The Second Department, reversing Supreme Court, over a two-justice dissent, determined the umbrella policy had been cancelled for non-payment just hours before plaintiff (Garcia) was struck by the car owned by the insured, Rakowski. The Second Department rejected the argument that the insurance contract was divisible. The GEICO policy in effect was a $2,000,000 umbrella policy which represented an increase from a prior $1,000,000 policy. The additional premium ($199) for the $2,000,000 policy had not been paid, but the premium in an amount equal to the premium for the prior $1,000,000 policy ($306) had been paid. The Second Department held that the $1,000,000 coverage was no longer available. Only the $2,000,000 policy was in effect, and that was cancelled for failure to pay the additional $199 premium:
Garcia argues, and our dissenting colleagues would conclude, that, because of how the premiums were set out in the Amended Declarations, there is an ambiguity as to whether Rakowski received a policy for $2,000,000 or $1,000,000, or as to whether the policy was divisible or severable as to the amount of coverage. We disagree. The fact that the premium was separately stated for the increase in the coverage limit is irrelevant here. The $1,000,000 renewal proposal of the policy from the previous year had already been sent out before Rakowski asked for an increase in the amount of coverage to $2,000,000. The “Amended Declarations,” which, by their terms, “SUPERSEDE[D] ANY PREVIOUS DECLARATION” for the policy period beginning October 10, 2005, were sent to Rakowski after she asked for the changes to her policy. Thus, the additional billing, which separated the original premium from the amount attributable to the increase, was unremarkable and did not give rise to an ambiguity in the policy that Rakowski had asked for and GEICO agreed to provide: a liability limit of $2,000,000 as of the beginning of the new policy period. Garcia is not seeking to divide Rakowski’s policy, but, in effect, to rewrite it to provide what Rakowski never asked for: a policy with coverage of only $1,000,000.
As Garcia points out, forfeiture is not favored in the law… , and, where cancellation of an entire policy would result in forfeiture, courts may be reluctant to hold that an insurance contract is not divisible … . There is, however, no forfeiture here. Rakowski asked for, and received, a $2,000,000 policy, and she had $2,000,000 in coverage from the outset of the policy period, October 10, 2005. Because she only paid part of the premium, her coverage was cancelled, upon notice, when the prorated premium for the coverage she contracted for was exhausted. In other words, Rakowski got everything she paid for, and she forfeited nothing. That Rakowski “just missed” being insured for the injuries caused to Garcia is unfortunate, but nonetheless irrelevant to this analysis. GEICO sent its cancellation notice more than six months before Rakowski’s vehicle struck Garcia. We are not free to alter the meaning of the policy to avoid the result caused by Rakowski’s nonpayment of the premium for her $2,000,000 policy … . Garcia v Government Empls. Ins. Co., 2017 NY Slip Op 05202, 2nd Dept 6-28-17