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Southern Pilot Insurance Co. v. CECS, Inc.

United States District Court, N.D. Georgia, Atlanta Division

September 12, 2014

SOUTHERN PILOT INSURANCE CO., Plaintiff,
v.
CECS, INC., JASON CHATHAM, LOUIS DUCKWALL, ADRIANA DUCKWALL, and ROBERT MILLER, as surviving spouse of TRISHA MILLER and as the administrator/executor of the estate of TRISHA MILLER, Defendants

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FOR PLAINTIFF SOUTHERN PILOT INSURANCE COMPANY: Adam Charles Joffe, R. Tyler Bryant, Robert Malcolm Darroch, Goodman McGuffey Lindsey & Johnson, LLP, Atlanta, GA; Stephanie F. Glickauf, Goodman McGuffey Lindsey & Johnson, Atlanta, GA.

FOR DEFENDANT CECS, INC. and JASON CHATHAM: James Glenn Richardson, Talley Richardson & Cable, P.A., Dallas, GA.

FOR DEFENDANT LOUIS DUCKWALL and ADRIANA DUCKWALL: Lawrence J. LoRusso, Rebecca L. Sample, LoRusso Law Firm, P.C., Atlanta, GA.

FOR DEFENDANT ROBERT MILLER: Jennifer Suzanne Ivey, Linley Jones, Linley Jones, P.C., Atlanta, GA.

FOR MICHAEL DILLON and LITTLE AND SMITH, INC.: Brenton Sewell Bean, Christine L. Mast, Hawkins Parnell Thackston & Young, LLP-GA, Atlanta, GA.

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ORDER

Amy Totenberg, United States District Judge.

On September 6, 2011, Defendant Jason Chatham was driving a truck owned by his company Defendant CECS, Inc. (" CECS" ) when he was involved in a motor vehicle collision with Defendants Louis Duckwall and Trisha Miller. Trisha Miller died and Louis Duckwall was injured. CECS identified the truck as a scheduled vehicle on a Southern Pilot Business Auto Policy (" Policy" ). According to Plaintiff Southern Pilot Insurance Company (" Southern Pilot" ), however, CECS failed to timely submit its monthly premium payment in August 2011. Southern Pilot contends that after sending a legally sufficient cancellation notice and receiving no response, Southern Pilot cancelled the policy, effective before the collision occurred. On this basis, Southern Pilot has brought this action for declaratory relief. For their part, Chatham and CECS assert that the cancellation notice was insufficient under Georgia law because, among other reasons, at the time they received the notice, no premium was due. Chatham and CECS also lodge a counterclaim of accord and satisfaction.

The parties have filed cross motions for summary judgment. [Docs. 105, 107.][1] For the reasons that follow, the Court GRANTS Southern Pilot's Motion for Summary Judgment [Doc. 107] and DENIES Defendant CECS, Inc. and Jason Chatham's Second Motion for Summary Judgment [Doc. 105].

I. Legal Standard

The Court may grant summary judgment only if the record shows " that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). A factual issue is genuine if there is sufficient evidence for a reasonable jury to return a verdict in favor of the non-moving party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A factual issue is material if resolving the factual issue might change the suit's outcome under the governing law. Id. The motion should be granted only if no rational fact finder could return a verdict in favor of the non-moving party. Id. at 249.

When ruling on the motion, the Court must view all the evidence in the record in the light most favorable to the non-moving party and resolve all factual disputes in the non-moving party's favor. See Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150, 120 S.Ct. 2097, 147 L.Ed.2d 105 (2000). The moving party need not positively disprove the opponent's case; rather, the moving party must establish the lack of evidentiary support for the non-moving party's position. See Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). If the moving party meets this initial burden, in order to survive summary judgment, the non-moving party must then present competent evidence beyond the pleadings to show that there is a genuine issue for trial. Id. at 324-26. The essential question is " whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Anderson, 477 U.S. at 251-52.

The standard of review for cross-motions for summary judgment does not differ from the standard applied when only one party files a motion, but simply requires

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a determination of whether either of the parties deserves judgment as a matter of law on the facts that are not disputed. Am. Bankers Ins. Group v. United States, 408 F.3d 1328, 1331 (11th Cir. 2005). The Court must consider each motion on its own merits, resolving all reasonable inferences against the party whose motion is under consideration. Id. The Eleventh Circuit has explained that " [c]ross-motions for summary judgment will not, in themselves, warrant the court in granting summary judgment unless one of the parties is entitled to judgment as a matter of law on facts that are not genuinely disputed." United States v. Oakley, 744 F.2d 1553, 1555 (11th Cir. 1984). Cross-motions may, however, be probative of the absence of a factual dispute where they reflect general agreement by the parties as to the controlling legal theories and material facts. Id. at 1555-56.

II. Factual Background

Keeping in mind that when deciding a motion for summary judgment, the Court must view the evidence and all factual inferences in the light most favorable to the party opposing the motion, the Court provides the factual background below. See Optimum Techs., Inc. v. Henkel Consumer Adhesives, Inc., 496 F.3d 1231, 1241 (11th Cir. 2007) (observing that, in connection with summary judgment, courts must review all facts and inferences in light most favorable to non-moving party). This summary statement does not represent actual findings of fact. Instead, the Court has provided the statement simply to place the Court's legal analysis in the context of this particular case or controversy. Nonetheless, the material facts are largely undisputed.[2]

A. Overview

CECS obtained a Southern Pilot commercial automobile insurance policy, effective March 2011.[3] According to Southern Pilot, CECS failed to make a timely premium payment in April or May, but each time, after sending CECS a notice of cancellation, CECS remitted its premium payment before the policy was cancelled.

This is not so, Southern Pilot contends, for the July payment. According to Southern Pilot, CECS failed to pay its July bill on time. Southern Pilot once again sent CECS a cancellation notice. The notice stated that the effective date of cancellation would be August 23, 2011. That day came and went without a payment, and thus Southern Pilot sent CECS a " Cancellation Memo," dated August 23, 2011 and received August 27, 2011. CECS submitted its payment electronically on August 24, 2011, but consistent with its policy, Southern Pilot printed CECS a refund check on September 4 and mailed the check to CECS on September 6.

Unfortunately, on September 6, 2011, CECS's owner Jason Chatham was driving a company vehicle when he collided with another vehicle, injuring one and killing another. Southern Pilot and CECS now dispute whether CECS was insured at the time of this collision. CECS's main argument is that it did not receive billing statements, and that its premiums were not due

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on any particular day. Thus, CECS argues, Southern Pilot's July payment demand and subsequent cancellation notices were premature. Southern Pilot obviously takes a different view.

B. CECS's Procurement of Insurance

Since 2005, CECS worked with its insurance agency Little and Smith, Inc. (" Little Smith" ) and its agent Michael Dillon, for all of its commercial insurance needs. In February 2011, Little and Smith applied for commercial insurance policies on behalf of CECS. (Pl. Mot. Summ. J. Appx. (" Appx." ) VV, Doc. 108-13.) The application included a section entitled " Payment Plan," where the applicant presumably could sign up for a monthly, quarterly, or other premium payment schedule. ( See id. at 11.) This section on the application was left blank. ( Id.)[4]

In March 2011, Southern Pilot issued two insurance policies to CECS as the named insured: a Commercial Automobile Policy (the " CBA Policy" ) and a Comprehensive Insurance Policy (the " CCI Policy" ). The policies were retroactively effective as of March 1. The relevant policy for this case, the automobile policy, provided a limit of $1,000,000. The annual premiums for the CBA Policy and the CCI Policy were $4,535 and $3,100, respectively, totaling $7,645.

Southern Pilot provides its clients with several billing options. For example, in addition to accepting a prepayment of the entire premium amount, Southern Pilot accepts payments monthly. (Appx. VV, Doc. 108-10 at 3.) Pursuant to its monthly billing plan, Southern Pilot accepts a down payment equal to 16.67% of the total premium followed by 10 monthly installments of 8.33% each. ( Id.) And if an insured has more than one policy, as was the case here, Southern Pilot's practice is to apply the premium payments pro rata to all policies on the account unless the insured indicates otherwise. ( Id.)

The record contains no evidence that at the time CECS applied for Southern Pilot insurance, it selected any particular billing option. However, CECS made no advance payment on these policies. (Gragg Dep. at 39, Doc. 113.) Moreover, CECS admits that for all other policies issued to CECS (by different insurance companies) since January 1, 2008, CECS paid an initial payment followed by 10 monthly premium payments. (Pl. 1st Interrog. No. 9, Doc. 109-10 at 6; Appx. RR, Doc. 108-12 at 6.) These monthly premium payment plans were agreed-to in advance by the insurance company and CECS. (Appx. RR, Doc. 108-12 at 6.) The record contains no evidence of a similar advance agreement between Southern Pilot and CECS.

Defendants further assert that " there is no reference within the automobile policy which establishes[] any due date for premium to be paid." (Defs. SUMF No. 14, Doc. 105-1.) And Southern Pilot's corporate designee, Kristine Gragg, confirmed that the policy does not contain the billing information. (Gragg Dep. at 30, Doc. 113.) According to Gragg, this information is provided to the customer on a billing invoice. ( Id. at 30-31.)

Southern Pilot also directs the Court to the " Statement of Account" which was included with the copy of the CECS automobile policy. (Def. Ex. 3, Doc. 114-3 at 9.)

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This statement shows a total policy premium of $4,535.00 and states, without explanation, " MONTHLY BILL." ( Id.) The Statement of Account notes that it is " NOT A BILL" but that " BILLING INFORMATION WILL BE MAILED SEPARATELY." ( Id.) CECS admits that it received this " Statement of Account" on June 9, 2011. (Doc. 115-4 at 12.)

Finally, Defendants acknowledge that because CECS did not enroll itself in a premium billing plan, CECS was automatically enrolled in Southern Pilot's default billing plan, which is designated as " monthly." (Defs. SUMF No. 19, Doc. 105-1.) Jason Chatham admitted that when he signed up with Southern Pilot, he anticipated receiving bills monthly, every other month, or quarterly. (Chatham Dep. at 63, Doc. 124.) Chatham testified, however, that he never received a billing invoice sent to CECS. (Chatham Dep. at 65; see also Defs. SUMF No. 20, Doc. 105-1.)

C. Southern Pilot's Billing and Cancellation Notice Practice

Southern Policy maintains a billing system known as the Customer Account Billing System (" CABS" ). The CABS generates an invoice 20 days before payment is due and assigns a bar code to each printed invoice. Southern Pilot's process for mailing invoices and other notices, including notices of cancellation, is as follows:

(1) a Southern Pilot employee physically picks up the printed and coded documents the morning after they are printed;
(2) the employee hand-delivers the documents to a " Gunther", a high-volume mail processing machine that packages documents for mailing, located 25 feet away from the invoice printer;
(3) a Gunther operator feeds the documents into the Gunther which then scans the barcode for instructions on mailing including how to fold, staple and stuff the documents into envelopes and applies the correct postage on the envelope;
(4) the sealed envelopes are finally mailed through the U.S. Post Office.

Southern Pilot further explains that Gunther has an internal verification component. According to Southern Pilot's corporate designee, Kristine Gragg, Gunther prints a daily report verifying that the machine did what it was supposed to do. (Gragg Dep. at 65, Doc. 113; see also Appx. OO (" Sanborn Aff." ) ¶ ¶ 6-8, Doc. 108-10 at 9.) This report identifies correctly completed jobs as " OK." (Sanborn Aff. ¶ 6.) Ms. Gragg is unaware of any additional audit of the Gunther machine. (Gragg Dep. at 66.)

Southern Pilot on occasion receives returned mail as undeliverable. If a billing statement is returned, it is forwarded to the insured's agent. If a cancellation notice is returned as undeliverable, Southern Pilot keeps a scanned copy of the notice in the insured's file.

D. The First Billing Statement and Notice of Intent to Cancel

According to Southern Pilot, it issued and mailed its first billing statement to CECS on March 11, 2011. (Defs. Resp. Pl. SUMF No. 48, Doc. 119; see Appx. H, Doc. 108-5 at 5.) Southern Pilot directs the Court to Exhibit 4 of Gragg's deposition. (Appx. H, Doc. 108-5 at 5.) This billing statement shows the date of billing as March 11, 2011 and a payment due date of April 1, 2011. The statement also identifies the total balance due as $7,640 and the minimum due as $1,914.00, which is about 25% of the total balance. According to Gragg, this minimum amount due represents 16.67% of the total due as the initial

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down payment plus April's 8.33%. (Gragg Dep. at 123.) The April billing statement correctly identifies CECS's business address. There is no evidence in the record that the statement was returned as undeliverable.

Jason Chatham, CECS's owner and corporate representative, testified that he did not receive this first billing statement. (Chatham Dep. at 112, Doc. 124.) He explained that his method for keeping tabs on outstanding bills is as follows. After collecting the mail, Chatham would either open it or set it aside to be opened later. ( Id. at 141.) When he got around to opening the mail, he would open each envelope, discard the " junk items", and place relevant bills in a folder to be paid at a later time. ( Id.) Once a week, Chatham would review his bills to determine which need to be paid. (Appx. RR, Doc. 108-12 at 4.) Chatham did not, however, organize his bills by due date or otherwise mark bills for payment. (Chatham Dep. at 39.)

When Southern Pilot did not receive a payment from CECS by April 1, the CABS system automatically began the process of cancelling the policy. ( See Gragg Dep. at 60, Doc. 113 and 113-1.) Accordingly, the CABS system automatically generated a Notice of Intent to Cancel (" Notice of Intent" ) and two " Notices of Cancellation" (" Cancellation Notices" ) (one for each policy). ( Id. at 86.) The first page of these three documents, the Notice of Intent, was labeled with a bar code and dated April 6, 2011. ( Id. at 63.) Each document was printed on one piece of paper, front and back. ( See id. at 86-87.)[5] Thus, the entire mailing included 3 pieces of paper and a return ...


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