A notice of cancellation of a policy shall be effective only if it is based on one (1) or more of the following reasons:
Nonpayment of premium;
The named insured or any driver of the insured vehicle shall be convicted of:
Driving while intoxicated;
Homicide or assault arising out of the use of a motor vehicle; or
Three (3) separate convictions of speeding or reckless driving, or any combination of the two (2) during the policy period, including three (3) months prior to the effective date of the policy;
The driver's license or motor vehicle registration of the named insured or of any other operator who either resides in the same household or customarily operates an automobile insured under this policy has been under suspension or revocation during the policy period or, if the policy is a renewal, during its policy period or the one hundred eighty (180) days immediately preceding its effective date;
Fraud or misrepresentation of a material fact, the knowledge of which would have caused the insurer to decline to issue a policy; or
Nonpayment of membership dues when they are a requirement in the bylaws, agreements, or other legal instruments of a company before issuance and maintenance of a policy under this subchapter.
This section shall not apply to any policy or coverage which has been in effect less than sixty (60) days at the time notice of cancellation is mailed or delivered by the insurer, unless it is a renewal policy.
This section shall not apply to nonrenewal.
However, an insurer shall not be able to rescind bodily injury or property damage liability coverage under an insurance policy for fraud or misrepresentation with respect to any injury to a third party when suffered as a result of the insured's negligent operation of a motor vehicle.
Nothing in this subsection is intended to negate an insurer's right to rescind other coverages in the insurance policy purchased by the insured.
Cross References.
Effect of administrative revocation on motor vehicle insurance, § 27-22-106.
Research References
Ark. L. Notes.
Copeland, A Brief Survey of Some Important 1991 and 1992 Insurance Law Decisions, 1992 Ark. L. Notes 85.
Case Notes
Common Law Right of Rescission.
Arkansas compulsory insurance statutes have not abrogated the insurer's common law right to rescission when: (1) only the insurer and the insured are involved in a noncompulsory provision of the policy, and (2) the policy has been in existence less than 60 days, unless it is a renewal policy. Ferrell v. Columbia Mut. Ins. Cas. Co., 306 Ark. 533, 816 S.W.2d 593 (1991).
Fraud.
While an insurance company has the right to rescind coverages based on fraud by the insured without consent of the insured or a declaratory judgment, this right is unavailable when third-party claims are at issue. Douglass v. Nationwide Mut. Ins. Co., 323 Ark. 105, 913 S.W.2d 277 (1996).
The court declined to apply the 60-day period specified in this section and § 23-89-304 as a limitations period for rescission based on fraud. Douglass v. Nationwide Mut. Ins. Co., 323 Ark. 105, 913 S.W.2d 277 (1996).
Late Payment.
Premium payment made two months after cancellation renewed, rather than reinstated, the policy. Mid-Century Ins. Co. v. Miller, 55 Ark. App. 303, 935 S.W.2d 302 (1996).
Nonpayment.
Where the sole reason for the cancellation was nonpayment of premium, the chancellor's finding that a sufficient premium was in fact paid invalidated the stated ground for the cancellation and thereby rendered moot the issue of whether the cancellation was also statutorily prohibited because it occurred within six months of the policy's issuance. Equity Fire & Cas. Co. v. Needham, 323 Ark. 22, 912 S.W.2d 926 (1996).
Severance of Provisions.
Courts may sever compulsory provisions of an insurance policy from noncompulsory provisions and permit rescission only as to noncompulsory provisions. Ferrell v. Columbia Mut. Ins. Cas. Co., 306 Ark. 533, 816 S.W.2d 593 (1991).
Cited:
Farmers Ins. Co. v. Hall, 263 Ark. 734, 567 S.W.2d 296 (1978); Southern Farm Bureau Cas. Ins. Co. v. Easter, 374 Ark. 238, 287 S.W.3d 537 (2008).
Ferrell v. Columbia Mut. Cas. Ins., 816 S.W.2d 593 (Ark. 1991). · cites it 6דHe found that the “notice of cancellation” provisions of Ark. Code Ann. §§ 23-89-303 and 304 (1987) and the public policy of this State prohibited Columbia Mutual’s rescission of coverage ab initio.”
Equity Fire & Cas. Co. v. Needham, 912 S.W.2d 926 (Ark. 1996). · cites it 8דAppellee’s counter-motion for summary judgment included his argument that Ark. Code Ann. § 23-89-303 (Supp. 1993), which sets forth grounds for cancellation, prohibited the cancellation or rescission of any automobile-liability policy that has been in effect for less than sixty…”
Douglass v. Nationwide Mut. Ins., 913 S.W.2d 277 (Ark. 1996). · cites it 5דDuring the session of the General Assembly that followed the Ferrell decision, the Ferrell reasoning was adopted in Act 457 of 1993, now codified at Ark. Code Ann. § 23-89-303 (e) (Supp. 1993), which relates to automobile liability coverage: (e)(1) However, an insurer shall not…”
State Farm Fire & Cas. Co. v. Stockton, 750 S.W.2d 945 (Ark. 1988). · cites it 2ד(a) No notice of cancellation of a policy to which § 23-89-303 applies, and no notice of cancellation of a policy which has been in effect less than sixty (60) days at the time notice of cancellation is mailed or delivered, shall be effective unless mailed or delivered by the…”
Stanley Wood Chevrolet-Pontiac, Inc. v. Progressive Cas. Ins., 83 S.W.3d 445 (Ark. Ct. App. 2002). · cites it 9דFor reversal, appellant contends that the trial court erred in granting appellee’s motion for summary judgment and in finding that appellee owed no duty to appellant under Ark. Code Ann. § 23-89-303 to notify appellant that appellee no longer provided insurance coverage on the…”
Peraza v. United Fin. Cas. Co., 2015 Ark. App. 5 (Ark. Ct. App. 2015). · cites it 2דPeraza filed a countercomplaint for a declaratory judgment in October 2012, seeking to establish third-party rights pursuant to Ark.Code Ann. § 23-89-303(d)(1) (Repl. 2004).”
S. Farm Bureau Cas. Ins. v. Easter, 287 S.W.3d 537 (Ark. 2008). · cites it 2דSee Ark. Code Ann. § 23-89-303 (d)(l) (Repl. 2008) (expressly preventing an insurance company from rescinding coverage based on misrepresentations or fraud when the insured’s negligence causes injury to a third party).”
Wozniak v. Colonial Ins., 885 S.W.2d 902 (Ark. Ct. App. 1994). “1991) provides in part: (a)(1) No notice of cancellation of a policy to which § 23-89-303 applies, and no notice of cancellation of a policy which has been in effect less than sixty (60) days at the time notice of cancellation is mailed or delivered, shall be effective unless…”
James West v. Shelter Mut. Ins. Co., 2022 Ark. App. 38 (Ark. Ct. App. 2022). · cites it 10דOn appeal, West argues that the circuit court erred in granting summary judgment to Shelter because (1) the 1996 Dodge Ram was covered by the Shelter insurance policy; (2) Stacy Mathis was an insured person under the Shelter insurance policy; and (3) Shelter rescinded the…”
Cornerstone Nat'l Ins. Co. v. Rodriguez (W.D. Ark. 2021). · cites it 6דSeparate Defendants Dalia Griselda Ceja Arajuo and Monica Ceja Arajuo (“Arajuo Defendants”) also argue the reasonable belief exclusion is analogous to a denial of coverage based on misrepresentation or fraud and under Ark. Code Ann. § 23-89-303 (d)(1). Cornerstone cannot rescind…”
Swinney v. Atlanta Cas. Co., 854 S.W.2d 728 (Ark. Ct. App. 1993). “§ 23-89-304 (a)(l) (1992), it states: (a)(1) No notice of cancellation of policy to which § 23-89-303 applies, and no notice of cancellation of a policy which has been in effect less than sixty days at the time notice of cancellation is mailed or delivered, shall be effective…”
— Ark. Code Ann. § 23-89-303(b) — 1 case
Equity Fire & Cas. Co. v. Needham, 912 S.W.2d 926 (Ark. 1996). “Appellee’s counter-motion for summary judgment included his argument that Ark. Code Ann. § 23-89-303 (Supp. 1993), which sets forth grounds for cancellation, prohibited the cancellation or rescission of any automobile-liability policy that has been in effect for less than sixty…”
— Ark. Code Ann. § 23-89-303(d)(1) — 2 cases
Peraza v. United Fin. Cas. Co., 2015 Ark. App. 5 (Ark. Ct. App. 2015). “Peraza filed a countercomplaint for a declaratory judgment in October 2012, seeking to establish third-party rights pursuant to Ark.Code Ann. § 23-89-303(d)(1) (Repl. 2004).”
James West v. Shelter Mut. Ins. Co., 2022 Ark. App. 38 (Ark. Ct. App. 2022). “On appeal, West argues that the circuit court erred in granting summary judgment to Shelter because (1) the 1996 Dodge Ram was covered by the Shelter insurance policy; (2) Stacy Mathis was an insured person under the Shelter insurance policy; and (3) Shelter rescinded the…”
— Ark. Code Ann. § 23-89-303(e)(2) — 1 case
Douglass v. Nationwide Mut. Ins., 913 S.W.2d 277 (Ark. 1996). “During the session of the General Assembly that followed the Ferrell decision, the Ferrell reasoning was adopted in Act 457 of 1993, now codified at Ark. Code Ann. § 23-89-303 (e) (Supp. 1993), which relates to automobile liability coverage: (e)(1) However, an insurer shall not…”
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