INSURER’S MOTION FOR SUMMARY JUDGMENT BASED ON NONRENEWAL OF POLICY DENIED BY U.S. DISTRICT COURT - NO EVIDENCE SHOWING NOTICE OF NONRENEWAL WAS MAILED

Last week, the United States District Court for the Northern District of Texas denied an insurer’s motion for summary judgment based on nonrenewal of policy as there was no evidence that notice of nonrenewal was mailed to the insured. In Smith v. State Farm Lloyds, No. 2:18-CV-210-Z-BP, 2020 WL 2832393(N.D. Texas [Amarillo Division], June 1, 2020, mem. op.), Plaintiff insured her house with State Farm Lloyds (“State Farm”). In February 2018, State Farm wrote a letter to notify the insured it would not renew her insurance policy because they delayed roof repairs after State Farm paid a claim for the damaged roof.  The nonrenewal letter stated coverage would expire on March 14, 2018.  A fire destroyed insured’s house in May 2018, and she subsequently filed a claim to cover the fire loss. State Farm denied the claim on the grounds that the insurance policy had expired prior to the fire.  

The insured sued State Farm alleging improper cancellation of the insurance policy, among other causes of action, claiming that she (and her mortgagee bank and insurance agent) never received the nonrenewal notice. In response, State Farm sought summary judgment, submitting its nonrenewal letter as evidence.

The United States District Court, noting that “Texas law requires an insurer to mail a notice of nonrenewal before terminating an insurance policy,” denied State Farm’s motion for summary judgment.  The court reasoned that although State Farm “provided evidence that it generated the nonrenewal letter, but nowhere in the hundreds of pages of filings, exhibits, and appendices was there any evidence State Farm mailed the nonrenewal letter.” 

Another issue in this case was whether State Farm’s basis for nonrenewal – delay in rebuild after payment of a claim – was proper. To that end, the insurance policy provided: “’[w]e may refuse to renew this policy if you have filed three or more claims under the policy in any three-year period.”  The insured argued that this language was as an exhaustive list of reasons State Farm could decline to renew her policy. The Court disagreed and concluded that State Farm could non-renew the policy for the reason stated. First, the policy provision “did not purport to offer an exhaustive list of reasons for policy nonrenewal; instead, it illustrated a single scenario.” Second, such a narrow reading “ignores an insurer’s default right under Texas law to decline to renew a policy for any reason other than the insured’s being elected to political office” and “no reasonable interpretation of Plaintiff’s policy suggests the parties contracted away State Farm’s default right.” Nevertheless, based on its finding of no evidence to support mailing of the notice, State Farm’s summary judgment was denied.