Does Pennsylvania’s Act 86 Require an Insurer to Provide Notice to an Insured Before Policy Expiration?

By Jane E. Kane, Esq.*

Recently, the Philadelphia Court of Common Pleas granted summary judgment to an insurer and its agent in an action by a former insured seeking coverage for a fire loss under a commercial property insurance policy because the policy expired before the loss occurred, and the policy was not renewed. The court also held that the insurer had no obligation to provide notice under 40 P.S. §3403 because the insurer did not seek to cancel the policy in the middle of the term or non-renew the policy at the end of the term. Rather, the policy expired on its own accord at the end of the stated policy period.

In Get Busy Living Solutions, LLC v. Main Line Insurance Office, LLC, 2015 Phila. Ct. Com. Pl. LEXIS 33 (C.P. Phila. April 22, 2015), the plaintiffs, investment property owners, secured various insurance policies through their principal, Algernong Allen. For years before December 24, 2012, Allen had a business relationship with an insurance agent, Christopher Oidtman, who was associated with the insurance broker, Main Line Insurance.

When Allen first obtained insurance through Oidtman, Allen gave Oidtman a check on “December 24.” Thereafter, the terms for the policies Oidtman obtained for Allen covering the plaintiffs’ investment properties commenced on December 24 and expired on December 24 of the following year.

In dispute in the case was a commercial property insurance policy Landmark American Insurance Company issued, through its general agent USG, to the plaintiffs covering their bar in Philadelphia. The effective policy dates were December 24, 2011, to December 24, 2012, at 12:01 a.m. Eastern Standard Time.

On November 28, 2012, Landmark, through USG, sent Main Line a renewal quote for the policy covering the bar at the same price and on the same terms as the then current policy. However, Allen and Oidtman did not immediately undertake efforts to renew the policy but, instead, secured quotes from other carriers.

On December 21, 2012, Oidtman sent Allen a text message asking whether Allen wanted to renew the policy. On December 24, 2012, at 7:21 a.m., after the Landmark policy expired, Allen responded by text, “Yes.”

On December 24, 2012, at 1:00 p.m. there was a fire at the bar. On December 26, Oidtman attempted to bind coverage for the policy. The plaintiffs sought coverage from Landmark for their losses, but Landmark denied coverage because the policy had expired prior to the loss.

The plaintiffs sued Landmark and USG, claiming they failed to comply with the cancellation and non-renewal notice requirements of 40 P.S. § 3403. This statute is part of what is known as Act 86 (40 P.S. §§ 3401, et seq.), which requires insurers to provide 60 days’ written notice in advance of midterm cancellations or policy non-renewals.

The plaintiffs also claimed that Landmark and USG breached the provisions of the policy because they agreed to provide insurance until and unless non-renewal or cancellation, according to the policy and governing law. The plaintiffs claimed that the policy required 60 days’ notice of cancellation or non-renewal before the policy was canceled or not renewed.

The parties filed summary judgment motions. In their summary judgment motion, Landmark and USG contended that the plaintiffs’ coverage had expired and that prior notice of non-renewal or cancellation was not required because the policy had expired. The court agreed.

The court noted that Pennsylvania’s Act 86 was enacted in response to indiscriminate cancellation of commercial insurance policies. Act 86 requires that insurers provide written notice to insureds 60 days in advance of midterm cancellations or non-renewals. Without this notice, coverage remains in effect for the insured.

Here, the statutory contractual notice requirements did not apply because Landmark neither sought to cancel coverage in the middle of the policy nor non-renew the policy at the end of the policy term. The policy expired on its own terms, and coverage was properly denied.

*Jane, special counsel in our Philadelphia, Pennsylvania office, can be reached at 215.575.4556 or jekane@mdwcg.com.

_{Defense Digest, Vol 21, No. 4, December 2015}

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