Whether the common law rule that an insurance contract cancellation is only effective when notice of cancellation is received by the insurance company was abrogated by the 1978 amendment to Banking Law § 576.

No. The amendment to Banking Law § 576 did not abrogate the common law rule, and an insurance company still must receive a notice of cancellation before the cancellation becomes effective.

Unigard Insurance Company ("Unigard") issued an insurance policy to Prosper's Trucking Inc. ("Prosper's"). Prosper's then entered into a premium finance agreement with AFCO Credit Corporation ("AFCO"), under which AFCO had the power to cancel the Unigard policy due to missed premiums. Also, the agreement required AFCO to comply with the notice provisions of Banking Law § 576. On November 1, 1996, after Prosper's missed a premium payment, AFCO allegedly mailed a notice of intent to cancel, which Prosper's maintains that it did not receive. AFCO then mailed both Prosper's and Unigard a notice of cancellation, stating that the policy would be cancelled effective November 25, 1996. Prosper's and Unigard did not receive AFCO's cancellation notice until after November 29, 1996, when Plaintiff's decedent died from an accident with a Prosper's driver. Plaintiff sued Prosper's and the driver for wrongful death and initiated this action, seeking a declaratory judgment that Unigard has a duty to defend and indemnify Prosper's. Unigard argued that they did not have a duty to defend or indemnify because the policy was cancelled on November 25, 1996. The Supreme Court granted Unigard's motion for summary judgment, dismissed the complaint, and concluded that the 1978 amendment to Banking Law § 576(1)(d) "abrogated the common law rule requiring the insurer's receipt of the cancellation notice for the cancellation to be effective." The Appellate Division reversed, granted summary judgment for Plaintiff, Prosper's and the driver, and declared that Unigard had a duty to defend and indemnify, as Banking Law § 576 did not abrogate the common law rule. The Court of Appeals affirmed.

The Court noted how Banking Law § 576 regulates the cancellation procedure for premium finance agencies and how the 1978 amendment was enacted to provide better protection to "the insured and third parties by preventing gaps in coverage." The Court held that the legislative history indicates that the legislature did not intend to abrogate the common law rule, and that such abrogation would undermine the express intent of the amendment - to prevent coverage gaps. Therefore, the Court held that the plain language does not abrogate the common law rule. As applied to the present facts, under the common law rule, the policy was not canceled until Unigard (the insurer) received the notice, which was after the November 29^th accident. Thus, the Court affirmed the order of the Appellate Division.