Get Busy Living v. Main line Insurance ( 2016 )

J-A03003-16
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
GET BUSY LIVING SOLUTIONS, LLC; IN THE SUPERIOR COURT OF
AND PHILADELPHIA SHOWCASE PENNSYLVANIA
LOUNGE, LLC
Appellants
v.
MAIN LINE INSURANCE OFFICE, INC.;
CHRISTOPHER OIDTMAN; LANDMARK
AMERICAN INSURANCE COMPANY; AND
USG INSURANCE SERVICES, INC. F/K/A
USG INSURANCE SERVICES OF
PENNSYLVANIA, INC.
Appellees No. 1103 EDA 2015
Appeal from the Order Entered May 22, 2014
In the Court of Common Pleas of Philadelphia County
Civil Division at No(s): February Term, 2013, No. 1822
BEFORE: GANTMAN, P.J., MUNDY, J., and DUBOW, J.
DISSENTING MEMORANDUM BY MUNDY, J.: FILED MAY 23, 2016
I respectfully dissent from the Majority’s decision to affirm the trial
court’s grant of summary judgment to Appellees in this case. Appellants
request that we perform a straightforward application of 40 P.S. § 3403 to
resolve the issues in this case, and I see no reason not to do so. In my
view, Section 3403 was tailor-made by the General Assembly to preclude the
very lapse in coverage that was allowed to occur in this case.
The Majority accurately summarizes the factual and procedural history
of this case, as well as our standard of review; therefore, I need not repeat
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them here. As the Majority notes, Appellants aver in their first two issues
that Section 3403 required Appellees to provide coverage for the loss in this
case. Appellants’ Brief at 11. Section 3403 provides as follows.
§ 3403. Notice requirements for midterm
cancellations and nonrenewals
(a) Requirements.--Notices of midterm
cancellation and nonrenewal shall meet the following
requirements:
(1) The midterm cancellation or nonrenewal
notice shall be forwarded by registered or first
class mail or delivered by the insurance
company directly to the named insured or
insureds.
(2) Written notice of nonrenewal in the
manner prescribed in this section must be
forwarded directly to the named insured or
insureds at least 60 days in advance of the
effective date of termination.
(3) Written notice of cancellation in the
manner prescribed in this section must be
forwarded directly to the named insured or
insureds at least 60 days in advance of the
effective date of termination unless one or
more of the following exist:
(i) The insured has made a material
misrepresentation which affects the
insurability of the risk, in which case the
prescribed written notice of cancellation
shall be forwarded directly to the named
insured at least 15 days in advance of
the effective date of termination.
(ii) The insured has failed to pay a
premium when due, whether the
premium is payable directly to the
company or its agents or indirectly under
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a premium finance plan or extension of
credit, in which case the prescribed
written notice of cancellation shall be
forwarded directly to the named insured
at least 15 days in advance of the
effective date of termination.
(iii) The policy was canceled by the
named insured, in which case written
notice of cancellation shall not be
required and coverage shall be
terminated on the date requested by the
insured.
Nothing in this paragraph shall restrict
the insurer’s right to rescind an
insurance policy ab initio upon discovery
that the policy was obtained through
fraudulent statements, omissions or
concealment of fact material to the
acceptance of the risk or to the hazard
assumed by the company.
(4) The notice shall be clearly labeled “Notice
of Cancellation” or “Notice of Nonrenewal.”
(5) A midterm cancellation or nonrenewal
notice shall state the specific reasons for the
cancellation or nonrenewal. The reasons shall
identify the condition, factor or loss experience
which caused the midterm cancellation or
nonrenewal. The notice shall provide sufficient
information or data for the insured to correct
the deficiency.
(6) A midterm cancellation or nonrenewal
notice shall state that, at the insured’s request,
the insurer shall provide loss information to the
insured for at least three years or the period of
time during which the insurer has provided
coverage to the insured, whichever is less.
Loss information on the insured shall consist of
the following:
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(i) Information on closed claims,
including date and description of
occurrence, and amount of payments, if
any.
(ii) Information on open claims,
including date and description of
occurrence, amount of payment, if any,
and amount of reserves, if any.
(iii) Information on notices of
occurrence, including date and
description of occurrence and amount of
reserves, if any.
(7) The insured’s written request for loss
information must be made within ten days of
the insured’s receipt of the midterm
cancellation or nonrenewal notice. The insurer
shall have 30 days from the date of receipt of
the insured’s written request to provide the
requested information.
(b) Effective notice.--Until an insurer issues a
nonrenewal or cancellation notice that complies with
the provisions set forth in this act, insurance
coverage will remain in effect. However, if the
insured obtains replacement coverage, the
noncomplying insurer’s obligation to continue
coverage ceases.
40 P.S. § 3403.1
Appellants correctly conclude that the plain text of Section 3403’s
subsections reveal four general ways commercial property and casualty
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1
The parties do not dispute that the insurance policy in this case is a policy
covering commercial property and casualty risks that is governed by Chapter
14 of Title 40. See generally 40 P.S. § 3407(a) (stating, “this act applies
to insurance policies, exclusive of reinsurance policies, covering commercial
property and casualty risks located in this Commonwealth[]”).
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coverage terminates in this Commonwealth. See generally Appellants’
Brief at 14-15. First, the insurance company sends out a compliant notice of
midterm cancellation. See generally 40 P.S. § 3403(a)(1). Second, the
insurance company sends out a compliant notice that the subject policy will
not be renewed at its term’s end. See generally id. § 3403(a)(2). Third,
the insured opts to cancel coverage of his or her own choosing. See
generally id. § 3403(a)(3)(iii) (stating, “[if t]he policy [is] canceled by the
named insured … written notice of cancellation shall not be required and
coverage shall be terminated on the date requested by the insured[]”).
Fourth, the insurance company does not comply with the notice
requirements of subsection (a), but the insured obtains replacement
coverage. See generally id. § 3403(b) (stating, “if the insured obtains
replacement coverage, the noncomplying insurer’s obligation to continue
coverage ceases[]”). Therefore, when all of Section 3403’s subsections are
read together, it reveals an intent by the General Assembly to require
commercial property and casualty insurance policies to automatically renew,
“until” one of the four events identified in the Act occurs.2 Id.
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2
The policy contains nonrenewal language similar to the statute.
1. Nonrenewal
If we decide not to renew this policy, we will
mail or deliver written notice of nonrenewal,
stating the specific reasons for nonrenewal, to
(Footnote Continued Next Page)
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Appellants’ logical reading of the statute is most heavily reinforced by
subsection (b), which plainly states that, “[u]ntil an insurer issues a
nonrenewal or cancellation notice that complies with the provisions set forth
in this act, insurance coverage will remain in effect.” Id. § 3403(b)
(emphasis added). Appellees freely concede throughout their brief that
Appellants’ policy was neither cancelled nor nonrenewed.3 See Appellees’
Brief at 8, 10 (stating unequivocally in bold print, “Landmark Did Not
Attempt to Cancel the Policy Midterm” and “Landmark … Never Sought to
Nonrenew the Policy[]”). There is also no dispute that Appellants did not
cancel the policy, nor did they obtain replacement coverage. It is therefore
quite clear that, because Appellees admit that they did not “issue[] a
nonrenewal or cancellation notice that complies with the provisions set forth
in [Section 3403,]” “insurance coverage … remain[ed] in effect.” 40 P.S. §
_______________________
(Footnote Continued)
the first Named Insured at least 60 days before
the expiration date of the policy.
Appellants’ Motion for Summary Judgment, 2/4/14, Exhibit A.1, at 50.
3
Although not specifically argued by Appellants, I note the November 28,
2012 renewal letter cannot be considered a proper nonrenewal notice
because it did not comply with Section 3403 or the terms of the policy. It
did not comply with Section 3403 because it was not labeled as a “notice of
nonrenewal,” it did not list the specific reasons for nonrenewal, and it was
sent less than 60 days before the policy supposedly lapsed on December 24,
2012. Further, the November 28, 2012 renewal letter does not qualify as a
valid notice of nonrenewal under the terms of the policy for the same
reasons. Accordingly, the policy automatically renewed because the insurer
did not issue a nonrenewal notice, as Appellees admit.
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3403(b). In my view, subsection (b) says what it means and means what it
says. Leaving aside actions by the insured, if an insurance company issues
a compliant Section 3403(a) notice, coverage terminates on the appropriate
date, if there is no such notice “coverage will remain in effect.” Id.
However, Appellees aver that “[b]ecause Landmark neither cancelled
nor nonrenewed the Policy, it was not required to send out a notice of
cancellation or nonrenewal pursuant to [Section] 3403.” Appellees’ Brief at
14. The Majority agrees, stating “[t]he plain language of Section 3403 bars
Appellants’ assertion that this notice provision applies to situations other
than midterm cancellations or policy nonrenewals.” Majority Memorandum
at 8. Respectfully, in my view, the Majority’s conclusion is unsound for
several reasons.
First, as described above, the General Assembly has determined that
there are only four ways for coverage to terminate, which the Majority does
not appear to generally dispute. By accepting Appellees’ reading of Section
3403, however, the Majority has added a fifth avenue for terminating
coverage not sanctioned by the statute, i.e., the insured’s failure to respond
to a renewal offer. I cannot agree that Section 3403 permits policies to
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lapse or expire without notice, as it is precluded by the plain text of Section
3403(b).4
The Majority concludes, “Appellants’ Policy lapsed on December 24,
2012, at 12:01 a.m., as that was the date and time upon which it expired.”
Majority Memorandum at 9. However, under Section 3403 coverage cannot
lapse or expire. Instead, it automatically renews until the insurer issues a
notice of cancellation or nonrenewal. Because the insurer admits it did not
issue a nonrenewal notice, the policy could not lapse. The Majority’s
conclusion appears to be premised on a supposed distinction between lapse
and nonrenewal. See id. In my respectful view, that is a false premise.
There is no other situation recognized by Section 3403 besides a policy being
canceled or nonrenewed by the parties. Stated another way, when a policy
has lapsed it has ipso facto been nonrenewed.5
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4
I note that if at the time of automatic renewal the insured failed to pay the
next premium that was due, Section 3403(a)(3)(ii) shortens the notice
period from 60 days to 15 days. See generally 40 P.S. § 3403(a)(3)(ii).
However, as the loss in this case occurred approximately 13 hours after the
policy automatically renewed, this provision does not apply.
5
This is consistent with the regulations promulgated by the Pennsylvania
Insurance Department for this chapter of Title 40. The regulations define
nonrenewal in relevant part as “[t]he failure by an insurer to issue and
deliver a policy superseding at the end of the policy period one previously
issued and delivered by the same insurer or affiliated insurer, where the
renewal policy provides types and limits of coverage substantially equivalent
to those contained in the policy being superseded.” 31 Pa. Code § 113.81.
Important to the instant case, the definition says nonrenewal “also includes
the failure to issue and deliver a certificate or notice extending the term of a
(Footnote Continued Next Page)
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Second, Appellees’ interpretation of Section 3403 results in burden
shifting. Because Section 3403 requires automatic renewals absent notice,
the onus is generally on the insurance company to terminate coverage by
affirmatively complying with the notice requirement of subsection (a).
Appellees’ construction of Section 3403, which the Majority adopts, shifts the
obligation from the insurer, normally required to send notice in order to end
coverage, to the insured, by requiring it engage in an affirmative act in order
to continue coverage.6 That is to say, to effectuate continued coverage, the
_______________________
(Footnote Continued)
policy beyond its policy period or term with types and limits of coverage
substantially equivalent to those contained in the policy being extended.”
Id.
6
Appellants point out that other states have such burden shifting provisions
in their respective statutes. As the Court of Appeals of Georgia pointed out,
under Georgia law, “a policy will be automatically renewed unless a written
notice of nonrenewal is timely mailed or unless, in place of the nonrenewal
notice, the insurer communicates to the insured that the insurer
intends to renew the policy.” Prudential Prop. & Cas. Ins. Co. v.
Pritchett, 313 S.E.2d 706, 708 (Ga. Ct. App. 1983) (emphasis added); see
also Ga. Code Ann. § 33-24-55(f)(3) (West 2015) (stating that automatic
renewal shall not occur if “[t]he insurer [has] manifested its willingness to
renew by delivering a renewal policy, renewal certificate, or other evidence
of renewal to the named insured or his representative or by offering to issue
a renewal policy, certificate, or other evidence of renewal or having
manifested such intention by any other means[]”). Of course, conclusions of
Georgia law are not binding on this Court, but I point this out to illustrate
that legislatures are fully capable of adding such a renewal notice provision
into Section 3403. Importantly, our General Assembly has seen fit not to
engage in such burden shifting that the Majority now permits,
notwithstanding that other states, like Georgia, have opted to do so. See
generally Shore v. Coronet Ins. Co., 288 N.E.2d 887, 889 (Ill. App. Ct.
1972); Ray v. Associated Indem. Corp., 373 So. 2d 166, 168 (La. 1979);
Yovish v. U.S. Auto. Assoc., 794 P.2d 682, 684 (Mont. 1990);
(Footnote Continued Next Page)
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insured must now affirmatively contact the insurance company and agree for
the same coverage to continue at the same premium. 7 It is axiomatic that
Pennsylvania law generally construes insurance law and insurance policies in
favor of the insured, in favor of coverage, and against the insurance
company. See generally Mut. Benefit Ins. Co. v. Politopoulos, 75 A.3d
528, 531 (Pa. Super. 2013), affirmed on other grounds, 115 A.3d 844 (Pa.
2015); Adamitis v. Erie Ins. Exch., 54 A.3d 371, 380 (Pa. Super. 2012).
In my view, the case sub judice provides no compelling reason to depart
from this generally accepted policy.8
_______________________
(Footnote Continued)
Nationwide Mut. Ins. Co. v. Davis, 171 S.E.2d 601, 604 (N.C. Ct. App.
1970).
7
To the extent the trial court justifies this interpretation as consistent with
the common law, I note that Section 3403 displaces the common law. See
generally 40 P.S. § 25 (stating, “[t]he provisions of this act, so far as they
are the same as those of existing laws, shall be construed as a continuation
of such laws and not as new enactments[]”); 1 Pa.C.S.A. § 1504 (stating,
“[i]n all cases where a remedy is provided or a duty is enjoined or anything
is directed to be done by any statute, the directions of the statute shall be
strictly pursued, and no penalty shall be inflicted, or anything done
agreeably to the common law, in such cases, further than shall be necessary
for carrying such statute into effect[]”).
8
In contrast to Georgia law, prior to 2012, Florida law, like Pennsylvania, did
not have such a burden-shifting provision in its statutes. In Brown &
Brown, Inc. v. Estate of Edenfield, 36 So. 3d 889 (Fla. Dist. Ct. App.
2010), the District Court of Appeal of Florida noted that the obvious purpose
of these automatic renewal statutes was “to give the insured adequate time
to obtain coverage from another insurer before it is subjected to risk without
protection as a result of the nonrenewal of its insurance.” Id. at 891. The
Court of Appeal rejected the very argument advanced by Appellees here that
the Majority adopts, stating “[t]he purpose of the statute would be
(Footnote Continued Next Page)
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Third, Appellees’ argument eliminates the nonrenewal notice
requirement from the statute’s text. Under Appellees’ view of Section 3403,
an insurance company is allowed to simply offer to renew the policy on the
same terms and premium, and the policy lapses if the insured does not reply
irrespective of whether a Section 3403 nonrenewal was sent. As the Court
of Appeals of Wisconsin stated, “[i]f the insured must indicate a desire to
renew regardless of whether notice is given, then the mandatory notice
provision is converted into an optional procedure that the insurer can
_______________________
(Footnote Continued)
frustrated if, as Appellee argues, the statute did not apply when the insurer
intended to renew the coverage but did not do so for whatever reason
because in those circumstances, the result would be the same as if renewal
coverage was never offered—i.e., the insured would be left without
coverage.” Id. at 892.
The Court of Appeal further noted that “[h]ad the Legislature intended
for the provisions of [the statute] to not apply when the insurer intended to
renew the policy, it could have easily said so as it did elsewhere in the
Florida Insurance Code.” Id. Other states have adopted this view. See
generally Nat’l Auto. & Cas. Ins. Co. v. Cal. Cas. Ins. Co., 188 Cal.
Rptr. 670, 672 (Cal. Ct. App. 1983); Barbara Corp. v. Bob Maneely Ins.
Agency, 484 A.2d 1291, 1293-1294 (N.J. Super. Ct. App. Div. 1984);
Trinity Universal Ins. Co. v. Burnette, 560 S.W.2d 440, 442 (Tex. Ct.
Civ. App. 1977); Sausen v. Am. Family Mut. Ins. Co., 360 N.W.2d 565,
566 (Wis. Ct. App. 1984).
Ironically, Appellees point out that in 2012, the Florida legislature
subsequently adopted the renewal notice provision suggested by the District
Court of Appeal. Fla. Stat. Ann. § 692.9201 (West 2012). It is unclear how
this supports Appellees’ reading of Section 3403, which does not have this
renewal notice provision, as Florida and other states have adopted. If
anything, Florida’s amendment statutorily adopting Appellees’ view only
undermines their position, since it illustrates that legislatures are fully
capable of making such amendments if desired.
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disregard without risk.” Sausen, supra (emphases added). Under the
Majority’s reading, an insurance company may permit a commercial property
and casualty policy to lapse without complying with Section 3403’s
provisions, rendering its nonrenewal notice requirement meaningless.
The General Assembly enacted Section 3403 to preclude lapses
without notice in commercial property and casualty coverage, not to
perpetuate them. The plain language of the statute is clear, and a
straightforward application of said language is all that is required in this
case.9 Since Appellees freely concede they did not comply with the condition
the legislature requires to terminate coverage, coverage could not
terminate. The Majority’s contrary reading of Section 3403 strips the statute
of its very purpose, and turns the General Assembly’s mandate upside-
down. Accordingly, I would reverse the trial court’s May 22, 2014 order and
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9
In their third issue, Appellants advance the same reading of the insurance
policy that, “unless the insurer takes action to cancel or notify of a decision
to not renew, the default and automatic consequence is renewal.”
Appellants’ Brief at 29. Similar to Section 3403, under the policy by its own
terms, coverage cannot lapse or expire. Because the insurer admits it did
not issue a nonrenewal notice, the policy could not lapse. This is especially
true since Appellees cannot sell an insurance policy that contradicts the
General Assembly’s requirements. See 40 P.S. § 26 (stating, “[i]t shall be
unlawful for any … company … to negotiate or solicit … any contract of
insurance, or to effect the same, or to receive and transmit any offer or
offers of insurance, or receive or deliver a policy or policies of insurance, or
in any manner to aid in the transaction of the business of insurance, without
fully complying with the provisions of this act[]”).
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remand with instructions to grant Appellants’ motion for partial summary
judgment and for further proceedings. Respectfully, I dissent.
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