On March 23, 2016, Ms. Lively called GEICO to reinstate her policy. During the call, Ms. Lively spoke with GEICO service representative Samuel Cooper for approximately 45 minutes. Ms. Lively provided Mr. Cooper with all the information necessary to reinstate her policy with GEICO, including payment information, and the parties agreed on a quote for the cost of reinstatement.

Under GEICO's procedures, Mr. Cooper had authority to reinstate Ms. Lively's policy once her payment was processed.

The call was disconnected, however, before Mr. Cooper processed Ms. Lively's payment. Neither Mr. Cooper nor Ms. Lively attempted to reconnect the call, and Mr. Cooper neither processed the payment nor reinstated Ms. Lively's policy.

Mr. Cooper made a note in GEICO's internal record system stating “policyholder called in to reissue, line disconnected. If policy holder [sic] calls back, please get new card information and go over discounts.”

Ms. Lively, on the other hand, apparently believed that GEICO had renewed her policy as a result of her March 23 call.

On March 25, 2016, Ms. Lively found that her insurance information was unavailable on GEICO's website. At 2:30 p.m. on that day, Ms. Lively sent an email to GEICO inquiring as to the status of her insurance. At 2:35 p.m., GEICO replied to Ms. Lively's email, informing her that her policy had not been reissued because the premium payment had not been processed.

Ms. Lively did not respond to GEICO's email and took no steps to communicate further with GEICO.

On March 30, 2016, Ms. Lively was involved in a motor vehicle accident. The next day, she called GEICO to report a claim, but GEICO informed her she was not insured.

Ms. Lively subsequently sued GEICO, alleging that she had an insurance policy with GEICO at the time of the accident and that GEICO had failed to fulfill its legal and contractual obligations by refusing to pay her medical expenses. She contended that she had a binding contract with GEICO as of the conclusion of the March 23 phone call because mutual promises had been exchanged. She argued that GEICO's failure to process the payment after the call disconnected did not affect the enforceability of the parties' contract. In the alternative, she argued that promissory estoppel should apply to keep GEICO from denying Ms. Lively's claim because she reasonably relied on her belief that she had coverage after the March 23 phone call.

GEICO moved for summary judgment, arguing that Ms. Lively's insurance policy had been cancelled on February 5, 2016 and, therefore, Ms. Lively was not insured by GEICO at the time of the accident on March 30, 2016.

The Court's Decision

The court granted GEICO's motion, finding that no contract had been formed between the parties on March 23.

In its decision, the court explained that the GEICO policy would have become effective once the GEICO service representative received the card information and the authority from the customer to process the payment, “and the payment [was] processed.”

Here, the court pointed out, the March 23 call disconnected before Mr. Cooper processed the payment. In the court's view, the “only reasonable conclusion to be drawn from the record” was that Mr. Cooper “believed he did not have the authority to process the payment.” Even if his conclusion legally was incorrect, the court said, it was “undisputed that the payment was not processed and therefore GEICO received no consideration.”

Moreover, the court continued, Ms. Lively's promise to pay was insufficient consideration to reinstate her policy, given that Delaware law provides that an insurance policy cancelled for non-payment may be renewed, but the insurer is not liable for any losses or claims between the date of cancellation and the date “the full premium payment was actually received by the insurer or its agent.” 18 Del. C. § 3903(d) (emphasis added). Accordingly, no contract existed as of March 23 because no premium payment actually had been received by GEICO, the court ruled.

Finally, the court rejected Ms. Lively's contention that, even if her promise to pay was not sufficient consideration, she had reasonably relied on her conversation with GEICO and assumed she had a valid insurance policy. Even if promissory estoppel was a sufficient substitute for consideration between March 23 and March 25, the court concluded, once Ms. Lively was aware of sufficient facts to prompt an inquiry about the status of her insurance, “her continued reliance on the March 23 phone call was not reasonable.”

The case is Lively v. Government Employees Ins. Co., No. N16C-07-085 AML (Del. Super.Ct. May 30, 2018).