Arruda v. Progressive Casualty Insurance Company
Filing
19
ORDER DENYING 14 Plaintiff's Motion for Summary Judgment; GRANTING 16 Defendant United Financial Casualty Company's Motion for Summary Judgment. So Ordered by Senior Judge Mary M. Lisi on 4/18/2016. (Feeley, Susan)
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF RHODE ISLAND
JOSEPH ARRUDA
v.
C.A. No. 15-269-ML
UNITED FINANCIAL
CASUALTY COMPANY
MEMORANDUM AND ORDER
The Plaintiff, Joseph Arruda (“Arruda”) seeks a declaration
that the automobile insurance policy issued to him by Defendant
United Financial Casualty Company (“United”) (1) had not been
canceled prior to October 18, 2014; (2) was in effect on that date;
and that (3) United must provide coverage for a motor vehicle
accident loss that occurred on October 18, 2014.
Both parties have moved for summary judgment. For the reasons
set forth below, Arruda’s motion for summary judgment is denied and
United’s motion for summary judgment is granted.
I. Facts1
Arruda owns and operates Allied Investments, Inc. (“Allied”),
a real estate business that owns and manages rental properties. ASF
¶ 1. Arruda exclusively makes insurance decisions for Allied and
also for his personal insurance needs. ASF ¶ 5. For the past ten
years, Arruda’s
insurance
agent
for
all
of
his
and
Allied’s
1
The facts are taken primarily from
Statement of Facts (“ASF”) (Dkt. No. 15).
1
the
Parties’
Agreed
insurance needs has been Dave Herbst (“Herbst”), the owner of Burns
& Cotter, a general insurance agent that places insurance with a
number of carriers. ASF ¶¶ 6,7. During that time, Arruda obtained
insurance coverage with limits of $1,000,000 on vehicles owned by
himself and by Allied. ASF ¶ 8.
Prior to October 9, 2014, Arruda had purchased two commercial
insurance policies:
(1) the “Travelers Policy,” issued by Travelers Insurance
company, effective June 25, 2014 to June 25, 2015, naming Allied as
the insured, and providing $1,000,000 in coverage for a 2010
Chevrolet Silverado owned by Allied and driven by Arruda’s nephew
Michael, who owns 7% of Allied; and
(2) the “Progressive Policy,” issued by United, effective
February 15, 2014 to February 15, 2015, naming Arruda as the
insured and providing $1,000,000 in coverage for a 2011 Toyota
Tacoma (the “Toyota”) driven by Arruda. ASF ¶¶ 9-12.
In early October 2014, Herbst learned that the Toyota was
owned by Allied, not by Arruda. Concerned that the Toyota might not
be
validly
covered,
Deb
Kenney
(“Kenney”),
a
Burns
& Cotter
customer representative, added the Toyota to the Travelers Policy.
ASF ¶¶ 22-25. It is undisputed that Arruda, who had repeatedly
expressed his displeasure at high premium costs, approved the
change from the Progressive Policy to the Travelers Policy, which
resulted in a significantly lower premium at the same or better
2
coverage level. ASF ¶¶ 25-27. The Travelers Policy coverage for the
Toyota was effective as of October 9, 2014 and included Arruda as
a named driver.
ASF ¶¶ 25.
It is undisputed that Arruda understood that “with the change
in coverage from the Progressive Policy to the Travelers Policy,
the Progressive Policy would go away and there would no longer be
a Progressive Policy.” ASF ¶¶ 28. Likewise, it is undisputed that
Arruda did not intend to have two polices for the Toyota and did
not intend to pay two premiums for two policies for the Toyota;”
rather, he “intended to have one policy and pay one premium.” ASF
¶¶ 28, 29.
After binding coverage for the Toyota on the Travelers Policy,
Kenney did not notify Progressive of the cancellation of the
Progressive Policy on that date. ASF ¶ 30. It was Burns & Cotter’s
business practice to wait until it received written confirmation of
the
new
coverage
before
notifying
the
prior
carrier
of
the
cancellation. Id.
On October 18, 2014, Arruda was involved in a motor vehicle
accident (the “Accident”) while driving the Toyota; Arruda reported
the accident to Progressive directly. ASF ¶¶ 37, 38.
On October 20, 2014, Burns & Cotter prepared an Automobile
Loss Notice regarding the Accident, which it sent to Travelers. ASF
¶¶ 37. On the same date, Burns & Cotter received confirmation that
the Toyota had been added to the Travelers Policy. ASF ¶ 31.
3
The
following
Request/Policy
day,
Kenney
Release (“Form
35"),
prepared
advising
a
Cancellation
Progressive
that
coverage under the Progressive Policy had been “rewritten” with
Travelers effective October 9, 2014. ASF ¶¶ 31, 32. Kenney also
informed Travelers by telephone about the Accident on that day. ASF
¶¶ 37.
Arruda signed Form 35 on October 23, 2014 and Kenney faxed the
form to Progressive. ASF ¶ 34. The cancellation date in Form 35 is
specified as “10/09/14.” ASF ¶ 32 Ex. 15 (Dkt. No. 15-10). The
“Policy Release Statement” above Arruda’s signature states as
follows:
The undersigned agrees that:
The above referenced policy is lost, destroyed or being
retained.
No claims of any type will be made against the Insurance
Company, its agents or its representatives, under this
policy for losses which occur after the date of
cancellation shown above.
Any premium adjustment will be made in accordance with
the terms and conditions of the policy.
On
November
4,
2014,
Progressive
sent
Arruda
a
letter
acknowledging the cancellation of the Progressive Policy “at your
request,” and included a premium refund of $1,314. On advice of his
attorney, Arruda did not cash the refund check. ASF ¶ 35. On
November
5,
2014,
Progressive
sent
another
letter
confirming
cancellation of the Progressive Policy. ASF ¶ 36.
The
Progressive
Policy
contains
relevant to this dispute:
4
the
following
provisions
15. Automatic Termination
If you obtain other insurance on an insured auto, any
similar insurance provided by this policy will terminate
as to that insured auto on the effective date of the
other insurance. Ex. 4 at 25 (Dkt. No. 15-17 at page 13
of 13).
The Progressive Policy also provides:
You may cancel this policy by calling or writing us, and
stating the future date that you wish the cancellation to
be effective.
We may cancel this policy by mailing a notice of
cancellation to the named insured shown on the
Declarations Page at the last known address appearing in
our records. If we cancel this policy at any time due to
nonpayment of premium, notice of cancellation will be
mailed at least ten (10) days before the effective date
of cancellation. Notice of cancellation due to any reason
other than nonpayment of premium will be mailed at least
thirty (30) days before the effective date of
cancellation. Ex. 4 at 44 (Dkt. 15-18 at page 10 of 12).
Following
the
Accident,
Travelers
acknowledged
that
the
Travelers Policy provided coverage for the Accident. ASF ¶ 39.
Progressive denied coverage for the Accident on the ground that the
Progressive Policy was cancelled prior to the Accident. ASF ¶ 48.
II. Procedural History
On May 29, 2015, Arruda filed a complaint (Dkt. No. 1-1)
against Progressive Casualty Insurance Company (“Progressive”) in
Rhode Island state court, which Progressive removed to this Court
on June 26, 2015. On July 23, 2015, Progressive filed an answer in
which it asserted that Arruda had failed to name the proper party
to the action (Dkt. No. 6). With permission by this Court, Arruda
filed an amended Complaint (the “Complaint”) on January 19, 2016 in
5
which he named United2 as the proper party defendant (Dkt. No. 12).
Pursuant to the scheduling order (Dkt. No. 9) issued by this Court
on August 24, 2015, the parties filed cross-motions for summary
judgment on January 29, 2016 (Arruda Mot., Dkt. No. 14; United
Mot., Dkt. No. 16). The Parties also submitted a Statement of Facts
(“ASF”) agreed to by the parties (Dkt. No. 15), to which they
attached a list of agreed upon exhibits (Dkt. Nos. 15-1 through 1519).
United filed a response in opposition to Arruda’s motion on
February 16, 2016 (Dkt. No. 17). Arruda filed his response in
opposition to United’s motion on February 23, 2016 (Dkt. No. 16).
III. Standard of Review
Summary judgment is appropriate “if the movant shows that
there is no genuine dispute as to any material fact and the movant
is entitled to judgment as a matter of law.”
Fed. R. Civ. P.
56(a). “A dispute is genuine if the evidence about the fact is such
that a reasonable jury could resolve the point in the favor of the
non-moving party.”
Prescott v. Higgins, 538 F.3d 32, 40 (1st Cir.
2008) (citations omitted).
“A fact is material if it has the
potential of determining the outcome of the litigation.”
Id.
(quoting Maymi v. Puerto Rico Ports Auth., 515 F.3d 20, 25 (1st Cir.
2008).
2
The pleadings interchangeably use the names “United” or
“Progressive.” According to United’s memorandum in support of its
motion for summary judgment, United is “a company within the
Progressive Group of Insurance Companies.” Defs.’ Mem. At 3. (Dkt.
No. 16).
6
The
party
establishing
seeking
the
lack
summary
of
a
judgment
genuine
bears
issue
of
the
burden
material
of
fact.
Merchants Ins. Co. of New Hampshire, Inc. v. U.S. Fidelity and
Guar. Co., 143 F.3d 5, 7 (1st Cir. 1998). “Once such a showing is
made, ‘the burden shifts to the nonmoving party, who must, with
respect to each issue on which [it] would bear the burden of proof
at trial, demonstrate that a trier of fact could reasonably resolve
that issue in [its] favor.’” Flovac, Inc. v. Airvac, Inc., -– F.3d
– 2016 WL 1319274 at *2 (1st Cir. April 4, 2016) (quoting Borges ex
rel. S.M.B.W. v. Serrano–Isern, 605 F.3d 1, 5 (1st Cir.2010)).
The Court, in considering a motion for summary judgment,
“read[s] the record in the light most favorable to the non-moving
party, drawing all reasonable inferences in its favor.”
Merchants
Ins. Co. of New Hampshire, Inc. v. U.S. Fidelity and Guar. Co., 143
F.3d at 7 (citing Reich v. John Alden Life Ins. Co., 126 F.3d 1, 6
(1st Cir. 1997)).
“The presence of cross-motions ‘neither dilutes nor distorts
this standard of review.”
Scottsdale Ins. Co. v. Torres, 561 F.3d
74, 77 (1st Cir. 2009)(quoting Specialty Nat’l Ins. Co. v. OneBeacon
Ins. Co., 486 F.3d 727, 732 (1st Cir. 2007)). Rather, “‘[c]ross
motions simply require [the court] to determine whether either of
the parties deserves judgment as a matter of law on facts that are
not disputed.’” Scottsdale Ins. Co. v. Torres, 561 F.3d at 77
(quoting Littlefield v. Acadia Ins. Co., 392 F.3d 1, 6 (1st Cir.
7
2004));
Reich v. John Alden Life Ins. Co., 126 F.3d at 6 (“When
deciding
cross-motions
for
summary
judgment,
the
court
must
consider each motion separately, drawing inferences against each
movant in turn.”).
IV. Discussion
The Court interprets the terms of an insurance policy in
accordance with the rules established for the construction of
contracts. New London County Mut. Ins. Co. v. Fontaine, 45 A.3d
551, 557 (R.I. 2012)(citing Beacon Mutual Insurance Co. v. Spino
Bros., Inc., 11 A.3d 645, 649 (R.I.2011)). Accordingly, the Court
looks at the four corners of a policy, viewing it “in its entirety,
affording its terms their ‘plain, ordinary and usual meaning.’”
Town of Cumberland v. Rhode Island Interlocal Risk Management
Trust,
Inc.,
860
A.2d
1210,
1215
(R.I.
2004)(quoting
Casco
Indemnity Co. v. Gonsalves, 839 A.2d 546, 548 (R.I.2004)). “The
test to be applied is not what the insurer intended by his words,
but what the ordinary reader and purchaser would have understood
them to mean.” Town of Cumberland v. Rhode Island Interlocal Risk
Management Trust, Inc., 860 A.2d at 1215 (quoting Pressman v. Aetna
Casualty and Surety Co., 574 A.2d 757, 760 (R.I.1990)).
Absent a finding that the policy is ambiguous, the Court does
not deviate from the literal language of the policy. Lynch v.
Spirit Rent-A Car, Inc., 965 A.2d 417, 425 (R.I. 2009)(citing
Mallane v. Holyoke Mutual Insurance Co. in Salem, 658 A.2d 18, 20
8
(R.I.1995)). Only “[i]f the terms of the policy are ambiguous,
subjecting them to more than one reasonable interpretation, ‘the
policy will be strictly construed in favor of the insured and
against the insurer.’” Lynch v. Spirit Rent-A Car, Inc., 965 A.2d
at 425 (quoting Mallane v. Holyoke Mutual Insurance Co. in Salem,
658 A.2d at 20).
As noted by the Rhode Island Supreme Court, “it is clear that
the substitution of a second policy of insurance can work a
cancellation
of
an
original
policy.”
Capuano
v.
Kemper
Ins.
Companies, 433 A.2d 949, 956 (R.I. 1981) (citing Nelson v. American
Reliable Insurance Co., 286 Minn. 21, 27, 174 N.W.2d 126, 130
(Minn. 1970)). However, “in order for cancellation by substitution
of policies to be effective, it must be based upon the mutual
assent of both the insurer and the insured, and cancellation by
substitution may not be unilaterally affected unless the policy so
provides.” Capuano v. Kemper Ins. Companies, 433 A.2d at 956
(emphasis added)(citing Northern Insurance Co. of New York v.
Mabry, 4 Ariz. App. 217, 219, 419 P.2d 347, 349 (1966); Tyner v.
Cherokee Insurance Co., 262 S.C. 462, 205 S.E.2d 380, 381 (1974)).
As the Rhode Island Supreme Court further clarified, “the policies
[have] to be sufficiently similar in order that one policy could
reasonably be considered a substitute for the other.” Employers
Mutual Casualty Company v. Martin, 671 A.2d 798, 800 (R.I. 1996).
Arruda
takes
the
position
9
that
the
October
23,
2014
communication
from
Kenney,
informing
Progressive
that
the
Progressive Policy had been cancelled effective October 9, 2014
could not function as a “retroactive cancellation,” and that,
therefore, the Progressive Policy was still in effect on October
18, 2014, the date of the Accident. Pltf.’s Mot. Sum. Judg. at 1
(Dkt.
No.
14-1).
Arruda
also
suggests
that
the
Automatic
Termination provision in the Progressive Policy is unenforceable
because
(a)
the
provision
is
ambiguous,
id.
at
15;
(b)
the
Travelers Policy is not a “similar” policy, id. at 12; and (c)
Arruda and Progressive did not mutually agree that the Progressive
Policy was cancelled on October 9, 2014. Pltf.’s Reply at 2 (Dkt.
No. 18).
On its part, Progressive (United) takes the position that the
Automatic Termination provision of the Progressive Policy was fully
satisfied by the transfer of coverage for the Toyota to the
Travelers Policy on October 9, 2014. Def.’s Mot. Sum. Judg. at 28
(Dkt. No. 16). For the reasons that follow, the Court agrees with
that position.
The Progressive Policy at issue in this case contains an
Automatic Termination provision, pursuant to which “any similar
insurance provided by this policy will terminate as to that insured
auto on the effective date of the other insurance,” in the event
the insured obtains “other insurance on an insured auto.” As such,
there is no discernible ambiguity to that provision. It simply
10
provides that obtaining a similar insurance policy results in the
automatic termination of the Progressive Policy covering the same
automobile and that the termination is effective on the same date
the coverage starts under the new policy.
As indicated by Rhode Island case law, the policies have to be
sufficiently
similar
for
one
to
be
reasonably
considered
a
substitute of the other. See supra. In this case, it is undisputed
that Arruda, concerned about not having proper coverage for the
Allied-owned Toyota, and further motivated by the prospect of
saving premium costs, authorized the switch from Progressive to
Travelers. Both policies afforded $1,000,000 in liability coverage,
$5,000
in
medical
coverage,
and
Collision
and
Comprehensive
Coverage of actual cash value, less the applicable deductible. In
addition, the Travelers Policy offered $1,000,000 in Uninsured
Motorist
Coverage
(compared
to
only
$25,000
provided
by
the
Progressive Policy), and had only a $500 deductible (half the
deductible
under
the
Progressive
Policy).
Finally,
the
lower
premium of the Travelers Policy yielded an annual savings of $2,540
to Arruda.
Given the similarity in the pertinent coverage provisions of
the two policies and the fact that the differences between the two
policies were only to Arruda’s benefit, this Court finds that the
policies
were
sufficiently
similar
to
be
deemed
reasonable
substitutes. Arruda’s suggestion that he, himself, did not obtain
11
other insurance on the Toyota because, while he was the insured
under the Progressive Policy, Allied was the insured under the
Travelers Policy, is not relevant under the circumstances. It is
undisputed that, with the exception of a small percentage, Arruda
is Allied’s majority owner. Arruda also acknowledged that he made
all the decisions regarding Allied’s and his own insurance needs.
Finally, Arruda does not dispute that the very reason for obtaining
the Travelers’ Policy was to reflect Allied’s ownership of the
Toyota and to assure proper insurance coverage for that automobile.
With Arruda’s consent and knowledge, his authorized insurance
agent obtained coverage under the Travelers Policy, effective
October 9, 2014. Pursuant to terms in the Progressive Policy, no
further action would have been necessary to terminate that policy.
Instead,
under
the
clear
terms
of
the
Automatic
Termination
provision, the Progressive Policy terminated automatically as soon
as the coverage under the Travelers Policy became effective on
October 9, 2014.
As noted, Burns & Cotter’s business practice was to await
written confirmation of the new coverage before notifying the prior
carrier. However,
even
if
Burns
&
Cotter had
never
informed
Progressive of the newly obtained coverage of the Toyota, the
termination of the Progressive Policy would have become effective
on October 9, 2014. Kenney’s Cancellation Request/Policy Release,
which
cited
October
9,
2014
as
12
the
effective
date
of
the
termination, did
not operate as a retroactive cancellation of the
Progressive Policy; rather, it accurately reflected the automatic
termination that had already occurred as a result of obtaining the
Travelers Policy.
In sum, the Court finds that the Progressive Policy was
effectively terminated on October 9, 2014, when coverage of the
Toyota under the Travelers Policy became effective. The October 23,
2014 correspondence from Burns & Cotter was not a retroactive
cancellation
recovering
and,
a
other
portion
of
than
his
assisting
already
Arruda
paid
in
premium,
promptly
it
was
superfluous in light of the Automatic Termination provision.
Conclusion
For the reasons stated herein, Arruda’s motion for summary
judgment
is
DENIED.
United’s
motion
for
summary
judgment
is
GRANTED. The clerk is directed to enter judgment in favor of
United.
SO ORDERED.
/s/ Mary M. Lisi
Mary M. Lisi
Senior United States District Judge
April 18, 2016
13
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