Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_06-cv-00053/USCOURTS-caed-1_06-cv-00053-1/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1330 Breach of Contract

---

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

1

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

ALBERT GEORGE CURTIS and

KATHLEEN CURTIS,

Plaintiff,

v.

ZURICH AMERICAN INSURANCE

COMPANY, MARYLAND CASUALTY

COMPANY, and DOES 1 through

50, inclusive

Defendants.

1:06-CV-00053 OWW LJO

MEMORANDUM DECISION AND ORDER

GRANTING DEFENDANTS’ MOTION

FOR SUMMARY JUDGMENT

1. INTRODUCTION

This matter comes before the court on removal from the

Superior Court of the State of California, County of Tulare. 

Plaintiffs filed a complaint in Superior Court as judgment

creditors against Zurich American Insurance Company (“Zurich”)

and Maryland Casualty Company (“Maryland”) to enforce a liability

insurance policy and for breach of the covenant of good faith and

fair dealing. Defendants removed the case to federal district

court. Defendants then filed a motion for summary judgment. 

Plaintiffs have opposed the motion. 

2. PROCEDURAL BACKGROUND

Plaintiffs filed their complaint in Superior Court of the

State of California, County of Tulare on November 15, 2005. 

(Doc. 1, Notice of Removal, Ex. A, Filed January 13, 2006.) On

Case 1:06-cv-00053-OWW -LJO Document 42 Filed 03/29/07 Page 1 of 18
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

2

January 13, 2006, Defendants removed the case to federal district

court. (Id.) Defendants then moved for summary judgment on

December 13, 2006. (Doc. 16, Defendants’ Motion for Summary

Judgment, Filed December 13, 2006.) On January 5, 2007

Plaintiffs opposed the motion. (Doc. 25, Opposition.) On

January 12, 2007 Defendants filed their reply. (Doc. 37,

Defendants’ Reply.) 

3. FACTUAL BACKGROUND

A. Background

On or about July 1999, Defendant Zurich, acting through its

subsidiary Maryland issued to Highland Enterprises, Inc.

(“Highland”) a special contractor’s policy No. SCP 33645111

effective August 1, 1999 to August 1, 2000. (Doc. 1, Notice of

Removal, Ex. A, Complaint, ¶ 6.) A proposed renewal policy of

the same number was for the period August 1, 2000 to August 1,

2001. 

Under the terms of the aforementioned policy Defendants

agreed to defend and indemnify Highland with regard to any civil

action or suit seeking damages for personal injury and property

damage. (Id. ¶ 9.) The insurance coverage was effective for

covered events that occurred during the policy period. (emphasis

added.) 

On or about January 29, 2002, Plaintiffs in an underlying

lawsuit Curtis v. Highland Enterprises, Inc, et. al, Case No. 01-

197549, filed a complaint for personal injury and property damage

in Superior Court naming Highland as a Defendant. (Id., ¶ 10.)

Defendants Zurich and Maryland undertook the defense of

Highland as its insured and employed the law firm of Vitale &

Case 1:06-cv-00053-OWW -LJO Document 42 Filed 03/29/07 Page 2 of 18
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

3

Burns to answer said complaint and respond to numerous pleadings

and discovery. (Id. ¶ 13.) 

Plaintiffs claim that in breach of its obligation under the

insurance policy issued on August 1, 2000 to Highland, Defendants

denied coverage and withdrew from providing legal defense in the

underlying case. (Id. ¶ 15.) Defendants argue that Highland had

failed to pay their insurance premiums and that as of the date of

the accident on October 21, 2000, Highland had no insurance

coverage. (Id. ¶ 29.) Highland’s councel withdrew from the

underlying case and thereafter the case went to trial on

September 17, 2003. (Id. ¶ 16.) 

The cancellation terms of the policy read as follows: 

“Cancellation provision in the policy: 

1. The first Named Insured shown in the Declarations

may cancel this policy by mailing or delivering to

us advance written notice of cancellation. 

2. We may cancel this policy by mailing or delivering

to the first named insured written notice of

cancellation at least: 

a. 10 days before the effective date of

cancellation if we cancel for non payment of

premium; or 

b. 30 days before the effective date of

cancellation if we cancel for any other

reason. 

3. We will mail or deliver our notice to the first

named insured’s last mailing address known to us. 

4. Notice of cancellation will state the effective

Case 1:06-cv-00053-OWW -LJO Document 42 Filed 03/29/07 Page 3 of 18
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

 Section 11580(b)(2) of the California Insurance Code 1

provides that “whenever judgment is secured against the insured

or the executor or administrator of a deceased insured in an

action based upon bodily injury, death, or property damage, then

an action may be brought against the insurer on the policy and

subject to its terms and limitations, by such judgment creditor

to recover on the judgment.” 

4

date of cancellation. The policy period will end

on that date. 

5. If this policy is cancelled, we will send the

first named insured any premium refund due. If we

cancel, the refund will be pro rata. If the first

named insured cancels, the refund may be less than

pro rata. The cancellation will be effective even

if we have not made or offered a refund. 

6. If notice is mailed, proof of mailing will be

sufficient proof of notice.” 

(Doc. 1, Notice of Removal, Ex. A, ¶ 4.04, Filed January 12,

2006.) The parties point to no provisions in the contract

governing a notice of cancellation from an agent of the insured. 

On March 23, 2004, judgment was entered against Highland in

favor of Plaintiffs for a total of $5,923,185.01. (Id.) The

judgment has not been paid. As a result, Plaintiffs filed a

complaint against Defendants pursuant to Cal. Ins. Code § 11580

(b)(2) as creditors against insurers on an insurance policy and 1

for a breach of the covenant of good faith and fair dealing in

denying coverage and a defense at trial. 

B. Undisputed Facts

On October 21, 2000, Plaintiffs George and Kathleen Curtis

were injured in a motor vehicle accident. (DSUF, No. 1.) 

Case 1:06-cv-00053-OWW -LJO Document 42 Filed 03/29/07 Page 4 of 18
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

5

Plaintiffs George and Kathleen Curtis filed a lawsuit arising out

of that accident claiming negligence on the part of Highland

Enterprises, the City of Visalia, and others. That lawsuit was

entitled Curtis v. City of Visalia, et. al., Tulare County

Superior Court Case No. 01-197549 (hereinafter the “Curtis v.

City of Visalia lawsuit.”) (DSUF, No. 2.) 

Plaintiffs obtained a Judgment against defendants in the

Curtis v. City of Visalia action in the total amount of

$5,923,185.01. (DSUF, No. 3.) 

Maryland issued an insurance policy to Highland as the named

insured for the policy period 8/01/99 to 8/01/00 [“the 1999

policy”]. The 1999 policy number is SCP 33645111. (DSUF, No. 4.) 

The Commercial General Liability Coverage Form, form number

760203 (Ed. 6-96), in both the 1999 Policy and the proposed 2000

renewal policy included the insuring language in Section I -

Coverages, Coverage A, Bodily Injury and Property Damage

Liability, which stated:

I. Insuring Agreement.

a. We will pay those sums that the insured becomes

legally obligated to pay as damages because of

“bodily injury” or “property damage” to which this

insurance applies. We will have the right and duty

to defend the insured against any “suit” seeking

those damages. However, we will have no duty to

defend the insured against any “suit” seeking

damages for “bodily injury” or “property damage”

to which this insurance does not apply... [para.] 

b. This insurance applies to “bodily injury” and

Case 1:06-cv-00053-OWW -LJO Document 42 Filed 03/29/07 Page 5 of 18
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

6

property damage” only if (1) the “bodily injury”

or property damage” is caused by an “occurrence”

that takes place in the “coverage territory” and

(2) The “bodily injury” or “property that takes

place in the “coverage territory”; and (3) The

“bodily injury” or “property damage” occurs during

the policy period. 

(DSUF, No. 5.) 

The insuring language under the Commercial Umbrella Coverage

Form, form 982003 (Ed. 1-96), in both the 1999 Policy and the

proposed 2000 renewal stated, in pertinent part: 

Section 1. INSURING AGREEMENTS

1.01 Coverage

A) We will pay on behalf of the insured those sums in

excess of the “retained limit” which the insured

becomes legally obligated to pay as damages for:

(1) “Bodily injury” or “property damage”

occurring during the POLICY PERIOD stated on

the DECLARATIONS PAGE and arising out of your

business, excluding advertising, publishing,

broadcasting or telecasting done by or for

you. [Emphasis added.] 

(DSUF, No. 6.) 

In the Common Policy Conditions forms, Condition A under the

11/85 edition of Form IL 00 17 in the 1999 policy and the 11/98

edition of Form IL 00 17 in the proposed 2000 renewal stated:

“The first Named Insured shown in the Declarations may

cancel this policy by mailing or delivering to us

Case 1:06-cv-00053-OWW -LJO Document 42 Filed 03/29/07 Page 6 of 18
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

7

advance written notice of cancellation.” 

(DSUF, No. 7.) 

The Commercial Umbrella Coverage Form in both the 1999

Policy and the proposed 2000 renewal similarly stated in section

4.04(A):

4.04 Cancellation - Non Renewal

A) The first Named Insured shown on the Declarations

Page may cancel this policy by mailing to us advance

written notice of cancellation. 

(DSUF, No. 8.) 

The 1999 policy and the proposed 2000 renewal both listed

Highland Enterprises, Inc., as the named insured on the

Declarations page. (DSUF, No. 9.) 

Defendants sent a Notice of Cancellation of the 1999 Policy

to Highland Enterprises, Inc. on July 11, 2000 for nonpayment of

premiums. (DSUF, No. 10.) 

Highland Enterprises, Inc. never paid any amount for the

past-due premium. (DSUF, No. 11.) While Highland Enterprises

and Defendants were discussing possible reinstatement of the

policy at a lower premium rate, Defendants’ computer system

generated a proposed renewal for what would have been an August

1, 2000 [sic] to August 1, 2001 policy period. The insurer was

to be Maryland; Highland, was to be the named insured; and the

policy number was once again to be SCP 33645111. (DSUF, No. 12.) 

Defendants received a Cancellation Request signed by an

employee of HSS and dated July 12, 2000. This Cancellation

Request stated the reason for cancellation was “agent request,”

and requested that the policy be “canceled flat,” meaning at the

Case 1:06-cv-00053-OWW -LJO Document 42 Filed 03/29/07 Page 7 of 18
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

8

08/01/00 inception of the proposed 2000 renewal policy. (DSUF,

No. 14.) 

The policy cancellation request was processed at 12:01 a.m.

on August 1, 2000. (DSUF, No. 15.) 

Although one entry dated October 3, 2000, in Defendants’

electronic Activity Detail uses the term “reinstatement”, this

refers to reinstating the information in the billing program for

billing purposes only, not to reinstating any coverage afforded

by the policies. (DSUF, No. 16.) 

No offer of reinstatement of coverage was communicated to

Highland Enterprises, Inc., prior to the date of the Curtis

accident, October 21, 2000. (DSUF, No. 20.) 

Defendants sent an invoice dated October 5, 2000, to

Highland Enterprises, Inc., which stated, in part: “We regret you

are no longer a customer. A premium amount due of $29,285.00 is

still owed. We valued you as a customer and would like to bring

closure to your account in a timely and positive manner.” (DSUF,

No. 21.) 

Highland Enterprises Inc. did not communicate any acceptance

of any reinstatement of coverage afforded by any policy prior to

the date of the Curtis accident, October 21, 2000. (DSUF, No.

22.) 

Highland Enterprises, Inc. never paid the $29,285.00 or any

other amount for the past due premium. (DSUF, No. 23.) 

Highland Enterprises, Inc. never paid any consideration for

reinstatement of the 1999 Policy or the 2000 Policy. (DSUF, No.

24.) 

Case 1:06-cv-00053-OWW -LJO Document 42 Filed 03/29/07 Page 8 of 18
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

9

C. Disputed Facts

Hooper, Spuhler & Sturgeon Insurance Services (“HSS”) acted

as the agent for Highland Enterprises in procuring the insurance

policy from Defendants. (DSUF, No. 13.) 

The parties dispute that the policy cancellation was

effective at 12:01 a.m. on August 1, 2000. (DSUF, No. 15.) 

Defendants argue that only the billing statement was

“reinstated” in October of 2000 as confirmed by the October 1,

2000 entry in Defendants’ Activity Detail which states the action

to be taken is “restart bill”. (DSUF, No. 17.) Plaintiffs deny

that the “restart bill” does not include reinstatement coverage

and that coverage was reinstated on June 11, 2000. 

Defendants contend that the fact that only the billing was

“reinstated” in October of 2000 is without significance because

each time a Direct Notice of Cancellation (“DNOC”) for nonpayment

of premium is rescinded, there is an entry in Defendants’

Activity Detail which states, “DNOC Rescinded,” and there is no

such entry following the October 1, 2000, reference to

“reinstatement.” (DSUF, No. 18.) Plaintiffs claim that “DNOC

Rescinded” does not always appear as an entry when coverage is

reinstated after a notice of cancellation issues. 

Defendants assert that the fact that only the billing was

“reinstated” in October of 2000 is confirmed because each time a

Direct Notice of Cancellation “DNOC” for nonpayment of premium is

rescinded, there is an entry in Defendants’ record keeping system

Scratchpad which states , “Rein,” and there is no such entry

following the October 1, 2000, reference to “reinstatement”. 

(DSUF, No. 19.) Plaintiffs however, contest the fact that a

Case 1:06-cv-00053-OWW -LJO Document 42 Filed 03/29/07 Page 9 of 18
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

 Cal. Ins. Code § 678.1(b) provides that “a notice of 2

nonrenewal shall be in writing and shall be delivered or mailed

to the producer of record and to the named insured at the mailing

address shown on the policy.” 

10

Scratchpad entry for September 29, 2000 has the notation “rein”

in it. 

Plaintiffs further claim that Defendants initially attempted

to cancel the 1999-2000 policy no. SCP 33645111 as of April 25,

2000. (PSUF, No. 1.) According to Plaintiffs the policy was

reinstated on June 11, 2000, because Highland Enterprises Inc.,

disputed the premium amount added as a result of the prior term

audit. (PSUF, No. 2.) 

Plaintiffs argue that a renewal policy was issued to

Highland Enterprises, Inc., by Defendants on June 29, 2000 and

that the renewal policy covered the period August 1, 2000 to

August 1, 2001. (PSUF, No. 3 and No. 4.) According to

Plaintiffs, no Notice of Nonrenewal was given to Highland

Enterprises, Inc. as required by Cal. Ins. Code § 678.1. (PSUF, 2

No. 5.) 

Plaintiffs claim that Defendants canceled the renewal policy

at the request of an employee of HSS. (PSUF, No. 6.) According

to Plaintiffs, cancellation for a reason other than fraud or

nonpayment of a renewal policy requires 30 days notice plus an

additional 10 days if notice is mailed from another state. 

(PSUF, No. 7.) Plaintiffs assert that the Defendants did not

give Highland Enterprises, Inc. 30 days notice of the agent's

request to cancel the renewal policy and that therefore the

cancellation was ineffective. (PSUF, No. 8.) 

Case 1:06-cv-00053-OWW -LJO Document 42 Filed 03/29/07 Page 10 of 18
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

11

4. STANDARD OF REVIEW

Summary judgment is warranted only “if the pleadings,

depositions, answers to interrogatories, and admissions on file,

together with the affidavits, if any, show that there is no

genuine issue as to any material fact.” Fed. R. Civ. P. 56(c);

California v. Campbell, 138 F.3d 772, 780 (9th Cir. 1998). 

Therefore, to defeat a motion for summary judgment, the nonmoving party must show (1) that a genuine factual issue exists

and (2) that this factual issue is material. Id. A genuine

issue of fact exists when the non-moving party produces evidence

on which a reasonable trier of fact could find in its favor

viewing the record as a whole in light of the evidentiary burden

the law places on that party. See Triton Energy Corp. v. Square

D Co., 68 F.3d 1216, 1221 (9th Cir. 1995); see also Anderson v.

Liberty Lobby, Inc., 477 U.S. 242, 252-56 (1986). Facts are

“material” if they “might affect the outcome of the suit under

the governing law.” Campbell, 138 F.3d at 782 (quoting Anderson,

477 U.S. at 248). 

The nonmoving party cannot simply rest on its allegations

without any significant probative evidence tending to support the

complaint. Devereaux v. Abbey, 263 F.3d 1070, 1076 (9th Cir.

2001).

[T]he plain language of Rule 56(c) mandates the

entry of summary judgment, after adequate time

for discovery and upon motion, against a party

who fails to make a showing sufficient to

establish the existence of an element essential

to the party's case, and on which that party

Case 1:06-cv-00053-OWW -LJO Document 42 Filed 03/29/07 Page 11 of 18
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

12

will bear the burden of proof at trial. In such

a situation, there can be “no genuine issue as

to any material fact,” since a complete failure

of proof concerning an essential element of the

nonmoving party’s case necessarily renders all

other facts immaterial.

Celotex Corp. v. Catrell, 477 U.S. 317, 322-23 (1986). The

more implausible the claim or defense asserted by the nonmoving

party, the more persuasive its evidence must be to avoid summary

judgment. See United States ex rel. Anderson v. N. Telecom,

Inc., 52 F.3d 810, 815 (9th Cir. 1996). Nevertheless, the

evidence must be viewed in a light most favorable to the

nonmoving party. Anderson, 477 U.S. at 255. A court’s role on

summary judgment is not to weigh evidence or resolve issues;

rather, it is to determine whether there is a genuine issue for

trial. See Abdul-Jabbar v. G.M. Corp., 85 F.3d 407, 410 (9th

Cir. 1996).

5. DISCUSSION

A. Subject Matter Jurisdiction 

Federal courts are courts of limited jurisdiction and may

only preside over certain types of civil cases, as authorized by

Congress and the United States Constitution. Kokkonen v.

Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). A court

has “federal question jurisdiction” over civil actions “arising

under the Constitution, laws, or treaties of the United States.” 

28 U.S.C. § 1331. Alternatively, federal district courts possess

“diversity jurisdiction” over civil suits where the parties are

citizens of different states and the dispute involves more than

Case 1:06-cv-00053-OWW -LJO Document 42 Filed 03/29/07 Page 12 of 18
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

13

$75,000.00. 28 U.S.C. § 1332. In determining which choice of

law rules to apply, a federal court sitting in diversity

jurisdiction applies the rules of the state wherein the district

court sits. Patton v. Cox, 276 F.3d 493, 495 (9th Cir. 2002). 

Defendant Zurich is a corporation with its principal place

of business in the state of New York. (Doc. 1, Notice of

Removal, ¶ 3.) Defendant Maryland is a corporation with its

principal place of business in the State of Maryland. (Id., ¶

4.) Plaintiffs are residents of the State of California. (Id.,

¶ 2.) The amount in controversy in the case is in excess of

$75,000. (Id, ¶ 6.) The parties have brought suit in the state

of California. California insurance law governs this case. 

B. Judicial Notice

“Courts may only take judicial notice of adjudicative facts

that are ‘not subject to reasonable dispute.’” U.S. v. Ritchie,

342 F.3d 903, 908-09 (9th Cir. 2003)(quoting Fed. R. Evid.

201(b)). “Facts are indisputable, and thus subject to judicial

notice, only if they are either ‘generally known’ under Rule

201(b)(1) or ‘capable of accurate and ready determination by

resort to sources whose accuracy cannot be reasonably questioned’

under Rule 201(b)(2)” Id. “A court shall take judicial notice

if requested by a party and supplied with the necessary

information.” Fed. R. Evid. 201(d). 

Defendants have requested judicial notice of the following

documents: 

1. The Complaint originally filed in The Superior Court of the

State of California, County of Tulare, Case No. 05-216885.

2. Plaintiffs Second Amended Complaint in the underlying action

Case 1:06-cv-00053-OWW -LJO Document 42 Filed 03/29/07 Page 13 of 18
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

14

Curtis v. City of Visalia, et. al., Case No.01-197549. 

3. The Judgment on Special Verdict filed in Tulare County

Superior Court in the underlying action, Curtis v. City of

Visalia, et. al., Case No.01-197549 on March 23, 2004. 

Also, Plaintiffs have requested judicial notice of Statement

of Uncontroverted Facts in City of Visalia v. Zurich, 03-cv005435 AWI-LJO. All the documents are matters of public record,

the existence of which are judicially noticeable under Fed. R.

Evid. 201(d). This does not mean that disputed facts contained

in such documents are necessarily established. 

The parties’ requests for judicial notice are GRANTED. 

C. Effective Cancellation of the Policy 

Cal. Ins. Code § 676.2 governs the cancellation of

commercial insurance policies. According to the statute, after a

policy has been in effect for more than 60 days cancellation by

the insurer is effective if a notice of cancellation is provided

in writing and mailed to the insured in accordance with Cal. Ins.

Code § 677.2 based on one or more of several events which,

includes non payment of premium, including any payment due on a

prior policy issued by the insurer and due during the current

policy term covering the same risks. Cal. Ins. Code § 676.2

(2006). 

Based on the record, it appears the insurer Maryland made

two attempts to cancel the policy. The first attempt was made by

the Defendants and based on the undisputed fact that Highland had

not paid a past due premium for the insurance policy. As a

result, Defendants mailed a written Notice of Cancellation of the

1999 policy to Highland based on non payment on July 10, 2000. 

Case 1:06-cv-00053-OWW -LJO Document 42 Filed 03/29/07 Page 14 of 18
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

 To effect a cancellation, it is necessary that the insured 3

or the insurance broker to the insured indicate a present resort

to the insured’s privilege to cancel. Glen Falls Ins. Co. v.

Founders’ Ins. Co., 209 Cal. App. 2d 157, 165 (Cal. Ct. App.

1962.) However, “an agent authorized to procure insurance is not

thereby made the agent of the insured to cancel a policy.” K.C.

Working Chemical Co. v. Eureka-Security Fire and Marine Insurance

Company of Cincinnati, 82 Cal. App. 2d 120, 129 (Cal. Ct. App.

1947) Authority to keep property insured is not authority to

consent to a cancellation of insurance which would leave the

insured wholly without insurance. Id. This rule does not apply

where the broker has been specifically given the authority to

accept cancellation on behalf of the insured. see, Ferrar v. W.

Assurance Co., 30 Cal. App. 489, 492 (1916). No evidence is

provided whether Highland granted HSS cancellation authority. 

15

Under Cal. Ins. Code § 676.2, Defendants’ notice of cancellation

after the non payment by Highland is sufficient notice of

cancellation of the commercial insurance policy. 

Plaintiffs, however, dispute a separate attempt at

cancellation by Highland’s agent, HSS, in its capacity as

Highland’s broker. Defendants received a Cancellation Request

signed by an employee of HSS and dated July 12, 2000. This

Cancellation Request stated the reason for cancellation was

“agent request,” and requested that the policy be “canceled

flat,” meaning at the 08/01/00 inception of the proposed 2000

renewal policy. Plaintiffs argue that their agent, HSS did not

have the authority to request the cancellation and that the

cancellation was not effective. 

Even if HSS did not have authority to request cancellation

as Highland’s broker Plaintiffs do not dispute that Highland 3

thereafter failed to pay its past due insurance premium, that

Defendants sent Highland a written notice of cancellation as a

result, and that a cancellation was processed on August 1, 2000. 

Case 1:06-cv-00053-OWW -LJO Document 42 Filed 03/29/07 Page 15 of 18
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

16

Plaintiffs accident occurred on October 21, 2000, more than two

years later. Plaintiffs contest the effectiveness of

cancellation but offer no evidence in law or fact to show that

Defendants did not effectively cancel the policy in accordance

with Cal. Ins. Code § 676.2. 

D. Renewal of the Policy

Plaintiffs also argue that even though the policy was

cancelled, the policy was subsequently renewed prior to the date

of Plaintiffs accident. “An insurance policy is a contract and,

like all contracts, requires mutuality of assent.” Golden Eagle

Ins. Co. v. Foremost Ins. Co., 20 Cal. App. 4th 1372, 1384 (Cal.

Ct. App. 1993.) “Acceptance of an offer to renew an insurance

policy may be found from the circumstances.” Id. 

Plaintiffs fail to provide any facts to show that Defendants

made a renewal offer to Highland and that Highland accepted such

renewal prior to Plaintiffs accident on October 21, 2000. 

Plaintiffs agree that Highland did not communicate any acceptance

of any reinstatement of coverage and never paid any consideration

to reinstate the insurance policy. Highland never paid any of

the past due premium. 

The undisputed facts show that Highland and Defendants

temporarily reinstated the insurance policy in June 2000 when

Highland disputed the premium amount owed. However, according to

the facts, Defendants then resumed billing the account by sending

a second cancellation notice. Highland never paid any premium

amount and Defendants ultimately processed a cancellation

effective July 26, 2000. 

An October 3, 2000 billing system entry uses the term

Case 1:06-cv-00053-OWW -LJO Document 42 Filed 03/29/07 Page 16 of 18
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

17

“reinstatement.” This refers to reinstating the billing program

for billing purposes only. It is undisputed that defendants sent

an invoice dated October 5, 2000, to Highland Enterprises, Inc.,

which stated, in part: “We regret you are no longer a customer. 

A premium amount due of $29,285.00 is still owed. We valued you

as a customer and would like to bring closure to your account in

a timely and positive manner.” (Doc. 24, Ex. H, Filed December

14, 2006.) This is evidence that the insurer confirmed the

policy had been cancelled and sought payment for unpaid premiums

from Highland. 

Defendants sued Highland for the unpaid premiums in Fresno

County Superior Court, Case No. 02 CE CG 00161 and obtained a

default judgment. On November 20, 2000, Ron Cox, Highland’s

president called Maryland stating a need to reinstate the policy. 

Highland was advised that this could not be done without payment

of the $29,285 judgment for unpaid premiums before a new policy

could be issued. 

Plaintiffs, do not dispute that Highland and Defendants were

in negotiations for a lower premium for the policy, Plaintiffs

argue that the temporary reinstatement of the policy during these

negotiations constituted a renewal of the policy which resulted

in coverage for Highland from August 1, 2000 to August 1, 2001

period. Further, Plaintiffs argue that Highland received a

renewal policy on June 29. However, Defendants rejoin that the

printout Plaintiffs identify as the “renewal policy” is instead a

printout for billing purposes. 

//

//

Case 1:06-cv-00053-OWW -LJO Document 42 Filed 03/29/07 Page 17 of 18
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

18

6. CONCLUSION

Plaintiffs have failed to provide sufficient evidence to

raise a disputed issue of material fact that cancellation of

Highland’s insurance policy by Defendants was not effective and

that there was no renewal of the policy prior to the date of

Plaintiffs’ accident. 

Defendants motion for summary judgment is GRANTED

IT IS SO ORDERED.

Dated: March 28, 2007 /s/ Oliver W. Wanger 

dd0l0 UNITED STATES DISTRICT JUDGE

Case 1:06-cv-00053-OWW -LJO Document 42 Filed 03/29/07 Page 18 of 18