Keys v. Safeway Ins. Co.
| Decision Date | 09 February 2011 |
| Docket Number | CIVIL ACTION NO. 2:07-CV-372-KS-MTP |
| Parties | CHARLES KEYS v. SAFEWAY INSURANCE COMPANY |
| Court | U.S. District Court — Southern District of Mississippi |
PLAINTIFF
DEFENDANT
Presently before the Court are Defendant's Motion for Summary Judgment [59] and Plaintiff's Motion for Leave to Amend Complaint [65]. For the reasons stated below, the Court grants Defendant's Motion for Summary Judgment [59] and denies Plaintiff's Motion for Leave to Amend [65].
On July 29, 2006, Plaintiff purchased an insurance policy from Defendant. The policy provided automobile liability coverage for Plaintiff and his wife on three separate vehicles. The policy had a six month term, running from July 28, 2006, through January 28, 2007.
On December 7, 2006, Defendant sent a bill to Plaintiff, stating that $106.40 premium was due on December 22, 2006. On December 11, 2006, having not yet received payment, Defendant sent a notice of cancellation to Plaintiff, which provided:
You are hereby notified that in accordance with the terms and conditions of your automobile policy, that your policy will be cancelled or terminated on the date and time indicated, for the reason described below:
Non-Payment of Premium
You are hereby notified pursuant to section 83-11-11 of the Mississippi Statutes to contact your agent for possible eligibility for insurance through the Mississippi Automobile Insurance Plan.
The notice stipulated that the cancellation date was December 22, 2006, and that the amount due was $106.40. It also provided that "a $5 late fee must be added to the amount due if payment is postmarked on or after the due date shown on the last bill issued."
Plaintiff failed to make a payment by December 22, 2006. On December 31, 2006, he was involved in an automobile accident. Following the accident, he attempted to pay the policy premium and reinstate his insurance. He submitted a check for $111.40 to Defendant on January 2, 2007, and subsequently filed a claim for the accident.
Defendant rejected Plaintiff's payment and his claim by a letter dated January 4, 2007. Therein, Defendant stated that Plaintiff's policy had been "cancelled for non-payment of premium on 12-22-06 at 12:01 am." After Plaintiff retained counsel, Defendant reversed its position, chose to pay the claim, and so informed Plaintiff by a letter dated March 30, 2007.
Plaintiff subsequently brought this suit, alleging that Defendant "acted with gross negligence, malice and reckless disregard for the rights of the Plaintiff when it cancelled the subject policy in violation of Mississippi law and denied the claim submitted." Therein, Plaintiff requested punitive damages, exemplary damages, and damages for emotional distress, mental anguish, and loss of enjoyment of life.
On March 25, 2008, Defendant filed its Motion for Judgment on the Pleadings [9], arguing that it fully complied with applicable state law and, therefore, could not have engaged in "bad faith handling" of Plaintiff's claim. Plaintiff opposed Defendant's motion, arguing that Defendant misconstrued the applicable state law. The crux of the issue was whether an insurance company's preemptive notice of cancellation satisfies the requirements of Mississippi Code Section 83-11-5. Defendant argued that the statute merely requires that an insurance company send a notice ofcancellation at least ten days before the date of cancellation. Plaintiff argued that the statute's intent requires that the condition triggering cancellation occur prior to the notice of cancellation being sent.
In a Memorandum Opinion and Order [15] dated April 22, 2008, the Court denied Defendant's motion. See Keys v. Safeway Ins. Co., 556 F. Supp. 2d 586 (S.D. Miss. 2008). The Court held that Defendant's use of preemptive notification defeated the underlying purpose of the statute-to provide the insured with a ten-day window in which to cure their default or seek substitute coverage. Id. at 589-90. As the parties had not yet engaged in discovery and no facts surrounding Defendant's initial denial of the claim had been established, the Court declined to address whether Defendant's actions were sufficient to merit the relief requested by Plaintiff. Id. at 591.
On June 15, 2009, Defendant filed its Motion for Summary Judgment [59]. Therein, Defendant argued that the propriety of its preemptive notice was not dispositive as to Plaintiff s bad faith claim. Phrased differently, Defendant contended that even if it had violated Section 83-11-5, its actions did not rise to the level of bad faith. Defendant further argued that it would be inappropriate, in this case, for the Court to venture an Erie guess as to the application of Section 8311-5. Defendant presented evidence that industry practice and the viewpoint of the Mississippi Department of Insurance comported with Defendant's interpretation of the statute: that insureds should be reminded, at least ten days in advance, that they must either timely pay their premiums or make alternative arrangements before the equity in their policy expires and their coverage lapses. Finally, Defendant argued that Plaintiff failed to request a hearing with the Commissioner of Insurance to challenge the cancellation of his policy, as required by Mississippi Code Section 83-1117.
In response [61], Plaintiff argued that the preemptive cancellation notice was "merely a cog in the bad faith wheel." Plaintiff claimed that he had been late on prior premium payments, but that Defendant did not cancel his policy. Therefore, Plaintiff argued that the only possible reason that Defendant canceled his policy was that he filed a claim. Plaintiff asserted that Defendant's focus on the propriety of its preemptive cancellation notice was merely an attempt to redirect the Court's attention from the broader question of whether Defendant exhibited bad faith by providing preemptive notice of cancellation, refusing late premium payments for policies on which a claim has been filed, and then using the preemptive notice as a means of escaping payment on the claim.
On August 11, 2009, the Court ordered Plaintiff to provide a supplemental brief addressing in further detail the extent to which he had plead a viable claim against Defendant-assuming that the preemptive notice issue would not support a claim of bad faith [64]. Plaintiff subsequently requested leave to amend his Complaint to allege with greater particularity the circumstances constituting fraud and bad faith [65]. Defendant opposed Plaintiff's motion to amend, citing its purported untimeliness, futility, and the burden to which it would expose Defendant [67].
On October 13, 2009, the Court stayed the case pending administrative review by the Commissioner of Insurance [79]. See Keys v. Safeway Ins. Co., No. 2:07-CV-372-KS-MTP, 2009 U.S. Dist. LEXIS 100229 (S.D. Miss. Oct. 13, 2009). The Court observed that Mississippi Code Section 83-11-17 requires an administrative hearing "to contest the reason or reasons for a cancellation of a policy which has been in effect for sixty (60) days or more." Id. at *7-*8 (quoting Miss. Code Ann. § 83-11-17). Plaintiff's substantive claim was that Defendant's stated reason for the cancellation of his policy-nonpayment of premium-was false. Therefore, his claim fell within the ambit of Section 83-11-17, and Plaintiff was required to appeal Defendant's cancellation withthe Commissioner of Insurance. Id. at *10-*11. The Court noted that exhaustion of the administrative remedies would not present a significant burden on the parties. Id. at *12-*13. Furthermore, the Court observed that Section 83-11-17 creates a presumption that a cancellation which is subject to the statute "shall be deemed effective unless the Commissioner of Insurance determines otherwise in accordance with the provisions of this article." Id. at *14 (quoting Miss. Code Ann. § 83-11-17). Accordingly, the Court stayed the case pending Plaintiff's exhaustion of the administrative review and appeal process. Id. at *20.
On December 10, 2009, the Commissioner of Insurance issued his decision [80-2]. Therein, the Commissioner found that Defendant's actions were "not inconsistent with its practice as regulated and approved by the Mississippi Insurance Department ("MID")." The Commissioner further found that the Department has never interpreted Section 83-11-5 "as creating a 'grace period' of ten (10) days after an insurance premium is due." Rather, the Commissioner found that "the notice provision of Miss. Code Ann. § 83-11-5 has been and is now understood by the MID and insurers doing business in Mississippi as a requirement of reminding customers, at least ten days in advance, that they should either timely pay their premiums or make alternative arrangements before the coverage in place expires." He additionally found that the MID had never communicated to insurers that preemptive notices of cancellation were improper, imposed a penalty on an insurer for sending a preemptive notice of cancellation, or found a notice of cancellation ineffective based on it being sent before the premium due date. Therefore, the Commissioner concluded that Defendant's preemptive notice of cancellation did not violate Section 83-11-5, and its cancellation of Plaintiff's policy for nonpayment of premium was valid.
On December 16, 2009, the Court ordered the parties to submit supplemental briefs, if sodesired, within five (5) days [80]. Plaintiff expressed his intention to appeal the Commissioner's decision [81], and he filed a motion to stay the case pending the completion of the appeal process [84]. Defendant argued that the Commissioner's decision was dispositive as to Plaintiff's bad faith claim insofar as it proved that Defendant had an arguable basis for its decisions regarding Plaintiff's policy and claim [82].
On February 8, 2010, the Court removed the case from the active docket pending the completion of the administrative appeal...
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