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Archway Insurance Services, LLC v. James River Insurance Co.

September 21, 2010


The opinion of the court was delivered by: O'neill, J.


Plaintiff Archway Insurance Services, LLC filed suit against defendant James River Insurance Company, alleging claims of (1) breach of contract; (2) unjust enrichment; and (3) conversion. Presently before me are defendant's motion for summary judgment, plaintiff's response and defendant's reply. For the following reasons, I will grant in part and deny in part defendant's motion.


Defendant is an insurance company. Plaintiff is an insurance broker. The Ardsley Group, which is owned and operated by Stanley Segal,*fn1 manages facilities that provide care and services to the elderly. All Risks is an insurance broker that specializes in obtaining insurance for high-risk companies that experience difficulty obtaining insurance in the standard market. In this case, All Risks acted as defendant's agent.

On March 28, 2007, plaintiff, with the assistance of All Risks, brokered an insurance contract between Ardsley and defendant. In exchange for receiving $1,500,00.00 in insurance coverage from defendant, Ardsley was obligated to pay an annual premium totaling $257,350.00. The policy was numbered "15320-1" and was scheduled to expire on March 28, 2008. Policy v. number 15320-1 provided both professional liability coverage and general commercial liability coverage.

In order to pay the premium, Ardsley entered into a second agreement with plaintiff and Bank Direct Capital Finance LLC. Under the terms of this agreement, BankDirect loaned Ardsley $257,350.00 and Ardsley agreed to repay the loan in ten installment payments of $29,795.45.*fn2

On April 16, 2007, Ardsley delegated the management of its nursing homes to Reliant Healthcare Management.*fn3 Reliant then contracted with New Courtland to manage the finances of the nursing homes. Reliant and New Courtland continued to make the installment payments owed to Bank Direct. At the end of February 2008, plaintiff was replaced by Oxford Coverage as Ardsley's broker on the policy. In March 2008, the parties agreed to renew the policy for one year. The renewal policy term was scheduled to begin on March 28, 2008 and to end on March 28, 2009. Defendant assigned number "15320-2" to the renewal policy.

On March 27, 2008 and again on May 8, 2008, Ardsley submitted claims under its insurance policy with defendant. The parties disagree over whether the claims were made under the original policy or under the renewal policy. Defendant asserts that both claims were made under the original policy. Plaintiff argues that the claims were brought under the renewal policy.

By letter dated March 16, 2009, Segal, on behalf of Ardsley, assigned to plaintiff the right to receive the unearned premiums under policy number 15320-1. Plaintiff asserts that policy number 15320-1 had been cancelled on October 12, 2007. In support of its assertion, plaintiff cites a pair of documents which, on their face, bear no obvious relationship to each other. The first is a fax transmission coversheet sent from Fred Milbert at Union One Insurance Group dated October 12, 2007. In the "To:" line of the coversheet, Milbert typed "Whom it may concern." The fax was copied to All Risks. The "Re:" line of the coversheet reads "Ardlsey -- James River -- 00015320-1[.]" The second document is an undated letter from Segal to Union One Insurance Group. The "Re:" line of the letter reads "Ardsley Group General and Professional Liability Policy." The text of letter states: "Sir: Please cancel my insurance policy immediately. Thank you[.]"

This case turns on whether these two documents, in conjunction with the other evidence proffered by the parties, establish that Ardsley cancelled policy number 15320-1. Defendant contends that based on the evidence in the record, no reasonable jury could conclude that the policy had been cancelled. Plaintiff, in response, argues that the evidence raises a genuine issue of material fact appropriate for disposition by a jury.


Rule 56(c) of the Federal Rules of Civil Procedure provides that summary judgment is proper "if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." An issue of material fact is genuine if "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). Summary judgment will be granted "against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). The party moving for summary judgment has the burden of demonstrating that there are no genuine issues of material fact. Id. at 322-23. If the moving party sustains the burden, the nonmoving party must set forth facts demonstrating the existence of a genuine issue for trial. See Anderson, 477 U.S. at 255.

When a properly supported motion for summary judgment is made, "an adverse party may not rest upon the mere allegations or denials of the adverse party's pleading, but the adverse party's response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial." Fed. R. Civ. P. 56(e). The adverse party must raise "more than a mere scintilla of evidence in its favor" in order to overcome a summary judgment motion and cannot survive by relying on unsupported assertions, conclusory allegations, or mere suspicions. Williams v. Borough of W. Chester, 891 F.2d 458, 460 (3d Cir. 1989). However, the "existence of disputed issues of material fact should be ascertained by resolving all inferences, doubts and issues of credibility against" the moving party. Ely v. Hall's Motor Transit Co., 590 F.2d 62, 66 (3d Cir. 1978) (citations and quotation marks omitted).


Defendant argues that it is entitled to judgment as a matter of law for eight reasons. Plaintiff wholly disagrees.*fn4 I will discuss each argument in turn.*fn5

I. Plaintiff's Claims Are Not Time-Barred by the Contractual Suit Limitation Provision

Defendant first argues that plaintiff's claims are barred by the contractual time limitation on bringing suits under the policy. See Def.'s Br. at 11-13. The relevant provision states:

4. Legal Action Against Us

No one may bring a legal action against us under this policy unless:

A. There has been full compliance with all of the terms of this policy; and

B. No suit, action or proceeding for the recovery of any claim under this policy shall be sustainable in any court of law or equity [sic] the same be commenced within twelve (12) months next after discovery by the insured of the occurrence which gives rise to the claim, provided however, that if by any of the laws of the state within which this policy is issued each limitation is invalid, then any such claims shall be void unless such action, suit or proceeding be commenced within the shortest limit of time permitted by the laws of such state. We will not be liable for damages that are not payable under the terms of this policy or that are in excess of the applicable Limit of Insurance.

Policy Number 15320-1, Common Policy Conditions at 1 (Def.'s Ex. C at JRIC-UW-1-00211). Plaintiff argues that the time limitation does not apply to "non-claim related actions arising out of the policy." See Pl.'s Br. at 10 ("[Defendant's] assertion that [plaintiff's] claims are time barred is completely erroneous."). I agree with plaintiff.

The dispositive question is whether a claim for unearned premiums is a "claim under this policy" as specified in section 4(B). Although this question appears to be an issue of first impression in this Circuit, other courts have answered it in the negative. See P. & E. Finance Co. v. Globe & Republic Ins. Co., 239 P.2d 1009, 1011 (Okla. 1951); McCallum v. Nat'l Credit Ins. Co. 86 N.W. 892, 892-93 (Minn. 1901); see also 44A Am. Jur. 2d Insurance § 1910 (2010) (noting that a contractual time limitation within which a suit must be brought does not apply to "an action to recover unearned premiums upon the cancellation of a policy[.]"); 45 C.J.S. Insurance § 722 (2010) (same); C.T. Drechsler, Annotation, Limitations governing action to recover unearned premium retained by insurer upon cancellation of policy, 29 A.L.R. 2d 938 (1953) (same).

In P. & E. Finance Company v. Globe and Republic Insurance Company of America, 239 P.2d 1009, 1010 (Okla. 1952), the plaintiff bought automobile insurance from the defendant. The defendant then cancelled the insurance prior to its expiration date. P. & E. Fin. Co., 239 P.2d at 1010. Because the defendant refused to return the unearned premium, the plaintiff filed a lawsuit. Id. The defendant moved to dismiss the case on the ground that it had been brought outside the one year statute of limitations applicable to actions "for recovery of benefits under the policy." Id. at 1011. The trial court agreed and dismissed the case. Id. at 1010. The Supreme Court of Oklahoma reversed. Id. It held that "an action to recover unearned premium upon the cancellation of a policy of insurance is not an action for recovery of benefits under the policy. . . ." Id. at 1011.

In McCallum v. National Credit Insurance Company, 86 N.W. 892, 892-93 (Minn. 1901), under slightly different circumstances, the court likewise distinguished between claims arising under the policy and claims for reimbursement of unearned premiums. There, the defendant insurance company became insolvent and the plaintiffs brought suit against the defendant to enforce liability against the stockholders of the insurance company. Id. at 892. The court divided the plaintiffs' claims into two categories: (1) "[t]hose arising from losses under the contract of insurance; [and] (2) claims for unearned premiums." Id. The court found the first category of claims to have been settled prior to the initiation of the litigation. Id. at 893. With respect to claims for unearned premiums, the court found inapplicable the contractual limitation on suits brought more than one year after the claim had accrued. Id. It reasoned that "[t]he claims for unearned premiums were not claims or liabilities under the contract of insurance." Id.

This case is analogous. I am persuaded by the distinction, set forth in both P. & E. Finance and McCallum, between claims for recovery of benefits under the policy and claims for unearned premiums. I likewise conclude that the contractual time limitation provision applies to the former but not to the latter. ...

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