Hart et al v. Safeco Insurance Co et al

Filing 62

ORDER granting 57 Defendants' Motion for partial Summary Judgment on Plaintiffs' second cause of action (breach of contract) and third cause of action (bad faith). Further, the Court GRANTS summary judgment for Def endants on Plaintiffs' sixth cause of action (equitable estoppel) and GRANTS summary judgment for Defendants on Plaintiffs' fourth cause of action (negligent misrepresentation) and fifth cause of action (promissory estoppel) to the extent t hose causes of action seek damages for Defendants' refusal to provide insurance coverage of the February 1, 2016 accident. The Court REMANDS this action to the Charleston County Court of Common Pleas. AND IT IS SO ORDERED. Signed by Honorable Richard M Gergel on 2/14/2017.(sshe, )

RECEIVED
CClERK.CHP-RlESTON.SC
IN THE UNITED STATES DISTRICT COU\{(¥
DISTRICT OF SOUTH CAROLINA
20n FEB \ 4 PM t: 35
CHARLESTON DIVISION
Juanita Hart and Devon Hart-Barron,

~

Safeco Insurance Co., a subsidiary of
Liberty Mutual Insurance Company;
and First National Insurance Company of
America,
Defendants.

Civil Action No. 2: 16-2777-RMG

)

Plaintiffs,

)
)
)
)

ORDER AND OPINION

)
)
)
)
)
)
)

This matter is before the Court on Defendants' motion for partial summary judgment on
Plaintiffs' claims for breach of contract and bad faith denial of insurance. For the reasons set forth
below, the Court grants the motion, grants summary judgment on Plaintiffs' claim for equitable
estoppel, and grants summary judgment on Plaintiffs claims for negligent misrepresentation and
promissory estoppel to the extent those causes of action seek damages for Defendants' refusal to
provide insurance coverage. Because Plaintiffs' remaining claims are state-law claims that cannot
possibly approach the jurisdictional threshold of $75,000, the Court remands this matter to the
Charleston County Court of Common Pleas.

I.

Background
This is an automobile insurance coverage case. Plaintiffs Juanita Hart and Devon Hart-

Barron allege that, in August 2015, Ms. Hart purchased an automobile insurance policy (number
F3013258) issued by Defendants from American Auto, an independent insurance agent. (Dkt. No.
54,-r 8.) Effective December 31, 2015, Ms. Hart added a 2015 Nissan Sentra to the Safeco policy
and Plaintiff Devon Hart-Barron as a named insured. (Jd.,-r,-r 12-15.) Plaintiffs allege American
Auto and Safeco setup a monthly automatic draft payment plan from Ms. Hart's checking account
-1­

for the insurance premiums. (Id. , 11.) The undisputed facts show Ms. Hart setup a monthly debit
card payment, with her premiums charged to a Visa card ending in 7047 and expiring in August

2019. (See Dkt. Nos. 57-1 , 3; 58-1 at 3-4; 58-14.)
On February 1, 2016, Ms. Hart-Barron was involved in an automobile accident that
rendered the 2015 Sentra a total loss. (Dkt. No. 54,,16-17.) Plaintiffs notified Defendant Safeco
and American Auto. (Id.) On February 4, 2016, Defendants acknowledged coverage for the
accident and offered to pay for the vehicle. (Id., 19.) That offer was contingent on Plaintiffs
executing a power of attorney authorizing Safeco to salvage the vehicle. (Id., 20.)
Plaintiffs allege that on February 9, 2016, Ms. Hart called American Auto to ask for
instructions regarding transfer of the vehicle to Defendants, she was informed that the January
premium payment was not processed and that her policy may be cancelled. (Id., 22.) It is
undisputed that the premium due on January 3, 2016 was not paid. (See id. '25.) Plaintiffs allege
Defendants never executed the scheduled automatic draft and provided no notice of nonpayment.

(Id. " 22,25-26.) Defendants aver that Ms. Hart's card was declined and that timely notice of
nonpayment and cancellation were provided. (Dkt. No. 57-1 '4.)
Despite the cancellation of coverage, Plaintiffs nonetheless executed the power of attorney
and Defendants took possession of the vehicle on February 15,2016. (Dkt. No. 54,23.) After
Defendants took possession of the vehicle, Plaintiffs learned the insurance policy had been
cancelled because the January 2016 premium payment was not made. (Id." 24,26.) Plaintiffs
further allege that they demanded return of the vehicle but Defendants refused because the vehicle
had already been scrapped. (Id., 26.) Defendants claim the vehicle was in fact returned and
Plaintiffs have since conceded the vehicle was returned on July 8, 2016. (See Dkt. Nos. 56,19;

58 at 4.)

-2­

On July 5, 2016, Plaintiffs filed the present action in the Charleston County Court of
Common Pleas. The case was removed to this court on August 9,2016. The second amended
complaint asserts six causes of action: conversion, breach of contract, bad faith denial of insurance,
negligent misrepresentation, promissory estoppel, and equitable estoppeL Defendants move for
summary judgment on Plaintiffs' claims of breach of contract and bad faith.

II.

Legal Standard
Summary judgment is appropriate if a party "shows that there is no genuine dispute as to

any material fact" and that the movant is entitled to judgment as a matter of law. Fed. R. Civ. P.
56(a). In other words, summary judgment should be granted "only when it is clear that there is no
dispute concerning either the facts of the controversy or the inferences to be drawn from those
facts." Pulliam Inv. Co. v. Cameo Props., 810 F.2d 1282, 1286 (4th Cir. 1987). "In determining
whether a genuine issue has been raised, the court must construe all inferences and ambiguities in
favor of the nonmoving party." HealthSouth Rehab. Hosp. v. Am. Nat'l Red Cross, 101 F.3d 1005,
1008 (4th Cir. 1996). The party seeking summary judgment shoulders the initial burden of
demonstrating to the court that there is no genuine issue of material fact. Celotex Corp. v. Catrett,
477 U.S. 317,323 (1986).
Once the moving party has made this threshold demonstration, the

non~moving

party, to

survive the motion for summary judgment, may not rest on the allegations averred in his pleadings.

Id at 324. Rather, the non-moving party must demonstrate that specific, material facts exist that
give rise to a genuine issue. Id Under this standard, "[c]onclusory or speculative allegations do
not suffice, nor does a 'mere scintilla of evidence'" in support of the non-moving party's case.

Thompson v. Potomac Elec. Power Co., 312 F .3d 645, 649 (4th Cir. 2002) (quoting Phillips v.
CSXTransp., Inc., 190 F.3d 285, 287 (4th Cir. 1999)).

-3­

III.

Discussion
Defendant moves for partial summary judgment because there is no genuine dispute that

Ms. Hart's automobile insurance policy was cancelled for nonpayment of premium due January 3,
2016, after she received proper notice of cancellation. The Court agrees. Plaintiffs produce no
evidence suggesting that Defendants failed to present Ms. Hart's January premium to Wells Fargo
for payment or failed to provide notice of nonpayment and cancellation in proper form and timely
under the insurance contract and under S.C. Code § 38-77-120.
Plaintiffs' argue Ms. Hart's bank records are evidence suggesting Defendants failed to
present her January premium to Wells Fargo:
Unbeknownst to Plaintiffs, Safeco never automatically drafted Ms. Hart's account
for the January premium. Safeco claims there were insufficient funds in the Wells
Fargo checking account to pay the January premium, but if there were insufficient
funds in Ms. Hart's bank account, Wells Fargo would have paid the premium,
charged a $35 overdraft fee to the account, and notified Ms. Hart that her account
was overdrawn so she could deposit funds. See Exhibit 2 Hart Depo. 67:3-68:6.[1]
Because Safeco set up the automatic premium payment plan using Mrs. Hart's
Wells Fargo routing number and checking account number, drafted the August
2015 through December 2015 payments but never drafted Mrs. Hart's account in
January or February 2016 pursuant to the automatic bill payment system it set up,
the responsibility for any failure to pay a premium rests solely with Safeco. This
is verified by Mrs. Hart's Wells Fargo bank statements marked as an Exhibit in her
deposition and attached as Exhibit 3 herein. These show no return item fees from
December 11,2015 through February 10,2016.
(Dkt. No. 58 at 2-3.) That argument is misguided. Plaintiffs admit that Ms. Hart setup automatic
payments to her checking account with her Visa debit card, not "Mrs. Hart's Wells Fargo routing
number and checking account number."

(Dkt. No. 58-1 at 3-4 (Plaintiffs' supplemental

interrogatory responses).) Plaintiffs' supplemental interrogatory responses claim that PIN-less

Ms. Hart is not qualified to testify about how Wells Fargo processes transactions, but, regardless,
this citation is to a portion of Ms. Hart's deposition that does not concern bank overdrafts.
I

-4­

debit card transactions2 are processed through the Automatic Clearing House ("ACH") network.
ACH transfers process like checks and can generate non-sufficient funds ("NSF") charges on
checking accounts. But PIN -less transactions initiated with a Visa debit card are processed through
the Visa network. See Wells Fargo, Payment Network Qualification Matrix (Oct. 14, 2016),
http://www.wellsfargo.comlassets/pdf/small-business/merchantlinterchange-plus.pdf. 3

Wells

Fargo does not charge fees for declined debit card transactions, so declining Ms. Hart's January 3,
2016 insurance premium would not produce an NSF charge on her account. See Wells Fargo, How

to A void Overspending, http://www.wellsfargo.comlfinancial-educationlbasic-finances/manage­
money/cashflow-savings/avoid-overspending! ("There is no fee associated with a declined ATM
or debit card transaction."). Thus, the absence of an NSF charge is not evidence that Defendants
did not present Ms. Hart's January premium for payment.
Further, on January 3, 2016, Ms. Hart's account was overdrawn by $663.95 and it had been
overdrawn for six days. (Dkt. No. 58-3 at 2.) Ms. Hart's account did not have overdraft protection
or a debit card overdraft service. (ld at 1.) There is no reason to believe that an attempted debit
card charge of $379.91 (the amount of the January premium) to Ms. Hart's account when it was
overdrawn by $663.95 would not decline. Moreover, while Plaintiffs have no evidence that
Defendants failed to present Ms. Hart's January premium to Wells Fargo for payment, Defendants
have substantial evidence that they did. Defendants produce an affidavit from a receivables
manager, swearing that Ms. Hart's card declined a payment request for the January premium that

1 e., a transaction processed against a debit card number on file, where the cardholder does not
enter a PIN on a keypad at the point-of-sale.

2

Visa rules allow issuers to process non-Visa, non-PIN payments to known merchants through
other ATM/debit networks in some situations. See Fed. Reserve, Meeting Between Federal
Staff and
Representatives
of Visa
(Nov.
26,
2013),
Reserve
Board
http://www.federalreserve.gov/newsevents/rr.../visa-meeting-20131126. pdf.

3

-5­

Defendants submitted on January 3, 2016. (Dkt. No. 57-1.) Defendants also produce copies of
the cancellation notice for non-payment of premiums sent to Ms. Hart on January 11,2016, and
certificates of mailing of that notice. (Jd)
The Court therefore finds no genuine dispute that Defendants attempted to charge Ms.
Hart's debit card for her January premium and that the charge declined because Ms. Hart's
checking account was overdrawn.

Defendants therefore were entitled to cancel Ms. Hart's

insurance coverage, subject to contractual and statutory notice requirements. See S.C. Code § 38­
77-123(B)(2) (providing an insurer may cancel a policy for nonpayment of premium); (Dkt. No.
57-2 at 45 (contractual terms providing for cancellation for nonpayment)). Defendants aver that
they did mail Ms. Hart termination notice satisfying statutory and contractual requirements. (Dkt.
No. 57-1.) Plaintiffs do not dispute that. Rather, they argue 1) notice was not also sent to Ms.
Hart-Barron's North Charleston address and 2) email notice was sent to Ms. Hart's independent
insurance agent and not to Ms. Hart. (Dkt. No. 58 at 7.) The policy, however, plainly states, "We
may cancel by mailing notice to the named insured shown in this policy." (Dkt. No. 57-2 at 45.)
There is no requirement to mail additional notices to additional insureds who are not named insured
or to supplement mailed notice with emai1.4 Nor is proof of receipt of notice required. "[T]he
actual receipt by the insured of such notice is not a condition precedent to a cancellation of the
policy by the insurer, and the mere mailing of the letter containing a notice of cancellation is
sufficient to effect a cancellation." Moore v. Palmetto Bank, 120 S.E.2d 231, 233 (S.C. 1961)
(citations omitted).

Even if email notice were required, the parties agree Defendants did email notice of the
nonpayment to Ms. Hart's email address on file, which was the email address of her independent
insurance agent. (See Dkt. Nos. 57-3; 58 at 7.) Whether Ms. Hart's agent thereby assumed a duty
of care to alert Ms. Hart to communications from her insurer and whether the agent subsequently
breached that duty are issues between Ms. Hart and her agent, not Ms. Hart and her insurer.
4

-6­

Ms. Hart's policy was cancelled effective January 31, 2016. She had no insurance contract
in force with Defendant on February 1, 2016, when her accident occurred. Defendants' failure to
cover her February 1,2016 accident therefore does not give rise to any claim for breach ofcontract
or bad faith. Defendants therefore are entitled to judgment as a matter oflaw on Plaintiffs' second
cause of action (breach of contract) and third cause of action (bad faith) and the Court grants
Defendants' motion for summary judgment on those causes of action.
Although Defendants have not moved for summary judgment on Plaintiffs' sixth cause of
action-alleging Defendants are equitably estopped from denying coverage of the February 1,
2016 accident-the Court concludes they are entitled to summary judgment on that claim as well.
Plaintiffs assert Defendants are estopped from denying coverage because Defendants represented
Plaintiffs would have coverage so long as they paid premiums due, because Defendants
represented they would make monthly payment requests to Wells Fargo for premiums due, and
because Defendants represented they would provide notice of nonpayment before cancelling
insurance coverage. (Dkt. No. 54"59-60.) For the reasons discussed above, there is no dispute
that Ms. Hart would have had coverage had she paid the premiums, that Defendants did attempt to
draft Ms. Hart's bank account as agreed, and that Defendants did provide the required notice of
nonpayment and cancellation. Defendants therefore are entitled to judgment as a matter oflaw on
Plaintiffs' sixth cause of action (equitable estoppel) and the Court grants summary judgment on
that cause of action. For the same reasons, the Court grants summary judgment on Plaintiffs'
fourth cause ofaction (negligent misrepresentation) and fifth cause of action (promissory estoppel)
to the extent those causes of action seek damages for Defendants' refusal to provide insurance
coverage of the February 1,2016 accident.

-7­

The only remaining claims in this action concerns the salvage of Ms. Hart's vehicle. It is
undisputed that Defendants induced Ms. Hart transfer the vehicle to them by representing such
transfer as a prerequisite for coverage--coverage which, as explained above, Ms. Hart in fact did
not have. (See Dkt. Nos. 58-9.) Plaintiffs admit the wreck was returned to Ms. Hart, but they
assert that occurred after a delay of several weeks, and only after this action was filed. (Dkt. No.
58 at 4.) If Plaintiffs' allegation is true, Plaintiffs possibly could recover on their pleaded theories
of conversion, negligent misrepresentation, or promissory estoppel. But those are state law causes
of action and the undisputed salvage value of the vehicle was $2,055. (See Dkt. No. 57-5 at 6.)
The Court finds a legal certainty that claims regarding a purported three-month conversion of a
wrecked Nissan Sentra worth $2,055 cannot satisfy the $75,000 threshold for diversity jurisdiction.

See 28 U.S.C. § 1332(b). When the claims giving rise to federal jurisdiction in a case originally
filed in state court are dismissed before trial, any remaining state law claims generally should be
remanded back to state court for resolution. See United Mine Workers v. Gibbs, 383 U.S. 715,
725-27 (1966). The Court therefore remands this action to the Charleston County Court of
Common Pleas.

IV.

Conclusion
For the foregoing reasons, the Court GRANTS Defendants' motion for partial summary

judgment on Plaintiffs' second cause of action (breach of contract) and third cause of action (bad
faith). Further, the Court GRANTS summary judgment for Defendants on Plaintiffs' sixth cause
of action (equitable estoppel) and GRANTS summary judgment for Defendants on Plaintiffs'
fourth cause ofaction (negligent misrepresentation) and fifth cause of action (promissory estoppel)
to the extent those causes of action seek damages for Defendants' refusal to provide insurance
coverage of the February 1,2016 accident. The Court REMANDS this action to the Charleston
County Court of Common Pleas.
-8­

AND IT IS SO ORDERED.

United States District Court Judge

IV,

February
2017
Charleston, South Carolina

-9­