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District Court Finds Insurance Policy Language Precludes Breach Claim, But Estoppel and Waiver Claims Survive

Drexel v. Harleysville Ins. Co., 2008 WL 356938 (D.Del. Feb. 11, 2008)

Here the District Court evaluated a claim from an insured that a denial of coverage based on policy expiration constituted a breach of contract. The insured owned a property that sustained fire damage, and submitted a claim to Defendant, his insurer. The policy required annual renewal, but the insured did not submit the payment required for renewal until after both the policy expiration date and the subsequent grace period. However, the insured submitted his claim during the grace period, such that Defendant began to process the request and retain an adjuster and contractor. Defendant subsequently determined that the policy had expired prior to the insured’s claimed damages, and the insured had not submitted payment during the grace period. Defendant therefore denied coverage, and the insured sued on a theory of breach of contract, estoppel, and waiver. Defendant moved for summary judgment on all claims, while the insured moved for summary judgment on the breach claim. 

In making his breach claim, the insured argued that the policy language required 10 days notice prior to cancellation, which he did not receive. The Court, however, found that a clear distinction exists between cancellation and expiration. Here the insured’s policy expired as a result of his failure to timely submit payment to ensure renewal and continuous coverage under the policy’s grace period. Therefore the cancellation provision of the policy, and its 10 day notice requirement, was inapplicable, and the insured was not covered at the time the fire damages were sustained. The Court therefore granted Defendant’s motion for summary judgment on the breach claim. However, the Court found that under the summary judgment standard, sufficient evidence existed to establish a triable fact as to whether the insurer’s actions in processing the claim after the policy expired constituted estoppel or waiver of the policy expiration. The Court therefore denied Defendant’s motion for summary judgment on the estoppel and waiver claims. 

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