IN THE SUPERIOR COURT OF THE STATE OF DELAWARE

Jose Villalobos-Martin and
Jose Villalobos-Gomez,

Plaintiffs, C.A. No.: N18C-01-145 JAP

Vv.

Nationwide Mutual Insurance Company,

ede ee a a de a

Defendant.

Submitted: March 12, 2019
Decided: May 14, 2019

Upon Defendant Nationwide Mutual Insurance Company’s
Motion for Summary Judgment: GRANTED.

Upon Plaintiffs Jose Villalobos-Martin and Jose Villalobos-Gomez’s
Motion for Summary Judgment: DENIED.

Cynthia H. Pruitt, Esq., Doroshow Pasquale Krawitz & Bhaya, Attorney for
Plaintiffs.

Donald M. Ransom, Esq., Beth A. Swadley, Esq., Casarino Christman Shalk
Ransom & Doss, P.A., Attorneys for Defendant.

Rennie, J.

MEMORANDUM OPINION
Plaintiff, Jose Villalobos-Martin (the “Father”), maintained an automobile
insurance policy (the “Policy”) with defendant Nationwide Mutual Insurance

Company (“Nationwide”). Plaintiff, Jose Villalobos-Gomez (the “Son,” collectively
with the Father, “Plaintiffs”), who was previously on the Policy, had been excluded
from it since 2011. The Son was involved in a 2016 automobile accident. Plaintiffs
brought this declaratory action against Nationwide, contending that the original
exclusion was no longer valid in 2016, and therefore the Son was eligible for
coverage under the Policy for that accident. Nationwide disagrees and contends that
the exclusion has always been effective. Now before the Court are the parties’
cross-Motions for Summary Judgment, wherein the sole issue is whether the Son
was still effectively excluded from the Policy at the time of the 2016 accident.
I. FACTUAL AND PROCEDURAL BACKGROUND

The facts in this case are basically undisputed. By a letter (the “Exclusion
Letter”) dated April 29, 2011, Nationwide notified the Father that it would not renew
the Policy due to a “[s]evere violation for [the Son].”’ The “severe violation” was
identified as “reckless driving on 10/22/10.”? In the Exclusion Letter, Nationwide
indicated that it would continue the Policy with the Father if he agreed to exclude
the Son from it.2 The Father agreed to the exclusion and signed the applicable
waiver.’ Nationwide also offered the Son the option to get coverage under a separate

policy.» The Son rejected that offer and instead obtained coverage from another

 

' Plaintiffs’ Motion for Summary Judgment (“Pls.’ Mot.”), Ex. A, Letter from Nationwide to the
Father Excluding the Son from the Policy (“Exclusion Letter’) (Trans. ID. 62976261).

* Td.

3 Id.

* Pls.” Mot., § 2.

> See Exclusion Letter.
insurer.° Since that time, the Father had renewed the Policy every six months, and
each time the Son was listed as an excluded driver.’

On October 30, 2016, the Son was involved in a motor vehicle collision while
driving the Father’s vehicle that was insured under the Policy.® Plaintiffs sought
coverage for liability and property damage, and Nationwide declined coverage
stating that the Son was not insured under the Policy.? On January 12, 2018,
Plaintiffs filed this action against Nationwide, seeking a declaration that Plaintiffs
are entitled to liability and property damage coverage under the Policy for the Son’s
October 2016 accident. After the conclusion of discovery, the parties filed
cross-Motions for Summary Judgment.

II. STANDARD OF REVIEW

A summary judgment under Superior Court Civil Rule 56 may be granted if
the Court concludes that “there is no genuine issue as to any material fact and that
the moving party is entitled to a judgment as a matter of law.”!° The moving party
bears the initial burden of showing that no material issues of fact are present.'’ Once

the moving party has made such a showing, the burden shifts to the non-moving

 

6 Defendant’s Motion for Summary Judgment, Ex. C.2, Progressive Proof of Insurance (Trans. ID.
62758323).

T Amended Complaint, J] 6-10 (Trans. ID. 62051197).

8 Pls.” Mot., § 2.

7 I.

10 Super. Ct. Civ. R. 56(c).

'! Moore v. Sizemore, 405 A.2d 679, 680 (Del. 1979).

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party to demonstrate that there are material issues of fact in dispute.'* Upon

consideration of a motion for summary judgment, the Court must view the facts and

make reasonable inferences in a light most favorable to the non-moving party.'”
I. PARTIES’ CONTENTIONS

Plaintiffs contend that there is a lookback period under the relevant statute
which imposes a time limit on the efficacy of the exclusion. Because enough time
had passed since the Son’s 2010 accident/traffic citation, Plaintiffs argue, the Son
became eligible to be insured under the Policy in 2014, well before the 2016
accident. Plaintiffs further contend that Nationwide, with superior knowledge and
experience in the insurance industry, should have advised Plaintiffs of the Son’s
eligibility to be reinstated, and by failing to do so, breached the implied covenant of
good faith and fair dealing. Plaintiffs therefore argue that Nationwide should extend
coverage for the Son’s 2016 accident.

Nationwide contends that there is no time limit on its exclusion of the Son
from the Policy. Nationwide further contends that once a driver is excluded, there
is no statutory or contractual duty on the part of an insurance company with regard
to that driver. Because the Son had been excluded from the Policy, Nationwide

posits that he is not entitled to any coverage under the Policy.

 

12 Td. at 681.
13 Brzoska v. Olson, 668 A.2d 1355, 1364 (Del. 1995).

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IV. LEGAL ANALYSIS

The statutory provisions applicable to the cancellation and nonrenewal of an
automobile insurance policy as well as the exclusion of one or more drivers from
that policy are set forth in 18 Del. C. §§ 3903-3909. Section 3904 sets forth the
specific bases under which an insurance company can validly cancel or refuse to
renew a policy, or exclude a driver from a policy. Nationwide, in the Exclusion
Letter, identified the reason for the Son’s exclusion as his “reckless driving” record,
but did not specify which subsection of § 3904 the exclusion was based upon.

In its Motion for Summary Judgment, Nationwide states that the exclusion
was based on 18 Del. C. § 3904(a)(7)(c), which provides that the insurance company
may exclude a driver from a policy if he or ire “has an accident record, conviction
record (criminal or traffic), physical, mental, or other condition which is such that
his or her operation of an automobile might endanger the public safety.”'* Plaintiffs,
however, state that they learned of Nationwide’s reliance on § 3904(a)(7)(c) for the
first time in its Motion, and had believed that the exclusion was based on
§ 3904(a)(7)(h). Section 3904(a)(7)(h) allows for exclusion in the circumstance
where the to-be-excluded driver was involved in three at-fault accidents or

committed three or more violations of motor vehicle laws “within the 36 months

 

1418 Del. C. § 3904(a)(7)(c).
immediately preceding” the notice of exclusion.!° Plaintiffs do not seem to dispute
that the Son’s exclusion could fall under either of the two § 3904 subsections.
According to Plaintiffs, it is important to clarify which provision the Son’s exclusion
was based upon, because the 36-month lookback period is included in
§ 3904(a)(7)(h) but not (a)(7)(c).

The Court finds that, because Nationwide’s Exclusion Letter identified only
one incident, i.e., the Son’s “reckless driving on 10/22/10,” instead of several traffic
violations, the exclusion clearly appears to have been based on § 3904(a)(7)(c).
Hence, any argument of Plaintiffs regarding the lookback period would be
inapplicable because § 3904(a)(7)(c) does not contain a lookback period. Assuming,
arguendo, that § 3904(a)(7)(h) was the subsection relied upon by Nationwide as the
basis for the Son’s exclusion, the Court does not find that after the passage of the
lookback period, the Son then became eligible for coverage under the Policy.

Plaintiffs interpret the lookback period as placing a time limit on the
exclusion. According to Plaintiffs, the lookback period renders the exclusion valid
for only 36 months, and after the expiration of the 36-month period, the exclusion
becomes ineffective and the driver previously excluded becomes re-eligible for
coverage under the original policy. The Court does not agree with Plaintiffs’

interpretation of § 3904(a)(7)(h) or the lookback period because it is not supported

 

15 18 Del. C. § 3904(a)(7)(h).
by the plain language of the statute. The statute is unambiguous on its face. Like
other § 3904 subsections, it sets forth one of the multiple circumstances under which
an insurance company may exclude a driver from an insurance policy. Notably, §
3904(a)(7)(h) limits the period of time from which an insurance company is allowed
to consider an accident or violation in extending coverage. The insurance company
could consider only those accidents/violations that occurred within 36 months
preceding the notice of exclusion. In other words, the 36-month lookback period
comes into play and is calculated only from the point in time when the insurance
company makes the exclusion decision. Nothing in the statute suggests that the
lookback period somehow puts a time limit on the exclusion itself.

Since the Court finds that there was no time limit on the Son’s exclusion from
the Policy, Plaintiffs’ contention that Nationwide had an obligation to advise
Plaintiffs of such time limit is without merit. Regardless, even assuming such time
limit existed, the Court finds that Nationwide has done everything it was obligated
to do under the statute with regard to excluding the Son from the Policy. The
specifics of the exclusion process are set forth in 18 Del. C. § 3909. Section 3909(b)
authorizes an insurer to exclude a driver from a given policy for the reasons provided
in § 3904.'° In connection with the exclusion, the insurer is required to offer the

excluded driver coverage of at least the same type and amount of coverage from

 

16 18 Del. C. § 3909(b).
which the driver is excluded.'’? The excluded driver is then required to either accept
the offer, or furnish proof of coverage carried with another insurer or surrender his
or her driver’s license.'® There is no dispute that Nationwide had complied with all
statutory requirements discussed above. Nationwide’s statutory duty stopped there,
and it was under no obligation to do anything more than it had done.

Plaintiffs contend that Nationwide should have notified them which
subsection of 18 Del. C. § 3904 was the basis of the Son’s exclusion and that there
was an end date for the exclusion. As discussed above, the statute did not impose
any such duty of notification on Nationwide. Plaintiffs, at oral argument, conceded
that no statutory duty of notification existed, and therefore made a fairness argument
instead. They argue that Nationwide, with superior knowledge and experience in
insurance matters and a stronger bargaining power, had a duty to notify as a matter
of good faith and fair dealing.

The long-standing concept of implied covenant of good faith and fair dealing
is integrated in every contract. This implied covenant requires a party in a
contractual relationship to “refrain from arbitrary or unreasonable conduct which has
the effect of preventing the other party to the contract from receiving the fruits of

919

the bargain. The record in this case is devoid of evidence showing that

 

'718 Del. C. § 3909(d).
1818 Del. C. § 3909(e).
7 Dunlap v. State Farm Fire and Cas. Co., 878 A.2d 434, 442 (Del. 2005).

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Nationwide engaged in any conduct that was “arbitrary or unreasonable.”
Nationwide excluded the Son from the Father’s Policy for the Son’s traffic citation
of reckless driving. This fell squarely under at least one of the circumstances
allowed under the relevant statute as the basis for the exclusion. Although
Nationwide did not specify the particular subsection of 18 Del. C. § 3904 upon which
the exclusion was based, it clearly illustrated the reason for the exclusion. Plaintiffs
have never challenged the authenticity of the reckless driving record or asserted that
the initial exclusion was in any way improper. Instead, Plaintiffs seem to have fully
understood the reason for the Son’s exclusion and its ramifications. Nationwide, in
compliance with the statute, offered to provide coverage for the Son under a separate
policy. Plaintiffs rejected the offer and obtained separate coverage for the Son from
another insurance company. The Court finds that Nationwide did everything it
should have done under these circumstances, and had no further duty with regard to
the Son under the Policy once he had been excluded. There is no evidence showing
that Plaintiffs were in any way prevented from “receiving the fruits” of their bargain.
V. CONCLUSION

Nationwide complied with its statutory and contractual duty in connection to
excluding the Son from the Father’s Policy. The Son was properly excluded and
never reinstated his eligibility for the Policy. Therefore, Plaintiffs are not entitled to

coverage for liability and property damage for the Son’s 2016 accident under the
Policy. For the foregoing reasons, Nationwide’s Motion for Summary Judgment is
GRANTED, and Plaintiffs’ Motion for Summary Judgment is accordingly
DENIED.

IT IS SO ORDERED. /

a

Sheldon K. Rennie, Judge

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