Simply mailing a cancellation notice to a policyholder, when viewed in the context of other indicators, was enough to comply with state law and void a homeowner’s insurance policy just weeks before a fire destroyed a home, the North Carolina Supreme Court decided in a Nationwide General Insurance case last week.

“Abundant evidence shows that plaintiffs had actual notice of cancellation well before the fire. Because Nationwide gave plaintiffs the timely forewarning required by subsection 58-44-16(f)(10), it properly canceled their policy,” Justice Anita Earls wrote in the Aug. 23 opinion, which upheld a 2022 decision by a divided state Court of Appeals.

The question of what constitutes a proper cancellation notice, or whether a notice can be lost in the mail – as the plaintiffs argued in this case – has arisen multiple times in many states. Some jurisdictions have held that just mailing a letter is sufficient. Others have argued that certified mail receipt is required.

The justices in this case, Ha vs. Nationwide, were careful to note that their decision is not intended to be a sweeping endorsement of simply mailing a notice.

“We decline to gratuitously opine on whether depositing notice in the mail counts as ‘giving’ written notice under subsection 58-44-16(f)(10),” the court wrote. “…Most importantly, it affirms our longstanding recognition that ‘it is the fact of notice that is important.'”

Still, the opinion gives some guidance to insurers and insureds on how and when cancellations can void policies and preclude claims.

The case dates to 2015. Nung Ha and Nhiem Tran had moved from Vietnam to Wake County, North Carolina and found a house near Raleigh. AAA insurance wrote the HO policy that year but soon canceled, noting several hazards, including rotten wood and an unfenced swimming pool.

The plaintiffs then turned to Nationwide through an online policy application. Nationwide wrote the coverage, contingent on an inspection of the property, and set up monthly bank drafts to cover the premiums, the court explained. A few weeks later, after an inspection by an underwriter, the insurer said it mailed a cancellation letter to the homeowners, citing the same hazards that AAA had flagged.

The letter provided 15 days’ notice, with a cancel date of June 6, 2015. Less than three weeks later, the house burned to the ground. The family filed a claim and it was denied. Nationwide explained that the policy was not in force.

The homeowners said they had never received the notice in the mail. They filed suit against Nationwide.

After ups and downs in the appellate courts, the Supreme Court said Friday that Nationwide showed that it had sent the letter in compliance with state law, which allows insurers to cancel within the first 60 days by giving 15 days’ notice.

The opinion pointed to a 1965 decision by the state’s Industrial Commission, which held that a workers’ compensation insurance company did not give proper cancellation notice because it did not send the notice by certified mail. But the 1965 Supreme Court found that idea was in error and that statutes do not require certified mail or other proof of receipt. The commission had impermissibly “paramounted the manner of giving notice rather than the fact of notice.”

The 2024 court went on to explain that Ha and Tran also had other clues that their policy had been canceled: They knew of the gross hazards, as previously cited by AAA; but rather than fix the problems, they sought new coverage from Nationwide.

“So when plaintiffs contracted with Nationwide, they did not do so in a vacuum—they signed that policy aware of, and yet declining to address, the hazards that led another insurance carrier to end their coverage just weeks before,” the justices noted.

Perhaps most importantly, two days after Nationwide said it canceled the policy, it had sent a refund check to the family for the excess premium paid. The check showed the policy number and the homeowners signed the check and cashed it. Nationwide also halted the monthly bank drafts that had paid the premiums.

“Continuing our focus on substance over form, we hold that plaintiffs had advanced warning of cancellation and were armed with the ‘information necessary for [their] protection,'” the court wrote, citing previous court rulings.

Stephen Feldman, Travis Hinman and Garrett Steadman represented Nationwide in the appeal. The North Carolina Rate Bureau, which represents insurers on rate requests, filed an amicus curiae brief in the case. The Supreme Court opinion can be seen here.

This article was originally published by Insurance Journal. Reporter William Rabb is the Southeast editor of Insurance Journal.