Jet Drive General Marine Contracting Co. Inc v. Scottsdale Insurance Company

Background

Jet Drive sued Scottsdale for breach of contract and declaratory relief. The dispute concerned General Liability Policy No. NCS0001044, which covered a one-year period beginning on or about March 1, 2017. Jet Drive canceled the policy on or about February 27, 2018, two days before the policy term ended.

The policy included a “Minimum and Advance Premium/Minimum Earned Cancellation Endorsement.” The endorsement stated that the advance premium was a deposit and that Scottsdale would return any excess after calculating the earned premium, but only “subject to” Scottsdale retaining the scheduled minimum premium. The advance premium and minimum premium were each $285,800. The endorsement also stated that, if the insured requested cancellation, Scottsdale would retain “not less than” 25% of the advance premium; the blank for a different percentage was not completed.

After communications among Jet Drive’s insurance representatives and Scottsdale-related entities, Jet Drive was offered a $1,429 return premium for the final two days. Jet Drive alleged that it was entitled to at least $157,905, the difference between the stated earned premium of $127,895 and the advance premium of $285,800. The complaint sought $156,476 in damages, plus interest, attorneys’ fees, costs, and a declaration concerning the amount due under the policy.

Parties’ Arguments

Scottsdale moved to dismiss under Rule 12(b)(6), which allows dismissal when a complaint does not state a legally sufficient claim. Scottsdale argued that the policy was unambiguous and permitted it to retain the minimum premium. Jet Drive argued that the cancellation provision meant no minimum premium was due because Jet Drive canceled before the policy ended.

Jet Drive also argued that the cancellation provision would be unnecessary if Scottsdale could keep the minimum premium, and that Scottsdale’s correspondence offered several different interpretations of the policy. Jet Drive contended that these issues made the endorsement ambiguous.

Court’s Analysis

Applying New York law, the court explained that clear insurance-policy language must be given its ordinary meaning. Any genuine ambiguity generally would be resolved in favor of the insured, but a contract is not ambiguous merely because the parties propose different interpretations.

The court held that the premium provision clearly allowed Scottsdale to retain the scheduled minimum premium when the policy was canceled before expiration. The phrase “not less than 25%” in the cancellation provision meant at least 25%, not at most 25%. The cancellation provision did not override the premium provision.

The court concluded that the two provisions worked together. For an early cancellation, the cancellation provision could require Scottsdale to retain at least 25% of the advance premium. For the late cancellation involved here, the premium provision applied and allowed Scottsdale to retain the full minimum premium. Because the minimum premium equaled the advance premium, the court found no conflict or ambiguity.

The court also declined to consider the parties’ correspondence as evidence of ambiguity. It explained that a complete and unambiguous written agreement is interpreted without using outside evidence to change its terms.

Disposition

The court held that Scottsdale was entitled to retain the full $285,800 minimum premium and that Jet Drive had failed to state a claim for relief. Judge John G. Koeltl granted Scottsdale’s motion to dismiss Jet Drive’s breach-of-contract and declaratory-relief claims. The Clerk was directed to enter judgment dismissing the case, close the case, and close all pending motions.