Mead v. Travelers Indemnity Co. of Connecticut, Inc.
Docket: Civil Action No. 14-2695
Court: District Court, E.D. Pennsylvania; March 17, 2015; Federal District Court
Plaintiffs Andrea Mead and William Danowski, along with the Petwin Unit Owners Association, are pursuing a diversity action against Travelers Indemnity Company of Connecticut, Inc. for damages related to a fire at their Washington, D.C. condominium on December 4, 2012. Travelers denies coverage, claiming the insurance policy was canceled due to nonpayment of the premium effective October 28, 2012. The court is considering Travelers' motion for summary judgment on all claims and the plaintiffs' cross-motion for summary judgment based on estoppel, which Travelers seeks to strike as untimely.
Summary judgment is warranted when there is no genuine dispute of material fact and the movant is entitled to judgment as a matter of law, as per Fed. R. Civ. P. 56. The burden lies with the party asserting that a fact is genuinely disputed to provide evidence from the record. A genuine dispute exists if reasonable evidence could support a verdict for the non-moving party. Mere speculation is insufficient to contest summary judgment.
Undisputed facts indicate that Mead owned the condominium and was a member of the Petwin Unit Owners Association, alongside Nedoroscik, who held the insurance policy through Service First Insurance. Travelers renewed the policy effective September 8, 2012, for one year, but the premium of $1,457 was not paid on time, prompting Travelers to begin cancellation proceedings for nonpayment.
An insurer must follow specific procedures to cancel an insurance policy under the Municipal Regulations of the District of Columbia. If these procedures are not followed, the insured is entitled to renew the policy. Cancellation is only valid if all conditions are met; otherwise, policyholders can renew for a term equal to the expiring term for policies of one year or less, or for one year if longer. One key requirement is that the insurer must notify the broker of the intent to cancel at least five days before notifying the insured.
In this case, there is a dispute over whether a Notice of Intent to Cancel was sent to Service First, the Association's broker. Travelers claims such a notice was generated and sent electronically on September 10, 2012, and by mail, but no evidence of receipt exists on the broker's end. The plaintiffs argue that the lack of documentation indicates Travelers did not properly cancel the policy.
Despite these claims, it is acknowledged that the plaintiffs and Service First received a Notice of Cancellation on September 18, 2012, indicating the policy would be canceled on October 28, 2012, if payment was not received. The Association attempted to make a payment, which was ultimately dishonored by the bank due to an incorrect account number. Following this, Travelers informed the Association that the payment must be replaced by November 24, 2012, to avoid retroactive cancellation. The Association failed to make this payment and experienced another unsuccessful payment attempt on December 4, 2012, the same day a fire occurred at the condominium, resulting in the tragic death of Nedoroscik. Travelers was informed of the fire and the death the following days.
On December 17, 2012, a Travelers customer service representative informed Nedoroscik via voicemail that an attempted payment on December 4 had failed, leading to the cancellation of the insurance policy effective October 28, 2012, unless payment was received by January 1, 2013. No payment was made, yet Travelers' claims adjuster processed the claim for several weeks post-fire, indicating coverage for building damage, except for unit owner improvements, and assured that repair payments would be issued. On January 29, 2013, Travelers notified Mead of the policy's cancellation as of January 15, 2013, retroactively. Mead attempted to pay the premium but was denied and subsequently filed a complaint with the District of Columbia Department of Insurance Securities and Banking (DISB), which confirmed the policy was correctly canceled due to non-payment. In July 2013, the Estate of Nedoroscik and the Association assigned their rights under the policy to the plaintiffs, who allege in their amended complaint that Travelers breached the insurance contract by improperly canceling the policy and failing to indemnify them for losses. They also claim that Travelers is estopped from denying coverage based on the adjuster's conduct and assert a breach of the implied duty of good faith and fair dealing. Travelers seeks summary judgment regarding the breach of contract claims, arguing that it properly canceled the policy due to a lack of a Notice of Intent to Cancel sent to Service First. However, genuine disputes of material fact exist regarding whether this notice was sent, which must be resolved by a jury. Travelers' argument that the plaintiffs lack standing based on the DISB's letter is deemed meritless, as the letter does not carry binding authority on the DISB or the court.
The court considered the parties' cross-motions for summary judgment regarding the plaintiffs' estoppel claim in Count III of the amended complaint. It assumed, for the sake of argument, that a Notice of Intent to Cancel was sent to Service First in a timely manner. The plaintiffs argued that Travelers should be estopped from denying coverage for a fire due to its actions in sending a claims adjuster to evaluate the property over several weeks. Under District of Columbia law, estoppel requires three elements: a representation by the defendant, detrimental reliance by the claiming party on that representation, and reasonable reliance.
The court found that neither the Association nor Mead changed their position detrimentally based on Traveler's actions; Mead merely assumed the policy was in force without any detrimental change to her situation. Both parties were aware that the premium payment deadline was extended to November 24, 2012, but remained unpaid. A voicemail from Travelers extending the payment deadline to January 1, 2013, was unknown to Mead until after the deadline had passed, indicating no detrimental reliance. Therefore, the court concluded that the plaintiffs could not recover from Travelers on estoppel grounds, and Travelers' motion to strike the plaintiffs' cross-motion as untimely was rendered moot.
The court also addressed the plaintiffs' claim that Travelers waived its right to timely payment by extending deadlines. Waiver is defined as the intentional relinquishment of a known right. The court noted that this argument was not included in the amended complaint, making it improperly raised. Even if considered, the waiver claim lacked merit, as the Association had received an actual Notice of Cancellation and had failed to pay the premium despite multiple extensions granted by Travelers. The equities in this case favored Travelers.
Travelers waived its right to timely payment of the premium up to a certain point, specifically by granting extensions until January 1, 2013. However, this waiver did not extend beyond that date, and the premium remained unpaid after that, closing the extended payment window. There is no injustice in requiring plaintiffs to adhere to the agreed-upon payment terms, even following an extension granted after a fire incident.
Travelers sought to dismiss Count IV of the amended complaint regarding the breach of the implied covenant of good faith and fair dealing. In the District of Columbia, this covenant is inherent in all contracts and prevents parties from undermining the contract's spirit or interfering with performance. Plaintiffs alleged that Travelers misrepresented to the DISB that it sent a Notice of Intent to Cancel to Service First, which Service First claimed not to have received. However, plaintiffs failed to provide evidence of willful imperfect performance by Travelers or any conduct breaching the implied covenant. The court noted that while it would not determine the factual status of the Notice's transmission, it acknowledged that the Association had actual notice of cancellation on September 18, 2012, and was given multiple extensions to pay the premium. Consequently, the court granted summary judgment in favor of Travelers concerning the breach of the implied covenant claim.
Travelers seeks summary judgment against plaintiffs' claims for punitive damages, consequential damages, and attorneys’ fees. In the District of Columbia, punitive damages for breach of contract are typically unavailable unless the breach resembles a willful tort, as established in Sere v. Group Hospitalization, Inc. Even a willful breach does not qualify for punitive damages, per Washington v. Government Employees Insurance Co. The District follows the American Rule regarding attorneys’ fees, where each party generally covers its own costs, except in extraordinary cases of egregious bad faith conduct. Plaintiffs failed to present evidence of Travelers' bad faith, despite acknowledging a potential breach of contract and insurance regulations. Travelers extended the premium payment deadline and informed the Association of the policy cancellation due to nonpayment. Consequently, summary judgment is granted in favor of Travelers regarding punitive damages and attorneys’ fees. The court's order dated March 17, 2015, includes the following: 1) Travelers' motion for summary judgment is granted concerning Counts III and IV of the amended complaint; 2) other aspects of the motion are denied; 3) plaintiffs' cross-motion for summary judgment is denied; and 4) Travelers’ motion to strike the plaintiffs' cross-motion as untimely is denied as moot. The plaintiffs, residents of Pennsylvania, filed the action against a Connecticut corporation, and prior motions for sanctions related to evidence destruction were denied. The court assumes, for discussion, that a Notice of Intent to Cancel was sent to Service First in September 2012, but Travelers was not obligated to waive timely payment or provide actual notice of any waiver.
