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Brown v. Trustguard Insurance Co.

United States District Court, W.D. Kentucky, Bowling Green Division

September 18, 2018



          H. Brent Brennenstuhl United States Magistrate Judge

         Before the Court are motions for summary judgment filed by each of the parties. Plaintiff Guywanna Brown's motion for summary judgment is filed at ¶ 35. Defendant Trustgard[1]Insurance Company's motion is filed at ¶ 36 and Defendant Assured Partners NL, LLC is filed at ¶ 37. Responses (DN 39, 40, 41) and replies (DN 43, 44, 45) have been filed as to each dispositive motion. Because the motions are related, this order addresses all three.

         Nature of the Case

         Plaintiff Guywanna Brown and her husband Mike Brown were insured under a policy of automobile insurance issued by Trustgard and serviced by the Assured agency. Their friend Andy Perkins worked for a competitor agency and they decided to purchase a policy through him to replace the Trustgard policy. On September 17, 2015 Mr. Brown spoke with an agent at Assured and advised her they wished to cancel the Trustgard policy.[2] On September 25, 2015 Assured e-mailed the Browns a cancellation request form for their signature. The request form listed September 17, 2015 as the effective date of cancellation.

         The Browns did not immediately return the cancellation form, and Trustgard continued to debit the Browns' bank account for monthly premiums. Because Assured had not received the cancellation form back from the Browns, the agent sent Mr. Brown an e-mail advising him that Assured was still awaiting the return of the form and attached another form. Mr. Brown has testified that he failed to note that Trustgard was continuing to deduct premium payments from his bank account and did not know if he received either of Assured's e-mails to him. When the policy reached its expiration date, Trustgard issued a renewal policy and continued to automatically debit the Browns' bank account for the renewal policy monthly premiums.

         Mr. Brown eventually called Assured to inquire about the status of his premium refund. He was advised he needed to return the cancellation request and Assured sent a third copy of the form, this time by postal mail. Mr. Brown signed the cancellation request form and sent it to Assured on May 11, 2016, over seven months after initially notifying Assured that he wished to cancel the policy. As with the first form Assured sent him, the form Mr. Brown signed designated September 17, 2015 as the effective date of cancellation.

         On May 19, 2016, nine days after Mr. Brown signed and sent the cancellation request form to Assured, Mrs. Brown was injured in a motor vehicle accident. The parties dispute whether Mr. Brown notified Assured of the accident at that time. On May 24, 2016 an Assured agent signed the cancellation request form and forwarded it on to Trustgard. Trustgard required verification that the Browns had secured replacement coverage before it would agree to backdate the cancelation as indicated on the cancellation request. Trustgard received verification from Assured on May 27, 2016, issued a notice of cancelation as of February 12, 2016 and mailed a refund check to the Browns. Trustgard issued a second notice of cancellation on June 7, 2016 with an effective date of September 23, 2015 and mailed another refund check to the Browns. The two cancellation notices and different effective dates were because both the original and renewal policies were canceled. (DN 37-10, Emily Foster depo., p. 9, Tr. p. 35). Mrs. Brown subsequently sought underinsured motorist benefits under the Trustgard policy for injuries sustained in the May 19, 2016 accident. Trustgard denied her claim on the basis that the policy was cancelled prior to the date of the accident.

         The Browns brought this action against Trustgard for a declaration that the policy of insurance was effective on the date of Mrs. Brown's accident and that she is entitled to underinsured motorist coverage. The Browns' claims against Assured sound in negligence in the handling of their cancellation request.

         Motions for Summary Judgment

         Both the Plaintiff and Trustgard move for summary judgment on the issue of whether the Trustgard policy of insurance was in effect on the date of Plaintiff's accident. Assured joins in Trustgard's position, making essentially the same arguments. Plaintiff advances four arguments in support of her position that the policy was in effect at the time of the accident. First, she contends that, although Mr. Brown had submitted the written request to cancel the policy before Mrs. Brown's accident, Trustgard did not process the request and issue a notice of cancelation until after the accident, thus there was no meeting of the minds between the parties that the policy would be cancelled until after Trustgard's liability under the policy vested. Plaintiff's second argument is that KRS 304.20-030 prohibits retroactive cancellation of an automobile insurance policy after an accident has occurred. Plaintiff's third argument looks to language in the policy regarding Trustgard's obligation to provide notice in advance of any cancellation. Her fourth argument is a similar one, this time looking to Trustgard's internal policy requiring advance notification before cancelling a policy.

         Trustgard's arguments are the inverse of Plaintiff's. Trustgard contends that cancellation of the policy was effective as of Mr. Brown's execution of the written cancelation request, which specifically set forth an effective date of cancelation. Trustgard also points to Mr. Brown's testimony that it was never his intention to carry duplicate insurance coverage and he intended no overlap between the Trustgard policy and the replacement policy he obtained from Safeco.

         As Plaintiff's claims against Assured sound in negligence, Assured's motion for summary judgment contends that the evidence in the case demonstrates that it did exactly what the Browns asked it to do, namely secure cancellation of the Trustgard policy.


         A. Summary Judgment Standard

         To grant a motion for summary judgment, the Court must find that there is no genuine dispute as to any material fact and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). The moving party bears the initial burden of identifying the basis for its motion and the parts of the record that demonstrate an absence of any genuine issue of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). The Court must determine whether “the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.” Patton v. Bearden, 8 F.3d 343, 346 (6th Cir. 1993) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52 (1986)). The evidence, all facts, and inferences that may be drawn from the facts must be viewed in the light most favorable to the nonmovant. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). Once the moving party shows there is an absence of evidence to support the nonmoving party's case, the nonmoving party must present “significant probative evidence” to demonstrate that “there is [more than] some metaphysical doubt as to the material facts.” Moore v. Phillip Morris Cos., 8 F.3d 335, 339-40 (6th Cir. 1993).

         “When faced with cross motions for summary judgment, a district court is authorized to ‘assume the there is no evidence which needs to be considered other than that which has been filed by the parties.' However, the standards upon which the court evaluates the motions for summary judgment do not change. Instead, the court must evaluate each party's motion on its own merits, taking care in each instance to draw all reasonable inferences against the party whose motion is under consideration.'” Carolina Cas Ins. Co. v. KLLM, Inc., No. 3:00-CV-199-S, 2001 U.S. Dist. LEXIS 11245, *4 (W.D. Ky. Aug. 1, 2001) (citations omitted).

         Where, as here, summary judgment involves interpretation of a contract, “a contract can be interpreted by the court on summary judgment if (a) the contract's terms are clear, or (b) the evidence supports only one construction of the controverted provision, notwithstanding some ambiguity.” Gencorp, Inc. American Int'l Underwriters, 178 F.3d 804, 818 (6th Cir. 1999).

         B. Plaintiff's argument that KRS 304.20-030 prohibits backdating of the cancellation.

         KRS 304.20-030, titled “Retroactive annulment of liability policies prohibited” provides as follows:

No insurance contract insuring against loss or damage through legal liability for the bodily injury or death by accident of any individual, or for damage to the property of any person, shall be retroactively annulled by any agreement between the insurer and insured after the occurrence of any such injury, death, or damage for which the insured may be liable, and any such annulment attempted shall be void.

         Plaintiff argues this statute precludes Trustgard's retroactive cancellation of the insurance policy because it is one “insuring against loss or damage through legal liability for the bodily injury or death by accident of any individual, or for damage to the property of any person.” Trustgard responds by noting that the statutory prohibition only extends to instances in which an injury, death or damage has occurred “for which the insured may be liable.” This, Trustgard contends, means the prohibition speaks to instances of third party claims. Mrs. Brown's claim under the policy for underinsured motorist benefits would be a first-party claim by an insured.

         The undersigned agrees with Trustgard's argument. The intention of KRS 304.20-030 is to protect innocent third-parties from being deprived of the benefits of statutorily mandated liability coverage. “[W]e conclude that the compulsory automobile statutes, when read together, abrogate the right of an insurer to rescind automobile liability insurance so as to deny recovery to an innocent third-party claimant.” National Ins. Ass'n v. Peach, 926 S.W.2d 859, 863 (Ky. App. 1996) (emphasis added). UIM coverage is optional and not compulsory under Kentucky law. Ward v. Nationwide Assur. Co., No. 2012-CA-000809-MR, 2014 Ky. App. Unpub. LEXIS 1006, at *13-14 (Ky. App. Dec. 24, 2014).

         This interpretation is supported by the language of the statute, which specifies that the prohibition against retroactive cancellation of coverage only applies to accidents “for which the insured may be liable” (emphasis added). Here Mrs. Brown is the insured under the Trustgard policy. Mrs. Brown was the operator of her insured vehicle (DN 35-4, p. 5). Mrs. Brown cannot be liable to herself under UIM coverage.

         C. Plaintiff's argument that Trustgard's internal policy required twenty days advance notice of cancellation.

         Plaintiff has attached as an exhibit to her motion Trustgard's internal policies regarding cancellation (DN 35-5) and directs attention to the portion regarding cancellation of Kentucky automobile policies after the initial underwriting period. The internal policy requires that notice of cancellation must be given “14 5 days for nonpayment; 20 5 days for all other reasons” (DN 35-5, p. 11). She argues that Trustgard's internal policy thus required it to give her at least 20 days advance notice before any policy cancellation could be effective.

         Trustgard argues in response that the notice requirement only speaks to instances in which Trustgard has elected to involuntarily cancel a contract. The undersigned concurs. Reviewing the internal policy as a whole, it addresses reasons why Trustgard may elect to unilaterally terminate an insurance policy. These include non-payment of premiums, suspension of an insured's driver's license, discovery of fraud or misrepresentation in procuring the policy or invalidity of a policy by decision of the Insurance Commissioner (Id.). The internal policy is silent as to matters involving an insured's unilateral decision to cancel the policy. It is illogical to read the internal policy as requiring Trustgard to give an insured twenty days notice of a cancellation when the insured has requested termination. Certainly, Trustgard cannot compel an insured to continue to maintain insurance coverage for an additional twenty days after requesting cancellation.

         D. Plaintiff's argument that the insurance policy requires advance notice of cancellation.

         Plaintiff makes a similar argument with reference to language in the insurance policy.

         She directs attention to the policy provision which provides:

2. We may cancel by mailing to the named insured shown in the Declarations at the address shown in the policy:
a. at least 14 days notice if cancellation is for nonpayment of premium; or
b. at least 20 days notice in all other cases, including if notice is mailed during the first 60 days this policy is in effect and this is not a renewal or continuation policy.”

(DN 35-2, p. 53).

         As with Trustgard's internal policy, she argues that the insurance policy required Trustgard to give her at least twenty days notice in advance of any policy cancellation. Her argument ignores the existence of the policy provision immediately preceding the one she quotes, which provides:

1. The named insured shown in the Declarations may cancel by:
a. returning this policy to us; or
b. giving us advance notice of the date cancellation is to take effect.


         This policy provision appears standard in nature. “A cancellation provision not infrequently found in liability insurance policies is to the effect that the policy may be cancelled by the insured by mailing to the insurer written notice stating ‘when thereafter such cancellation shall be effective.' Generally speaking, a notice in order to comply with such cancellation provision must under all circumstances contain a definite date on which the cancellation shall become ...

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