Wade Clark Mulcahy LLP

<p style="text-align: justify;">In <a href="https://www.law.com/thelegalintelligencer/almID/1551929829PA190036/?download=190036.pdf"><em><a href="https://www.wcmlaw.com/wp-content/uploads/2019/04/Chad-Ashley-Inc.-v.-White-Pine-Insurance.pdf">Chad &amp; Ashley Inc. v. White Pine Insurance</a></em></a>, the Pennsylvania Court of Common Pleas evaluated an interesting situation regarding the cancellation of an insurance policy and the delayed delivery of a notice of cancellation.  Plaintiff had a policy with defendant with effective dates of October 8, 2015, through October 8, 2016.  On January 28, 2016, a fire broke out on plaintiff's property, causing a total loss.  Defendant previously sent plaintiff a notice of cancellation which stated the end date of the policy was January 3, 2016.  Additionally, the parties' insurance contract provided for a 10-day period of notice.  Plaintiff alleged it did not receive this notice until January 15, 2016.  The notice stated that the policy would no longer be in force on January 3, 2016, therefore, plaintiff had 15 days to get new coverage if it wanted to do so.  Plaintiff interpreted this cancellation notice as providing it with a 15-day notice, so plaintiff concluded the contract ran through January 30, 2016.  Consequently, plaintiff filed breach of contract and bad faith claims against the defendant.</p>
<p style="text-align: justify;">In an action to determine whether there was coverage under the Policy for the loss, the Court concluded that the 15-day provision was not a grace period, but instead, it stemmed from the specified end date in the notice.  Further, the Court found that even if January 15 was treated as the operative start date of the notice period, the 10-day period of coverage did not extend to the date of the loss.  Regarding the bad faith claim, the Court reasoned that the plaintiff was required to show by clear and convincing evidence that the insurer did not have a reasonable basis for denying benefits under the Policy, and that it knew or recklessly disregarded its lack of a reasonable basis in denying the claim.  The Court found that the insurance contract was not in effect at the time of the loss, and the defendant had a reasonable basis for denying benefits under the policy.  Therefore, the court dismissed the bad faith claim as well.</p>
<p style="text-align: justify;">This case provides important takeaways regarding sending written notices in connection with changes in policies.  It is important for insurers to ask for confirmation of delivery of notices so there is evidence of when a document was delivered.  That could prevent later disputes as to when documents were received.</p>
<p style="text-align: justify;">Thanks to Malik Pickett for his contribution to this post. Please email <a href="mailto:chayes@wcmlaw.com">Colleen Hayes</a> with any questions.</p>