Hiscox Insurance Company, Inc. v. Sandra Sanford and Midway Auction Company a/k/a Gilbert and Associates, LLC (mem. dec.) ( 2020 )

MEMORANDUM DECISION
Pursuant to Ind. Appellate Rule 65(D),
this Memorandum Decision shall not be FILED
regarded as precedent or cited before any Feb 19 2020, 9:24 am
court except for the purpose of establishing
CLERK
the defense of res judicata, collateral Indiana Supreme Court
Court of Appeals
estoppel, or the law of the case. and Tax Court
ATTORNEYS FOR APPELLANT ATTORNEY FOR APPELLEE
HISCOX INSURANCE COMPANY, INC. MIDWAY AUCTION COMPANY
Logan C. Hughes A/K/A GILBERT AND
Robert G. Sylvester ASSOCIATES, LLC
Reminger Co., L.P.A. Glen E. Koch, II
Indianapolis, Indiana Boren, Oliver & Coffey, LLP
Martinsville, Indiana
IN THE
COURT OF APPEALS OF INDIANA
Hiscox Insurance Company, Inc., February 19, 2020
Appellant-Defendant, Counter-Plaintiff/
Cross-Claimant, Court of Appeals Case No.
v. 19A-CT-1512
1 Appeal from the Morgan Superior
Sandra Sanford and Midway Court
Auction Company a/k/a Gilbert The Honorable Sara A. Dungan,
and Associates, LLC, Judge
Appellee-Plaintiff, Counter-Defendant, Trial Court Cause No.
Appellee-Defendant/Cross-Defendant. 55D03-1802-CT-261
Barnes, Senior Judge.
1
Sandford is represented by counsel in the trial court. Sanford’s counsel has entered an appearance in this
interlocutory appeal but has not filed a brief with this Court. However, under Indiana Appellate Rule 17(A)
“A party of record in the trial court or Administrative Agency shall be a party on appeal.”
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Statement of the Case
[1] Hiscox Insurance Company, Inc. (“Hiscox”) brings this interlocutory appeal
from the trial court’s order denying its motion for summary judgment on a
policy coverage issue, contending that the trial court erred by failing to find that
Hiscox is entitled to judgment as a matter of law. We affirm.
Issue
[2] Hiscox presents the following issue which we restate as the following question:
Did the trial court err by failing to find that Hiscox properly
cancelled the insurance policy issued to Gilbert and Associates,
LLC (“Gilbert”) for non-payment of a premium, thus entitling
Hiscox to judgment as a matter of law?
Facts and Procedural History
[3] Sandra Sanford (“Sanford”) filed a personal injury complaint alleging that she
was injured on the premises of Midway Auction Company, owned and
operated by Gilbert. Sanford’s injuries were alleged to have occurred on
January 1, 2018, and her complaint was filed on February 16, 2018, contending
that the injuries were suffered because of alleged negligence on the part of
Gilbert. Gilbert then turned to Hiscox seeking coverage for Sanford’s claim
under an insurance policy issued by Hiscox. Hiscox denied coverage alleging
that the policy was cancelled for non-payment of the monthly premiums several
months prior to Sanford’s alleged injury.
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[4] Next, on March 19, 2018, Sanford filed an amended complaint for damages
seeking a declaratory judgment that Hiscox’s insurance policy was effective on
the date of her alleged injury. On January 23, 2019, Hiscox filed its motion for
summary judgment seeking a declaratory judgment that Hiscox properly
cancelled its insurance policy for Gilbert’s non-payment of insurance premiums
such that the injuries alleged in Sanford’s complaint were not covered.
[5] On May 15, 2019, the trial court entered its order denying Hiscox’s motion for
summary judgment. On June 14, 2019, Hiscox filed a motion to certify for
interlocutory appeal the trial court’s decision on summary judgment, and the
trial court granted Hiscox’s motion. This Court granted Hiscox’s request to
accept the permissive interlocutory appeal.
[6] The pertinent facts developed through the argument on summary judgment are
as follows. Hiscox markets and sells insurance products, including general
liability insurance, professional liability insurance and a business owners policy
which is combined property and liability coverage for small business owners in
the United States. Those policies are sold directly to consumers on-line via the
corporate website and through a call center. Insurance premiums are collected
by credit or debit card, and insureds are given the option of paying premiums in
a lump sum or monthly installments. Policy documents are transmitted to
policyholders by email at the time of purchase.
[7] On May 25, 2017, Carl Gilbert (“Carl”), who owned Gilbert, contacted Hiscox
and entered into a contract for a business owners policy No. UDC-1984671-
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BOP-17 (“the Policy”). During a phone call to Hiscox’s call center, Carl
provided his name, telephone number, mailing address, email address, and
debit card information linked to an account issued by Citizens Bank, to make
automatic, monthly payments. Carl was the only individual with access to that
bank account.
[8] The correct mailing address for Gilbert is as follows:
Gilbert and Associates, LLC
554 W. State Rd. 42
Mooresville, IN 46158
The address entered into the Hiscox database was as follows:
Gilbert and Associates, LLC
554 W. State Rd. 42
42
Mooresville, IN 46158
Appellant’s App. Vol. II, pp. 153, 167.
[9] The incorrect address is found in four separate places in the Policy. Id. at 39,
114, 116. In the application summary, the address for Gilbert is listed twice
with the additional “42” on a separate line. Id. at 114, 116. That same address
appears twice in the “Businessowners Insurance Declarations” portion of the
Policy. Id. at 39.
[10] The “Your Insurance documents” section of the Policy includes two provisions
reading as follows:
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Enclosed you will find the policy documents that make up your
insurance contract with us.
Please read through all of these documents. If you have any
questions or need to update any of your information please call
us at 888-202-3007 (Mon-Fri, 8am-10pm EST).
***
Application Summary
This is a summary of the information that you provided to us as
part of your application. Please review this document and let us
know if any of the information is incorrect.
Id. at 37.
[11] Hiscox received two subsequent payments from Gilbert on July 26, 2017 and
August 28, 2017 but received no additional premium payments for the Policy.
Sometime around September 15, 2017, the debit card number associated with
Gilbert’s account with Citizens Bank changed. Although automatic payments
for other Gilbert’s contractual obligations continued after the card number
changed, no payments were made for the Policy after September 2017, and
Hiscox did not receive a payment due in September 2017. Gilbert’s bank
statement did not include a record of payment for the insurance premium in
September.
[12] When an insured fails to pay its premium, Hiscox will cancel the policy
pursuant to the terms of cancellation set forth in the Policy, which provides in
pertinent part as follows:
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III–COMMON POLICY CONDITIONS (APPLICABLE TO
SECTION I–PROPERTY AND SECTION II–LIABILITY)
A. Cancellation
***
2. We may cancel this policy by mailing or delivering to the first
Named Insured written notice of cancellation at least:
***
b. 10 days before the effective date of cancellation if we cancel
for nonpayment of premium.
3. We will mail or deliver our notice to the first Named Insured’s
last mailing address known to us.
***
6. If notice is mailed, proof of mailing will be sufficient proof of
notice.
Id. at 88-89.
[13] Hiscox’s normal business practice in Indiana for cancelling policies for
nonpayment of a premium is to mail a notice of cancellation to the last known
address of the named insured at least ten days prior to the effective date of the
cancellation. Hiscox’s normal business practice also includes obtaining a
certificate of mailing from the United States Postal Service verifying the date
the notice of cancellation was transmitted to the named insured at the address
in the Policy. The address listed on the certificate of mailing was as follows:
Gilbert and Associates, LLC
554 W State Rd 42 42
Mooresville, IN 46158
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Appellant’s App. Vol. II, p. 166.
[14] On October 11, 2017, Hiscox prepared a notice of cancellation of the Policy to
Gilbert at the address with the additional “42” on a separate line as appeared in
the Policy and informed Gilbert that the Policy would be cancelled on October
26, 2017 at 12:01 a.m. local time. Id. at 34, 120. The notice also indicated that
if the premium due was received prior to the cancellation date, the Policy
would remain in effect. Id. The certificate of mailing issued by the United
States Postal Service, however, confirmed the mailing of the notice on October
11, 2017, but at the address with the additional “42” appearing on the same line
instead of a separate line. Id. at 120.
[15] Hiscox claimed that it also took the additional step, not required by contract, of
leaving a voicemail message to Gilbert from Hiscox’s call center informing
Gilbert of the unpaid premium. Hiscox further claimed it did not receive
payment of the outstanding premium and did not receive a response from
Gilbert after the notice was mailed. Hiscox stated the Policy was cancelled by
means of a cancellation endorsement on October 26, 2017. Hiscox further
stated that the endorsement was transmitted to Gilbert via email.
[16] Carl filed an affidavit in opposition to Hiscox’s motion. He denied receiving
the notice of cancellation via U.S. Mail or receiving the voicemail message
from Hiscox’s call center. Id. at 53-54. Further, he averred that when he made
the claim with Hiscox an agent told him over the phone that Hiscox’s system
had a problem delivering email to Gmail accounts. Id. at 153. Carl further
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stated that he had a Gmail address, and that he had never received an email
notifying him that he was delinquent in paying the premiums or that the Policy
was going to be cancelled. Id. at 154. Additionally, he stated that it was a
Hiscox agent who had entered the address into their database and that he never
had access to or manipulated Hiscox’s databases. Id. at 153-54.
[17] After hearing arguments and considering the designated materials, the trial
court entered its order denying Hiscox’s motion for summary judgment.
Discussion and Decision
[18] Hiscox appeals from the denial of its motion for summary judgment. Our well-
settled standard of review is as follows:
We review summary judgment de novo, applying the same
standard as the trial court: Drawing all reasonable inferences in
favor of . . . the non-moving parties, summary judgment is
appropriate if the designated evidentiary matter shows that there
is no genuine issue as to any material fact and that the moving
party is entitled to judgment as a matter of law. A fact is material
if its resolution would affect the outcome of the case, and an
issue is genuine if a trier of fact is required to resolve the parties’
differing accounts of the truth, or if the undisputed material facts
support conflicting reasonable inferences.
The initial burden is on the summary-judgment movant to
demonstrate the absence of any genuine issue of fact as to a
determinative issue, at which point the burden shifts to the non-
movant to come forward with contrary evidence showing an
issue for the trier of fact. And although the non-moving party
has the burden of persuading us that the grant of summary
judgment was erroneous, we carefully assess the trial court’s
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decision to ensure that he was not improperly denied his day in
court.
***
Summary judgment is a desirable tool to allow the trial court to
dispose of cases where only legal issues exist. But it is also a
blunt . . . instrument, by which the non-prevailing party is
prevented from having his day in court. We have therefore
cautioned that summary judgment is not a summary trial, and
the Court of Appeals has often rightly observed that it is not
appropriate merely because the non-movant appears unlikely to
prevail at trial. In essence, Indiana consciously errs on the side
of letting marginal cases proceed to trial on the merits, rather
than risk short-circuiting meritorious claims.
Hughley v. State, 15 N.E.3d 1000, 1003-04 (Ind. 2014) (internal quotations,
citations, and parentheticals omitted).
[19] “It has long been held in Indiana that insurance policies are governed by the
law of contracts.” Pekin Ins. Co. v. Wheeler, 493 N.E.2d 172, 174 (Ind. Ct. App.
1986). “[T]he term ‘cancellation’ refers to the termination of a policy at the end
of the policy period.” Am. Family Mut. Ins. Co. v. Ramsey, 425 N.E.2d 243, 244
(Ind. Ct. App. 1981). “As a general rule, once a valid contract of insurance has
been effectuated, the right of either party to cancel it at pleasure can accrue in
only three ways: by a concurrent agreement, by a reservation in the policy, by
statute.” Cook v. Mich. Mut. Liab. Co., 289 N.E.2d 754, 758 (Ind. Ct. App. 1972)
(quoting Bushnell v. Krafft, 183 N.E.2d 340, 343 (Ind. Ct. App. 1962)), trans.
denied.
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[20] Where the right to cancel exists only by contract, a cancellation clause is a
condition requiring strict compliance to make an attempted cancellation valid.
Hibler v. Conseco, Inc., 744 N.E.2d 1012, 1018 (Ind. Ct. App. 2001) (citing 3
ERIC M. HOLMES, HOLMES’ APPLEMAN ON INSURANCE 2D § 16.7 at
354 (2d ed.1998)). In Moore v. Vernon Fire & Cas. Ins. Co., 234 N.E.2d 661, 663
(Ind. Ct. App. 1968), the Court at that time held that strict compliance with the
terms of the policy was not necessary, that is, where the notice of cancellation
stated an effective date less than ten days from the mailing of the notice, the
notice was sufficient to cancel the policy ten days after the mailing of the notice.
The Court further held that the notice was sufficient to inform the insured of the
insurer’s intentions to cancel the policy and to provide the insured with more
time than required in the policy to obtain other insurance.
[21] Several cases from this jurisdiction and others have analyzed a variety of
aspects of cancellation of insurance policies. We recite them here to thoroughly
explain our decision.
[22] Starting first with cases involving the law in Indiana, the Seventh Circuit Court
of Appeals, in State Farm Mut. Auto. Ins. Co. v. Perrin, 331 F.2d 565, 568 (7th Cir.
1964), observed that the majority view among states was that these cancellation
clauses similar to the one at issue here were not ambiguous and that proof of
depositing in the mail was sufficient to constitute notice regardless of the
insured’s lack of actual receipt.
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[23] In deciding that case, the Seventh Circuit quoted from Cnty. of Williamson v.
Standard Accident Ins. Co., 32 Ill. App. 2d 363, 365, 178 N.E.2d 149, 150 (Ill. Ct.
App. 1961), because the court found no Indiana cases yet addressing the issue.
In that case, the insurer denied a claim, contending that the policy had been
cancelled pursuant to a clause providing that mailing of notice shall be
sufficient proof of notice. The address on the policy was incorrect but was
mailed to the incorrect address as shown on the policy and was never actually
received by the insured. The court noted that the insured had the policy in its
possession for seven months prior to cancellation, and that the insured did not
object to the correctness of the address reflected in the policy. The court cited
to several cases, which follow, in support of its decision.
[24] In Raiken v. Commercial Cas. Ins. Co., 135 A. 479, 480 (N.J. 1926). The New
Jersey Supreme Court was asked to decide whether a notice of cancellation
mailed to the address, which was incorrect, but listed in the policy, and
returned to the insurer, constituted a valid cancellation of the policy. Despite
evidence showing that the insurer was aware of the correct address of the
insured, but had not corrected the policy to reflect such, the insurer had
followed the terms of the policy and the cancellation was valid.
[25] Next, in Duff v. Secured Fire & Marine Ins. Co., 227 S.W.2d 257 (Tex. Civ. App.
1949), a notice of cancellation was held to be valid because the address listed in
the policy was the only post office in Texas with that specific address. Evidence
that the address did not completely match that as listed in the policy because it
failed to include “El Paso” did not render the cancellation ineffective. The
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parties had contracted for delivery of the notice to the post office and not the
individual insured. Evidence that the insured did not receive the notice did not
invalidate the cancellation.
[26] In contrast, in Irving v. Sunset Mut. Life Ins. Co., 4 Cal. App. 455, 41 P.2d 194,
196 (Cal. App. 1935), a case in which the insured notified the insurer of a
mistake in address, but the agent failed to make a correction, proof of mailing
was ineffective to constitute notice of cancellation. The mistake was made by
an agent of the insurer and the policy was not corrected. Such prevented the
insurer from asserting a defense against coverage under the policy.
[27] In Boyle v. Inter Ins. Exch. of Chi. Motor Club, 82 N.E.2d 179, 180 (Ill. Ct. App.
1948), the court held that a complete defense was shown by the insurer. The
cancellation clause is the same as that in the present appeal and in the other
cases. The evidence in Boyle showed that the notice of cancellation was mailed
to the insured by the insurer to the address, albeit the incorrect address, but the
one set forth in the policy.
[28] Later, returning to Indiana cases, in Farber v. Great Am. Ins. Co., 406 F.2d 1228,
1229 (7th Cir. 1969), the Seventh Circuit Court of Appeals applied Indiana law
to resolve a dispute involving two attacks on the cancellation clause of the
insurance policy. The insured attacked the effectiveness of the cancellation
because it was mailed less than the 10 days before cancellation. The insured
also attacked the validity of the cancellation on the grounds that the notice was
never actually received in the mail. The Seventh Circuit cited Moore, 234
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N.E.2d at 663, to hold that, under the cancellation clause at issue, mailing of
notice, not actual receipt, was sufficient to comply with the terms of the
insurance contract. The cancellation was, therefore, valid and became effective
ten days from the date of its mailing.
[29] United Farm Bureau Mut. Ins. Co. v. Adams, 251 N.E.2d 696, 700 (Ind. Ct. App.
1969), involves a declaratory judgment action. The insureds were involved in a
collision and sought coverage from their insurer. The insurer denied coverage,
claiming that the policy had been cancelled by mailing notice prior to the
accident due to the insured’s failure to pay premiums. The policy contained the
same cancellation clause as the one involved in the present case, including the
provision that mailing of notice shall be sufficient proof of notice. The insured
claimed that no notice of cancellation was received. Because of language in the
policy, the issue of receipt of the notice was factually irrelevant, but the issue of
proof upon mailing was a live issue. There were enough gaps in the evidence to
find that there was insufficient proof of mailing.
[30] In Conrad v. Universal Fire & Cas. Ins. Co., 686 N.E.2d 840 (Ind. 1997), our
Supreme Court addressed an appeal involving the mailing by an insurer of a
cancellation notice by certified mail return receipt requested. The address used
for mailing was the correct address as it appeared in the policy. The policy
neither required nor prohibited the use of certified mail return receipt requested
as the method of mailing. The language in the policy included the provision
that “proof of mailing shall be sufficient proof of notice.” Id. at 841. The Court
held that proof of mailing did not create an irrebuttable presumption of notice,
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where the notice was returned to the insurer marked “unclaimed.” Summary
judgment in favor of the insurer was reversed. In the present case, there was no
certified mail issue, therefore, there was no return of the notice showing the
mailing was “unclaimed.”
[31] Although there are many other cases from other jurisdictions addressing the
issue, the above is a sufficient sampling of decisions regarding challenges to
cancellation notices and the addresses to which they are sent. Further, we note
it appears that compliance with Indiana statutes pertaining to cancellation of
policies is not at issue in the present case. See Ind. Code §§ 27-1-31-2, 2.5
(1988).
[32] Turning to the present appeal, we conclude that the trial court correctly denied
Hiscox’s motion for summary judgment. The incorrect address in the policy
appears in the document providing a notice of cancellation. However, the
certificate of mailing stamped by the United States Postal Service shows that the
notice was mailed to an address different from the one appearing in the Policy,
but also incorrect. The additional “42” did not appear on a separate line as it
does in the Policy. As in Adams, 251 N.E.2d 696, the issue of receipt of the
notice is factually irrelevant. However, the issue of proof of mailing presents a
genuine issue of material fact including, but not limited to, who was responsible
for the error in entering Gilbert’s address into the Hiscox database, and what
happens when a means of delivery used by the parties to the contract, such as
electronically by email, fails or has intermittent delivery issues.
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[33] The following language from Adams, concerning public policy considerations,
albeit regarding motor vehicle liability insurance, seems relevant here. The
following quote is worth considering.
However, before moving to that task, we are moved to remark that
the method in which this question is brought before the court is very
appropriate in light of the important policy considerations inherent
in the situation. Notice of motor vehicle liability insurance
cancellation touches an area of public interest far beyond the scope
of the relationship of the parties before us. The dangers of driving
uninsured vehicles are obvious. Not only may one be subjected to
the risk of a large financial liability at the hands of a negligently
injured person, but the opportunity for that other injured party to
gain a reasonable amount of damages for his injury is considerably
lessened. It is for the benefit of every driver and passenger on our
roads today, as well as ourselves, that we carry liability insurance.
When this protection is being cancelled, public policy demands a
strict compliance with the procedure involved so that the insured, or
former insured, may be given reasonable opportunity to make other
insurance arrangements before his old coverage is denied.
145 Ind. App. at 519-20, 251 N.E.2d at 698.
[34] As industries evolve to take advantage of advancements in technology,
adjustments have been made to the means of acquiring insurance. We must be
mindful to strike a balance between the competing interests of lowering the cost
of overhead and generating more business volume against providing liability
coverage at a reduced rate while providing coverage to protect those whose risk
is contemplated by the insurance.
[35] As stated in Hibler, “Where the right to cancel exists only by contract, a
cancellation clause is a condition requiring strict compliance to make an
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attempted cancellation valid.” 744 N.E.2d at 1018. Hiscox claims that it
mailed the notice to the address provided in the Policy and that it was Gilbert’s
contractual duty to read the contract in its entirety and notify Hiscox of any
inaccuracies. Gilbert argues that it was never in charge of nor had access to the
Hiscox database and provided the agent at the call center with the correct
information. Hiscox supports its argument in part by the certificate of mailing,
which visibly shows an incorrect address not appearing in the Policy. Yet, the
Policy provides that proof of mailing is sufficient proof of notice. Resolution of
this issue requires a trier of fact where the parties’ accounts of the truth differ, or
the undisputed material facts support conflicting reasonable inferences. See
Hughley, 15 N.E.3d at 1003. Such is the case here.
[36] Viewing the evidence most favorable to Gilbert, the non-moving party, we
conclude, as did the trial court, that there exists a genuine issue of material fact
such that summary judgment in favor of Hiscox is inappropriate.
Conclusion
[37] In light of the foregoing, we affirm the trial court’s denial of Hiscox’s motion
for summary judgment.
[38] Affirmed.
Mathias, J., and Pyle, J., concur.
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