral, if not legal, duty to allow a reasonable opportunity to cure the payment problem before refusing to cover the accident. They didn’t. Shame on them, and shame on the judge who dissented.

      Yeah, but here’s the problem. If I understood correctly, she refused to make good her bounced check, and thus never paid for any coverage. That’s the crux of the case, the part that made it reasonable that the judges had to rule. So what happens to her good faith in this case? What does that do to your opinions about it? As it says in the case, she “never paid” for the coverage. So there is no legally valid contract. I do agree that they should have to cover her if the company 1) notifies her promptly, and 2) allows her to make the payment good, and then she does so promptly. -rc

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      • I don’t know the details, but one of the things I’ve seen from a lot of insurers is that they refuse to cover you until the payment has cleared. This can be annoying, but it does block shenanigans like this. This is, from my understanding of the opening of the story, a brand new policy; so it wouldn’t at all surprise me if the insurance period is forward-dated once payment is fully received (and probably a bit more, insurance companies being what they are).

        If she hasn’t paid her premium, she isn’t insured. This should not be a difficult concept.

        Reply
      • “If I understood correctly, she refused to make good her bounced check, and thus never paid for any coverage.”

        Depends on the timing.

        If you got told “sod off, we’re not covering you” on (for example) Sep 9, 9 days after lodging the claim, would you then turn around and pay it?

        Me? Absolutely! Because if they accepted it then they’d be obligated to pay the claim, because at that moment I have completely fulfilled my part of the contract. If I refused to pay, then I would not have a moral leg to stand on to press the claim. Which, of course, is the entire crux of the case. -rc

        Reply
        • Randy, we (the general public) are not contract lawyers. In what world would we understand that a company that cancelled our policy and denied our claim would make good on it if we attempted to pay them a second time? In what world would a person having trouble keeping the amount of the policy premium in the bank be able to hire a contract lawyer to tell her this? It may be obvious to *you*, but as you’re a small business owner, I’m sure you know tons about all sorts of business and legal nuances we don’t.

          While I agree that increases the odds in general, I actually learned that as a teen, long before I was a business owner. I expected State Farm to bill me for my new auto insurance policy (me on my own, rather than on my parents’ policy), and the agent said no, I wanted to pay now because I’m covered from the moment I hand him the check; that even if the company decided to not take me on for some reason, I’d be covered for the time-being regardless. I’ve never forgotten that lesson, or that Grant Allison had given me a gift of understanding. (Yep: that’s his real name: I remember that, too!) -rc

          Reply
      • I’ve read the full decision (easy to find on Google).

        Yes, Randy, they should have to cover her if they 1) notify her promptly, and 2) allow her to make the payment good.

        WVa has a legal definition of “notify her promptly”; WVa Code (33-6A-1(e)(7) at the time, now 33-6A-1(d)) requires insurance companies to give ten days’ notice of cancellation for failure to pay the initial premium. Given that they didn’t notify her until 11 days *after* the accident, this doesn’t qualify.

        I didn’t see anything about “refused to make good” so I don’t know the details of that. If the insurance company said “Your policy was invalid so we’re not paying your claim, period… but you still have to cover this check (and our NSF fees)”, then it’s entirely reasonable for her to refuse. If they said “Cover this check (and our NSF fees) and we’ll cover the claim” and she refused but still expected coverage, then yes it’s absurd.

        It’s not clear to me exactly when the check bounced. She wrote it on 8/15 and they didn’t notify her until 9/11 (27 days later). It’s not mentioned whether it was sitting in someone’s drawer for most of a month, or if they tried to cash it immediately, or what. I can certainly sympathize if someone checks their balance (knowing they haven’t written any checks in the past few weeks) and assumes the money in the account is available. (It’s happened to me.)

        I don’t see that she was asking for anything other than “pay the claim”; no imagined damages, no mental anguish. It seems like an entirely reasonable ask, to me, and I agree with the courts’ findings. (I do hope that part of the judgment was “cover your bounced check”, though.)

        And again, the Stella case hinges on her apparently having never paid her premium. This is based on the dissent by Supreme Court Justice Elliott “Spike” Maynard, who I doubt would speak imprecisely in a ruling, where he declared that this was a “something for nothing” case in that Ms Conley “never paid for [her] insurance coverage.” (emphasis added) -rc

        Reply
  3. Back in the 1980s I paid about $350 cash to GEICO for auto insurance. This was at a time when I didn’t have savings; that money was my car insurance money and nothing else. After issuing several temporary “binders” they ultimately declined to insure my vehicle because it was a van — something they could have told me in the office on day one — and issued a refund by check which took six full weeks to arrive. Even though I had given them cash in their local office a cash refund was out of the question.

    I didn’t have the luxury of an “extra” $350 to buy insurance elsewhere so I had to just wait for the check. Because my van was now uninsured, I was not allowed to drive it onto the navy base and had to park it off-base in the 50cents/night burglars’ shopping center across the street. Where it was broken into twice.

    I never miss a chance to badmouth GEICO. They were unhelpful and unapologetic throughout. The gecko is cute though.

    Reply
  4. Was she ever previously charged or convicted of deliberately writing checks with insufficient funds? Without reading the actual trial transcript, it is hard for me to judge the situation since there have been legal cases from around that time (maybe still are) of banks that routinely post debits BEFORE credits at the end of business day, resulting in checks that “bounce” (allowing the bank to “earn” a hefty fee), even though the depositor had the funds “available.” (Living close to the edge of financial ruin sometimes means choosing to pay a bill late to ensure the paycheck is actually in the account before the check can arrive.)

    And why would they issue the policy BEFORE the check cleared? What did they do for other clients that had bounced checks but no immediate claims?

    And what does the contract itself say about cancelations?

    The Devil is in the details, and there’s not enough details presented here for me to pick a side. Presumably, the West Virginia Supreme Court had ALL the relevant details, so we must defer to their ruling. And if all — or even most — corporations were as concerned with acting “fairly” as they as they are with protecting quarterly (rather than annual or 5-year) profit margins, there would be no need for labor unions or minimum wage laws.

    Reply

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