Indian Harbor Insurance v. F & M Equipment, Ltd.
2015 U.S. App. LEXIS 17901
| 3rd Cir. | 2015Background
- Furnival (insured) bought a 10-year Pollution and Remediation Legal Liability Policy from Indian Harbor in 2001, covering 12 sites (including Elizabethtown) with a $10M limit later increased to $14M by endorsement.
- Endorsement No.16 promised Indian Harbor would not "refuse to offer a renewal extension of coverage" except for listed reasons; none of those reasons occurred.
- Near policy expiration, Indian Harbor sent an "Indication of Coverage" offering a one-year policy with $5M limit and excluding Elizabethtown; Furnival rejected it and demanded renewal on the same terms.
- Indian Harbor declined to revise the offer; Furnival mailed a premium check to accept what it viewed as the required renewal; Indian Harbor returned the check and filed for declaratory relief that its offer constituted a renewal.
- District Court denied Furnival's summary judgment; Third Circuit reviews de novo and must interpret Pennsylvania law on what qualifies as a "renewal."
Issues
| Issue | Furnival's Argument | Indian Harbor's Argument | Held |
|---|---|---|---|
| What does "renewal" require? | Renewal must be a new contract with the same or substantially similar material terms. | Any subsequent offer is a renewal if insurer gives advance notice of changed terms and they are commercially reasonable. | Renewal must continue coverage on the same or nearly the same terms as the expiring policy. |
| Did the Indication constitute a renewal? | No — Indication materially changed term length, limit, and excluded a previously covered site, so it was not a renewal. | Yes — insurer gave notice of changes, so the Indication satisfied the renewal promise. | The Indication was not a renewal because its terms were not the same or nearly the same. |
| Did Indian Harbor breach Endorsement No.16 by refusing to offer a renewal? | Yes — by offering a materially different contract, Indian Harbor breached its promise to offer a renewal extension. | No — providing a new offer with notice fulfills the renewal obligation. | Indian Harbor breached its obligation to offer a renewal. |
| Was Furnival entitled to unilaterally accept by mailing the full prior premium? | Furnival contends it validly accepted the required renewal by tendering the premium. | Indian Harbor contends it was not obligated to provide an identical policy, so the tender was not effective. | Furnival was not entitled to unilaterally accept by mailing the prior premium; premium amount had changed and parties must negotiate after a proper renewal offer. |
Key Cases Cited
- Flanagan v. Fidelity Bank, 652 A.2d 930 (Pa. Super. 1995) (renew means to begin again or continue in force the old contract)
- Schock v. Penn Twp. Mut. Fire Ins. Ass'n, 24 A.2d 741 (Pa. Super. 1942) (a renewal is a new contract and, unless otherwise expressed, on the same terms)
- Am. Cas. Co. of Reading, Pa. v. Continisio, 17 F.3d 62 (3d Cir. 1994) (change in material terms does not necessarily equal constructive nonrenewal)
- McCuen v. Am. Cas. Co. of Reading, Pa., 946 F.2d 1401 (8th Cir. 1991) (renewal requires continuation on the same or nearly the same terms)
- Davis v. Travelers Ins. Co., 196 N.W.2d 526 (Iowa 1972) (discussed in McCuen re: similarity requirement)
Disposition
The Third Circuit vacated the district court's judgment and remanded with instructions to enter summary judgment for Furnival on the breach issue, holding Indian Harbor breached its promise because its proposed contract was not the same or nearly the same as the original policy.