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Sunday v. Berkshire Hathaway Homestate Insurance Co.

United States District Court, M.D. Pennsylvania

July 30, 2018

JOSEPH SUNDAY, JR. d/b/a SUNDAY TRUCKING, LLC, Plaintiff,
v.
BERKSHIRE HATHAWAY HOMESTATE INSURANCE COMPANY and NATIONAL LIABILITY & FIRE INSURANCE COMPANY, Defendants.

          MEMORANDUM

          A. Richard Caputo United States District Judge

         Presently before this Court is a Motion for Summary Judgment filed by Defendants Berkshire Hathaway Homestate Insurance Company (“BHHIC”) and National Liability & Fire Insurance Company (“National Liability”) (collectively “Defendants”). This Motion will be granted in part and denied in part. Judgment will be entered in favor of the Defendants on Count I because the National Liability policy was void ab initio. However, judgment will not be entered with respect to Count III because (1) BHHIC failed to provide adequate notice of cancellation and (2) there remains a genuine dispute of material fact about whether cancellation was appropriate under the Cancellation and Non-Renewal Endorsement to the BHHIC policy.

         I. Background

         A. Factual History

         Plaintiff Joseph Sunday, Jr. (“Plaintiff”) owns and operates a trucking company that hauls commercial trailers. In order to operate this business in Pennsylvania Plaintiff was required to possess commercial auto insurance. Between December of 2014 and August of 2015, Plaintiff attempted to secure commercial auto insurance from two insurance providers: BHHIC and National Liability.

         (1) The BHHIC Policy

         On November 24, 2014, Plaintiff, through his agent, submitted an application for commercial auto insurance to BHHIC. (DSMF, Ex. B). This application listed Plaintiff's address as 427 Cortez Road, Lake Ariel, Pennsylvania. (Id.) BHHIC approved this application and provided commercial auto coverage for Plaintiff's Kenworth truck effective December 11, 2014. (DSMF, at ¶ 7.) The policy was scheduled to run for one year and end on December 11, 2015. (Id.)

         The BHHIC policy contained an endorsement specifying the possible bases for cancellation. This endorsement, titled “Pennsylvania Changes-Cancellation and Non-Renewal, ” specifically provided:

3. Cancellation Of Policies In Effect For 60 Days Or More If this policy has been in effect for 60 days or more . . . we may cancel this policy only for one or more of the following reasons:
. . .
b. [The insured] failed to pay a premium when due, whether the premium is payable directly to [BHHIC] or our agents or indirectly under a premium finance plan or extension of credit, notice of cancellation will be mailed at least 15 days before the effective date of cancellation.
c. A condition, factor or loss experience material to insurability has changed substantially or a substantial condition, factor or loss experience material to insurability has become known during the policy period. Notice of cancellation will be mailed or delivered at least 60 days before the effective date of cancellation.

(DSMF, Ex. C at 44.) Additionally, this endorsement explained that any notice provided would be delivered to the insured's last known mailing address and would “state the specific reasons for cancellation.” (Id.)

         There is no question that Plaintiff routinely made untimely premium payments. In fact, on February 17, 2015, March 17, 2015, April 23, 2015, and May 22, 2015 BHHIC issued Notices of Cancellation to Plaintiff explaining that his policy was pending cancellation due to the “nonpayment of premium.” (DSMF, at ¶¶ 11, 14.) However, after receiving each of these notices, Plaintiff paid BHHIC the premium owed and the Notices of Cancellation were rescinded. (DSMF, at ¶¶ 12, 15.) In other words, none of these notices ultimately triggered cancellation in accord with Section 3(b) of the Cancellation and Non-Renewal Endorsement.

         On June 4, 2015, BHHIC sent another Notice of Cancellation to Plaintiff. (DSMF, at ¶ 19.) But, this time, the notice did not inform Plaintiff he failed to pay his monthly premium. Instead, the notice detailed that cancellation was pending because “a condition, factor or loss experience material to insurability ha[d] changed substantially or become known during the policy term.” (DSMF, at ¶ 20; Ex. J.) This Notice of Cancellation resulted from an audit of Plaintiff's policy that concluded Plaintiff was operating “an unscheduled power unit under [his] trucking authority.” (DSMF, Ex. N; see also DSMF, Ex. J; Ex. K.) Put simply, following the audit, BHHIC had reason to believe that Plaintiff was operating equipment that was not insured by the BHHIC policy. As stated in the policy, Plaintiff was prohibited from operating such equipment.

         The unscheduled power unit was identified by BHHIC upon review of the U.S. Department of Transportation Federal Motor Carrier Safety Administration's (“FMCSA”) Safety and Fitness Electronic Records (“SAFER”) System. (DSMF, Ex. N; Ex. J.) Plaintiff claims that the SAFER system erred when it reported his use of the unscheduled unit. As of July 16, 2015, Plaintiff was in the process of contacting FMCSA to correct its error. (Id.) Unfortunately, even if the error was corrected, BHHIC had indicated that it would not “reconsider the cancellation, or rewrite the policy.” (DSMF, Ex. K.) So, Plaintiff was forced to look elsewhere for insurance.

         On August 6, 2015, the BHHIC policy cancelled.[1] (DSMF, Ex. M.)

         (2) The Nation Liability Policy

         On July 16, 2015, Plaintiff, through his agent, submitted an application for commercial auto insurance to National Liability. (DSMF, Ex. N.) National Liability issued ...


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