Sunday v. Berkshire Hathaway Homestate Ins. Co.
United States District Court for the Middle District of Pennsylvania
July 30, 2018, Decided; July 31, 2018, Filed
CIVIL ACTION NO. 3:17-CV-00946

Reporter
2018 U.S. Dist. LEXIS 127329 *; 2018 WL 3631932
JOSEPH SUNDAY, JR. d/b/a SUNDAY TRUCKING, LLC, Plaintiff, v. BERKSHIRE HATHAWAY HOMESTATE INSURANCE COMPANY and NATIONAL LIABILITY & FIRE INSURANCE COMPANY, Defendants.

MEMORANDUM
Presently before this Court is a Motion for Summary Judgment filed by Defendants Berkshire Hathaway Homestate Insurance Company (“BHHIC”) and National Liability & Fire Insurance Company (“National Liability”) (collectively “Defendants”). This Motion will be granted in part and denied in part. Judgment will be entered in favor of the Defendants on Count I because the National Liability policy was void ab initio. However, judgment will not be entered with respect to Count III because (1) BHHIC failed to provide adequate notice of cancellation and (2) there remains a genuine dispute of material fact about whether cancellation was appropriate under the Cancellation and Non-Renewal Endorsement to the BHHIC policy.

I. Background

A. Factual [*2] History
Plaintiff Joseph Sunday, Jr. (“Plaintiff”) owns and operates a trucking company that hauls commercial trailers. In order to operate this business in Pennsylvania Plaintiff was required to possess commercial auto insurance. Between December of 2014 and August of 2015, Plaintiff attempted to secure commercial auto insurance from two insurance providers: BHHIC and National Liability.
(1) The BHHIC Policy
On November 24, 2014, Plaintiff, through his agent, submitted an application for commercial auto insurance to BHHIC. (DSMF, Ex. B). This application listed Plaintiff’s address as 427 Cortez Road, Lake Ariel, Pennsylvania. (Id.) BHHIC approved this application and provided commercial auto coverage for Plaintiff’s Kenworth truck effective December 11, 2014. (DSMF, at ¶ 7.) The policy was scheduled to run for one year and end on December 11, 2015. (Id.)
The BHHIC policy contained an endorsement specifying the possible bases for cancellation. This endorsement, titled “Pennsylvania Changes-Cancellation and Non-Renewal,” specifically provided:
3. Cancellation Of Policies In Effect For 60 Days Or More
If this policy has been in effect for 60 days or more . . . we may cancel this policy only [*3] for one or more of the following reasons:
. . .
b. [The insured] failed to pay a premium when due, whether the premium is payable directly to [BHHIC] or our agents or indirectly under a premium finance plan or extension of credit, notice of cancellation will be mailed at least 15 days before the effective date of cancellation.
c. A condition, factor or loss experience material to insurability has changed substantially or a substantial condition, factor or loss experience material to insurability has become known during the policy period. Notice of cancellation will be mailed or delivered at least 60 days before the effective date of cancellation.
(DSMF, Ex. C at 44.) Additionally, this endorsement explained that any notice provided would be delivered to the insured’s last known mailing address and would “state the specific reasons for cancellation.” (Id.)
There is no question that Plaintiff routinely made untimely premium payments. In fact, on February 17, 2015, March 17, 2015, April 23, 2015, and May 22, 2015 BHHIC issued Notices of Cancellation to Plaintiff explaining that his policy was pending cancellation due to the “nonpayment of premium.” (DSMF, at ¶¶ 11, 14.) However, after receiving [*4] each of these notices, Plaintiff paid BHHIC the premium owed and the Notices of Cancellation were rescinded. (DSMF, at ¶¶ 12, 15.) In other words, none of these notices ultimately triggered cancellation in accord with Section 3(b) of the Cancellation and Non-Renewal Endorsement.
On June 4, 2015, BHHIC sent another Notice of Cancellation to Plaintiff. (DSMF, at ¶ 19.) But, this time, the notice did not inform Plaintiff he failed to pay his monthly premium. Instead, the notice detailed that cancellation was pending because “a condition, factor or loss experience material to insurability ha[d] changed substantially or become known during the policy term.” (DSMF, at ¶ 20; Ex. J.) This Notice of Cancellation resulted from an audit of Plaintiff’s policy that concluded Plaintiff was operating “an unscheduled power unit under [his] trucking authority.” (DSMF, Ex. N; see also DSMF, Ex. J; Ex. K.) Put simply, following the audit, BHHIC had reason to believe that Plaintiff was operating equipment that was not insured by the BHHIC policy. As stated in the policy, Plaintiff was prohibited from operating such equipment.
The unscheduled power unit was identified by BHHIC upon review of the U.S. Department of Transportation [*5] Federal Motor Carrier Safety Administration’s (“FMCSA”) Safety and Fitness Electronic Records (“SAFER”) System. (DSMF, Ex. N; Ex. J.) Plaintiff claims that the SAFER system erred when it reported his use of the unscheduled unit. As of July 16, 2015, Plaintiff was in the process of contacting FMCSA to correct its error. (Id.) Unfortunately, even if the error was corrected, BHHIC had indicated that it would not “reconsider the cancellation, or rewrite the policy.” (DSMF, Ex. K.) So, Plaintiff was forced to look elsewhere for insurance.
On August 6, 2015, the BHHIC policy cancelled.1 (DSMF, Ex. M.)
(2) The Nation Liability Policy
On July 16, 2015, Plaintiff, through his agent, submitted an application for commercial auto insurance to National Liability. (DSMF, Ex. N.) National Liability issued Plaintiff a policy effective August 6, 2015. (DSMF, Ex. R.)
The National Liability policy was conditioned on the down payment of premium. National Liability made clear that if Plaintiff’s financial institution did not honor his down payment for any reason, his policy would be void from inception or flat cancelled.2 Such warning was contained in: (1) the Bind Request Confirmation provided to Plaintiff’s [*6] agent; (2) a letter sent to Plaintiff on August 11, 2015; and (3) the National Liability policy itself. (DSMF, Ex. R; Ex. X, at 42; Ex. P at UW-2 075.)
Plaintiff provided his down payment to National Liability by check, written on his bank account, in the amount of $2,244.00. (DSMF, at ¶ 35.) Plaintiff’s bank did not honor his down payment; the check he provided bounced. (DSMF, at ¶ 40.) Accordingly, National Liability cancelled the policy effective August 6, 2015.3
(3) Plaintiff’s Loss and Claim
On August 21, 2015, Plaintiff’s Kenworth truck suffered a “total loss” due to a fire, which originated in the engine compartment and ultimately consumed the entire vehicle. (DSMF, at ¶ 46.) Immediately following this loss, Plaintiff reported the fire and submitted a claim to National Liability. (DSMF, at ¶ 47.) National Liability denied Plaintiff’s claim explaining that there was no policy in effect at the time of the loss. (DSMF, at ¶ 48.)

B. Procedural History
Following the denial of his claim, Plaintiff filed the instant action in the Lackawanna County Court of Common Pleas alleging two claims against each Defendant. (Doc. 1.) First, Plaintiff claims, in [*7] Counts I and III, that the Defendants breached their contractual duties when they cancelled his insurance policies. (Doc. 1, Ex. A.) Second, in Counts II and IV, Plaintiff alleges the Defendants acted in bad faith. (Id.)
The Defendants removed this action on May 30, 2017 and filed their answers to the Complaint on June 6, 2017. (Docs. 1-3.)
After answering the Complaint, the Defendants moved to sever the breach of contract and bad faith causes of action. (Doc. 6.) This motion was granted as unopposed. (Doc. 10.) Thus, discovery and trial on the breach of contract causes of action (Counts I and III) have proceeded separately and will conclude before the commencement of any discovery or trial on the bad faith causes of action (Counts II and IV). (Id.)
On May 18, 2018, the Defendants filed a Motion for Summary Judgment with respect to the breach of contract causes of action. (Doc. 13.) This Motion has been fully briefed and is now ripe for review.

II. Legal Standard

A. Motion for Summary Judgment
Summary judgment shall be granted “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). Summary judgment is appropriate [*8] when “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 and that the moving party is entitled to a judgment as a matter of law.” Wright v. Corning, 679 F.3d 101, 103 (3d Cir. 2012) (quoting Orsatti v. N.J. State Police, 71 F.3d 480, 482 (3d Cir. 1995)). A fact is material if proof of its existence or nonexistence might affect the outcome of the suit under the applicable substantive law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986).
Where there is no material fact in dispute, the moving party need only establish that it is entitled to judgment as a matter of law. See Edelman v. Comm’r of Soc. Sec., 83 F.3d 68, 70 (3d Cir. 1996). Where, however, there is a disputed issue of material fact, summary judgment is appropriate only if the factual dispute is not a genuine one. Anderson, 477 U.S. at 247-48. An issue of material fact is genuine if “a reasonable jury could return a verdict for the nonmoving party.” Id. at 248. Where there is a material fact in dispute, the moving party has the initial burden of proving that: (1) there is no genuine issue of material fact; and (2) the moving party is entitled to judgment as a matter of law. See Howard Hess Dental Labs., Inc. v. Dentsply Int’l, Inc., 602 F.3d 237, 251 (3d Cir. 2010). The moving party may present its own evidence or, where the non-moving party has the burden of proof, simply point out to the court that “the nonmoving party has failed to make a [*9] sufficient showing on an essential element of her case.” Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986).
When considering whether there are genuine issues of material fact, the court is required to “examine the evidence of record in the light most favorable to the party opposing summary judgment, and resolve all reasonable inferences in that party’s favor.” Wishkin v. Potter, 476 F.3d 180, 184 (3d Cir. 2007). Once the moving party has satisfied its initial burden, the burden shifts to the non-moving party to either present affirmative evidence supporting its version of the material facts or to refute the moving party’s contention that the facts entitle it to judgment as a matter of law. Anderson, 477 U.S. at 256-57. The Court need not accept mere conclusory allegations, whether they are made in the complaint or a sworn statement. Lujan v. Nat’l Wildlife Fed’n, 497 U.S. 871, 888, 110 S. Ct. 3177, 111 L. Ed. 2d 695 (1990).
In order to prevail on a motion for summary judgment, the non-moving party must show “specific facts such that a reasonable jury could find in that party’s favor, thereby establishing a genuine issue of fact for trial.” Galli v. N.J. Meadowlands Comm’n, 490 F.3d 265, 270 (3d Cir. 2007) (citing Fed. R. Civ. P. 56(e)). Although the non-moving party’s evidence may be either direct or circumstantial, and “need not be as great as a preponderance, the evidence must be more than a scintilla.” Id. (quoting Hugh v. Butler Cnty. Family YMCA, 418 F.3d 265, 267 (3d Cir. 2005)). In deciding a motion for summary judgment, “the judge’s function [*10] is not himself to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial.” Anderson, 477 U.S. at 249.

III. Discussion

A. Defendant’s Motion for Summary Judgment
(1) Count I: Breach of Contract Against Defendant National Liability
The Defendants argue that Plaintiff’s insurance policy with National Liability was void ab initio, or void from inception, and thus I should treat it as if it never existed. Specifically, Defendants believe the policy was void from inception because Plaintiff’s premium down payment was not honored by his bank; his check bounced. Plaintiff does not dispute that the check he provided for the premium down payment bounced. In fact, Plaintiff seems to admit that the National Liability policy was “void at inception due to the down payment check being returned” for insufficient funds. (Doc. 17, at 7.) Yet, Plaintiff contends that the policy should not have cancelled because he was not provided notice that the check bounced, and National Liability waived the “policy provision regarding cancellation for dishonored funds.4 ” (Doc. 17, at 13.) Insofar that Plaintiff acknowledges the policy was void from inception, he is correct.
In accord with Pennsylvania law, National Liability made clear that if Plaintiff’s bank did not honor his down payment, the policy was void from inception. See O’Brien v. Nationwide Mut. Ins. Co., 455 Pa. Super. 568, 689 A.2d 254, 257 (Pa. Super. Ct. 1997) (explaining that an insurer may void an insured’s policy ab initio when the insured does not provide a premium payment within the first 60-days of the policy’s effective date). National Liability informed Plaintiff in three separate documents that “if the initial premium payment is dishonored by the financial institution for any reason, this policy will be void from inception with no advance notice of cancellation required.” (DSMF, Ex. P at UW-2 075; Ex. R; Ex. X at 42.) Thus, there is no genuine dispute that Plaintiff knew the policy would be void from inception if his check bounced. And, again, there is no dispute that Plaintiff’s check bounced. (DSMF, at ¶ 40.) Therefore, there is no question that based on the terms of the policy, and as permitted by Pennsylvania law, the policy was void from inception. See O’Brien, 689 A.2d at 257.
Nevertheless, Plaintiff seems to argue that cancellation was improper because Pennsylvania law always requires a notice of cancellation. This is incorrect. It is true that 40 P.S. § 991.2006 requires a notice of cancellation [*12] be sent to an insured prior to the cancellation of an auto insurance policy. But pursuant to 40 P.S. § 991.2002(c)(3), the notice requirements contained in 40 P.S. § 991.2006 do not apply to policies that have been in effect for less than 60 days. Plaintiff’s National Liability policy was bound on August 6, 2015 and was cancelled five days later on August 11, 2015. (DSMF, Ex. R; Ex. U.) Additionally, the Cancellation and Non-Renewal Endorsement explicitly states that if Plaintiff’s check were to bounce the policy would be “void from inception with no advance notice of cancellation required.” (DSMF, Ex. X, at 42.) Therefore, Plaintiff’s argument that he was owed notice is without merit.5
Plaintiff also argues that National Liability waived the “policy provision regarding cancellation for dishonored funds.” (Doc. 17, at 13.) Plaintiff points to the declaration page of the National Liability policy, which states, “NO FLAT CANCELLATIONS.” (DSMF, Ex. Z.) A flat cancellation is a term meaning the cancellation of an insurance policy effective the date it was issued. (DSMF, Ex. Y at ¶ 9.) However, the use of this term on the declaration page was added, in-house, by an insurance underwriter. (DSMF, Ex. Y at ¶¶ 5, 7.) This notation [*13] was made “to reflect that the insured[, Plaintiff,] did not have the right to ‘flat cancel’ . . . .” (DSMF, Ex. Y at .¶ 9) As explained by the policy’s underwriter, “the above-referenced notation in no way amended the policy provision that states, ‘if the initial premium payment is dishonored by the financial institution for any reason, this policy will be void from inception with no advance notice of cancellation required.'” (DSMF, Ex. Y at ¶ 10.) So, the suggestion that National Liability waived the policy provision regarding cancellation for dishonored funds because the phrase “no flat cancellations” appears on the policy’s declaration page is also without merit.
Since Plaintiff’s “initial premium payment [was] dishonored by [Plaintiff’s] financial institution . . . [the National Liability] policy [was] void from inception.” (DSMF, Ex. R (as modified).) Plaintiff’s claims that he was owed notice of the cancellation and that National Liability waived the policy provision used to cancel the policy are inapposite. For these reasons, Defendants’ Motion for Summary Judgment on Count I will be granted and judgment will be entered in their favor.
(2) Count III: Breach of Contract Against [*14] Defendant BHHIC
Next, the Defendants argue that their Motion for Summary Judgment should be granted because BHHIC had the right to cancel Plaintiff’s insurance policy and cancellation occurred in accord with Pennsylvania law. Plaintiff disagrees and argues that no provision of the Cancellation and Non-Renewal Endorsement to the BHHIC Policy was satisfied to allow for cancellation.
Defendants claim BHHIC had two independent bases to cancel Plaintiff’s insurance policy.
(I) Untimely Payment of Premium:
First, Defendants cite Section 3(b) of the Cancellation and Non-Renewal Endorsement to the BHHIC Policy. Section 3(b) permits cancellation when: “(1) the policy is in effect for more than 60 days; (2) the insured has failed to pay premium when due; and (3) the insured receives 15-days notice of the pending cancellation.” (Defs. Reply Brief, Doc. 20 at 5; DSMF at ¶¶ 8-9.) It is undisputed that Plaintiff’s policy had been in effect for more than 60 days. The policy went into effect on December 11, 2014 and was cancelled on August 6, 2015. (DSMF, at ¶ 7.) It is also undisputed that Plaintiff made numerous untimely premium payments. In fact, Plaintiff was sent a Notice of Cancellation on four separate occasions—that were ultimately rescinded—due to his untimely payment of premium. [*15] (DSMF, Ex. D.) Finally, Plaintiff received notice of the August 6, 2015 cancellation on June 4, 2015. (DSMF, Ex. J.)
While Section 3(b) seems to support the cancellation of Plaintiff’s BHHIC Policy, the Notice of Cancellation sent to Plaintiff did not comport with Pennsylvania law or the terms of the Cancellation and Non-Renewal Endorsement. The law in Pennsylvania is clear: “[N]otice shall [s]tate the specific reason or reasons of the insurer for cancellation or refusal to renew.” 40 P.S. § 991.2006(3). The Cancellation and Non-Renewal Endorsement contained in the BHHIC policy echos the same: “Notice of cancellation will state the specific reasons for cancellation.” (DSMF, Ex. C at 44, ¶ 4.) Here, the June 4, 2015 Notice did not state that Plaintiff’s policy was being cancelled because of his untimely premium payments.6 (DSMF, Ex. J.) Rather, it stated that the sole reason for termination was that “a condition, factor or loss experience material to insurability ha[d] changed substantially or become known during the policy term.” (Id.)
Defendants maintain, however, that BHHIC intended to cancel Plaintiff’s policy because of his untimely premium payments. To that end, Defendants point to the findings of a BHHIC audit [*16] that concluded Plaintiff’s policy should be cancelled “due to [] unscheduled inspections and [his] poor payment history.” (DSMF, Ex. K (emphasis added).) So, BHHIC may have intended to cancel Plaintiff’s policy because of his poor payment history, but the notice provided did not commit such intent to writing.
Because the June 4, 2015 Notice did not cite Plaintif f’s untimely payment of premium as a reason for cancellation, the Notice is improper. Therefore, that Notice can not support cancellation for the untimely payment of premium in accord with Section 3(b) of the policy’s Cancellation and Non-Renewal Endorsement.
(ii) Operation of an Unscheduled Power Unit:
Second, Defendants believe that Plaintiff violated Section 3(c) of the Cancellation and Non-Renewal Endorsement. That section provides for cancellation if: “(1) the policy is in effect for more than 60 days; (2) there existed . . . a condition material to insurability which became known during the policy period; and (3) the insured receives 60-days notice of the pending cancellation.” (Defs. Reply Brief, Doc. 20 at 9; see also DSMF, Ex. C at 44.) Again, it is undisputed that the policy was in effect for more than 60 days. (DSMF, at ¶ 7.) There is also [*17] no question that Plaintiff received 60-days notice of the pending August 6, 2015 cancellation on June 4, 2015. But the parties dispute w hether there existed a condition material to insurabililty to provide for cancellation.
Defendants claim that an audit of Plaintiff’s policy conducted in May of 2015 uncovered that “an unscheduled power unit had been identified under [Plaintiff’s] trucking authority on the U.S. Department of Transportation Federal Motor Carrier Safety Administration’s (“FMCSA”) Safety and Fitness Electronic Records (“SAFER”) System.” (DSMF, at Ex. F ¶ 20.) In layman’s terms, BHHIC believed that Plaintiff was operating equipment not listed on the BHHIC policy. Plaintiff claims that an error in the SAFER System made it appear that he was operating uninsured equipment. (PSMF, at ¶¶ 20, 24.) He was not. Plaintiff claims that he contacted the FMCSA to have the error corrected prior to July 16, 2015. (DSMF, Ex. N; PSMF, ¶¶ 20, 24.) Plaintiff’s policy was cancelled on August 6, 2015, which, according to Plaintiff, was after the SAFER system error was corrected.7 If BHHIC would have checked the SAFER system prior to cancellation it would have concluded that cancellation was [*18] improper under Section 3(c) of the policy’s Cancellation and Non-Renewal Endorsement.
Because there is a genuine dispute of material fact concerning whether Plaintiff was operating unscheduled equipment and whether the SAFER system was corrected prior to cancellation, Defendants’ Motion for Summary Judgment on Count III will be denied.

IV. Conclusion
Defendants’ Motion for Summary Judgment will be granted in part and denied in part. Judgment will be entered in favor of the Defendants and against the Plaintiff with respect to Count I of the Complaint. Plaintiff may proceed against BHHIC on Count III.
An appropriate order follows.
July 30, 2018
Date
/s/ A. Richard Caputo
A. Richard Caputo
United States District Judge

ORDER
NOW, this 30th day of July, 2018, upon review on Defendants’ Motion for Summary Judgment (Doc. 13), IT IS HEREBY ORDERED that:
(1) Defendants’ Motion for Summary Judgment is GRANTED in part and DENIED in part:
(a) Judgment is ENTERED in FAVOR of Defendant National Liability & Fire Insurance Company and AGAINST Plaintiff Joseph Sunday, Jr. on Count I of the Complaint.
(b) Defendants’ Motion for Summary Judgment is DENIED with respect to Count III of the Complaint.
(2) This matter is placed on [*19] the October 2018 Trial List.
/s/ A. Richard Caputo
A. Richard Caputo
United States District Judge

Ortiz v. Benkius
Superior Court of New Jersey, Appellate Division
June 7, 2018, Argued; July 31, 2018, Decided
DOCKET NO. A-3823-16T1

Reporter
2018 N.J. Super. Unpub. LEXIS 1824 *; 2018 WL 3625162
TONY J. ORTIZ, Plaintiff-Appellant, v. WALTER S. BENKIUS and MARK IV TRANSPORTATION & LOGISTICS, INC., Defendants-Respondents, and IC UNLIMITED, LLC i/p/a IC UNLIMITED, BENTLEY TRUCK SERVICES, INC. a/k/a BENTLEY TRUCK SERVICES and BENTLEY TRUCKS, and OLYMPIC NATIONAL EXPRESS, Defendants.
Notice: NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION.
PLEASE CONSULT NEW JERSEY RULE 1:36-3 FOR CITATION OF UNPUBLISHED OPINIONS.
Prior History: [*1] On appeal from Superior Court of New Jersey, Law Division, Union County, Docket Nos. L-4318-14 and L-4349-15.

PER CURIAM
Plaintiff Tony J. Ortiz appeals from the April 13, 2017 Law Division order, denying his motion for reconsideration of the February 17, 2017 order. The February 17, 2017 order denied his motion to reinstate his complaint, and dismissed his complaint with prejudice, pursuant to Rule 4:23-5(a)(2), for failure to appear for deposition. We reverse and remand.
The relevant procedural history is as follows. On March 4, 2016, the trial court entered an order consolidating plaintiff’s 2014 and 2015 complaints against defendants Walter S. Benkius, Mark IV Transportation & Logistics, Inc. (Mark IV), IC Unlimited, LLC i/p/a IC Unlimited, Bentley Truck Services, Inc., also known as Bentley Trucks, Olympic National Express (Olympic), and several fictitious entities. The complaints [*2] stemmed from a December 19, 2013 automobile accident between plaintiff’s car and a tractor-trailer leased by Mark IV from Bentley Trucks and allegedly operated by Benkius as an agent for Olympic, IC Unlimited, LLC, Mark IV, or Bentley Trucks.1 Plaintiff alleged negligence by defendants and sought damages for the “severe bodily injuries” he suffered as a result of the accident.
On October 25, 2016, defendants Benkius and Mark IV moved to dismiss the complaint without prejudice pursuant to Rule 4:23-4 for plaintiff’s repeated failure to attend his deposition.2 In the supporting certification, defense counsel certified that they attempted to depose plaintiff on six separate occasions, but each time plaintiff requested an adjournment, despite being provided over a month’s notice of each scheduled deposition date. According to the certification, defendant was noticed to be deposed on September 9, 2015, and February 4, April 14, May 18, July 29, and October 12, 2016. Although defendants acquiesced to plaintiff’s adjournment requests on the first five dates, his “eleventh hour” cancellation of the October 12 date was “without notice.” Defense counsel certified further that, despite defendants’ willingness [*3] to accommodate plaintiff’s schedule, no dates were ever proposed by plaintiff’s attorney. According to defense counsel, plaintiff’s conduct “constitute[d] a deliberate attempt to evade being deposed” that “[had] and [would] continue to prejudice [d]efendants in defending this matter and preparing for trial.”
On November 18, 2016, the motion judge granted defendant’s unopposed motion and dismissed plaintiff’s complaint without prejudice. On January 31, 2017, defendants moved to dismiss plaintiff’s complaint with prejudice for failure to attend his depositions. In his accompanying certification, defense counsel recounted the six unsuccessful attempts to depose plaintiff. He certified that in the sixty days following the dismissal of the complaint, plaintiff failed to move to reinstate the complaint or otherwise contact defendants and failed to schedule a date for his deposition, despite being notified of the dismissal. Defense counsel asserted that dismissal with prejudice was therefore appropriate under Rule 4:23-5(a)(2).
The next day, February 1, 2017, plaintiff’s newly retained attorney sent a letter to the court, opposing the motion to dismiss the complaint. Plaintiff’s attorney explained that [*4] he had been retained on January 23, 2017, and had recently received plaintiff’s file from prior counsel. According to plaintiff’s attorney, when he received defense counsel’s motion to dismiss the complaint, he had already “prepare[d] a Motion to Restore the Complaint . . . , to adjourn the current arbitration date[,] and to extend discovery.” He assured defendants and the court that he would provide “any remaining discovery, including . . . [p]laintiff’s deposition,” but requested “some additional time” to “properly represent” plaintiff. He also stated his secretary was “in the process of trying to reschedule [plaintiff’s] deposition for the month of February.”
Plaintiff’s motion to restore the complaint and extend discovery and defendants’ motion to dismiss the complaint with prejudice were both returnable on February 17, 2017. In support of plaintiff’s motion, plaintiff’s attorney certified that plaintiff was “ready, willing[,] and able to appear for a deposition,” and he was prepared to schedule a date within thirty days of the adjudication of the motion, if not sooner. On February 14, 2017, three days prior to the return date of the motions, plaintiff’s counsel sent defendants [*5] a letter suggesting three dates for plaintiff’s deposition, all within two weeks of the letter and about a week after the return date of the motions, and even offered two different times on two of the proposed dates.
On February 17, 2017, during oral argument on the motions, plaintiff’s counsel informed the court that he had received plaintiff’s file from his previous attorney, Richard Rinaldo, who had been “involved in a very serious car accident a few years [earlier]” and suffered physical injuries that had “affected a great number of cases, . . . including this one.” Plaintiff’s counsel indicated that the trial in Rinaldo’s personal case had commenced in the county a few months earlier and so other judges in the county were aware of Rinaldo’s injuries. Although he hesitated to discuss the details on the record, plaintiff’s counsel stated he would attempt to obtain a certification from Rinaldo about the accident and argued that plaintiff should not be prejudiced for his prior attorney’s inaction.
Defense counsel countered that plaintiff’s motion to restore was deficient under Rule 4:23-5(a)(1), which required the delinquent party to move to restore supported by an affidavit reciting that the withheld [*6] discovery has been provided and accompanied by payment of a restoration fee. According to defense counsel, plaintiff’s attorney had failed to do either. Furthermore, defense counsel argued that under Rule 4:23-5(a)(2), dismissal with prejudice was mandatory unless plaintiff either provided “fully responsive discovery” or presented “exceptional circumstances,” neither of which applied. Defense counsel pointed out that plaintiff’s attorney had not included any information about Rinaldo’s injuries in his certification in support of his motion to restore. In fact, defense counsel represented to the court that during their attempts to depose plaintiff, Rinaldo had requested the adjournments, not for personal reasons, but because his office could not locate plaintiff.
Plaintiff’s counsel responded that he had filed “a vanilla Motion to Restore, because [he] [knew] that [the] [c]ourt . . . [was] aware of Mr. Rinaldo’s situation,”3 and there was no written opposition to his motion. He explained that, had he been aware of the opposition, he would have submitted the necessary certification establishing “extraordinary circumstances.”
After considering oral argument, the judge granted defendants’ motion and dismissed [*7] the complaint as to both defendants with prejudice. Citing Abtrax Pharm., Inc. v. Elkins-Sinn, Inc., 139 N.J. 499, 655 A.2d 1368 (1995), the judge recognized that “the sanction of dismissal with prejudice for discovery violations should be imposed only sparingly,” and that “clients should not be prejudiced because of [the] delinquency of the[ir] attorney.” However, the judge determined that dismissal was appropriate because there was “no certification from the prior attorney indicating that it was the attorney’s fault why the plaintiff could not attend six scheduled depositions” and “no valid reason to believe that the attorney may have had some problems.” Thus, the judge determined that no exceptional circumstances had been demonstrated. While declining to make a finding regarding whether plaintiff’s repeated failure to appear for deposition was deliberate, the judge concluded that defendants had a right to depose him, and the deposition went “to the very essence of their case.” Therefore, according to the judge, dismissal was appropriate under Rule 4:23-5.
As to plaintiff’s motion to reinstate the complaint, the judge denied the motion. In denying the motion, the judge explained that plaintiff’s motion had been before a different judge who had granted the motion on [*8] the papers without oral argument, but had not yet “sent out [the order] to both parties.”4 Nonetheless, the judge concluded that he had the “authority to hear both cases in . . . conjunction with each other” and would “do so in the interest of justice.” In denying plaintiff’s motion to restore, the judge vacated the undelivered order reinstating the complaint.
On March 7, 2017, plaintiff moved for reconsideration. In his supporting certification, plaintiff’s counsel argued that dismissal was inappropriate because plaintiff had provided the outstanding discovery “in the form of a letter prior to the return date of both [m]otions[,] offering to produce the [p]laintiff for depositions on several alternate dates.” However, he “never received a response to [his] letter.” Further, plaintiff’s counsel submitted a certification from Rinaldo, delineating exceptional circumstances to support the motion.
In the certification, Rinaldo explained that all but the last adjournment request “were due to litigation issues concerning the filing of [a]nswers of [d]efendants, issues with consolidation of the two [c]omplaints, the [d]efendant[s’] inability to produce Mr. Benkius, and discovery issues that [*9] were not within the control of the [p]laintiff or his attorney.” According to Rinaldo, only the last adjournment request was attributable to his personal issues, which prompted him “to refer [the] case to another law firm for further handling” and “request[] an adjournment . . . to allow new counsel to be retained and time to review the file.” Rinaldo noted that defendants never filed a motion to compel plaintiff’s deposition, and instead chose to “opportunistically use[] the file transfer delay” to obtain a dismissal. Rinaldo certified further that there was “no history of the [p]laintiff avoiding his deposition or not being available that [he could] recall.”
In opposition, defense counsel argued plaintiff’s motion “failed to articulate with specificity the basis on which he [had] brought [his motion for reconsideration],” and, in any case, he had failed to prove adequate grounds for reconsideration. Defense counsel asserted their motion for dismissal was properly granted, as plaintiff failed to comply with the requirements for reinstatement under Rule 4:23-5. In a supporting certification, defense counsel argued that plaintiff’s February 14, 2017 letter proposing new dates for plaintiff’s deposition [*10] was “irrelevant” and “should have no bearing on the court’s decision” because it “post-date[d] [p]laintiff’s [m]otion to [r]estore by almost two weeks,” and plaintiff made no effort to schedule or attend his deposition prior to filing the February 1, 2017 motion.
During oral argument on the reconsideration motion conducted on April 13, 2017, plaintiff’s counsel argued that the letter proposing dates for the deposition constituted compliance with discovery because it is impossible to “hogtie [an] adversary and force them to take a deposition.” Furthermore, he noted defendants had not argued that they had suffered prejudice due to the delay in deposing plaintiff and “[t]here was no [m]otion to [c]ompel a deposition.” Moreover, according to plaintiff’s counsel, “plaintiff himself [was] not at fault.” In response, defense counsel noted that the case was already three years old at the time of the hearing and that the significant delay had “substantially prejudiced” defendants. Defense counsel also reiterated that plaintiff’s application to restore the complaint was deficient and the discovery still had not been provided, and therefore, the court lacked discretion to deny their motion to [*11] dismiss the complaint with prejudice.
Following oral argument, in an oral decision, the judge denied plaintiff’s motion for reconsideration, finding that plaintiff failed to provide “with specificity, . . . any matters that the [c]ourt overlooked, or any controlling decisions . . . the [c]ourt [had] erred on.” The judge commended plaintiff’s counsel for his “skilled argument” that, unlike interrogatories, a plaintiff cannot “compel a deposition.” Nonetheless, the judge found the three-year delay in obtaining plaintiff’s deposition had prejudiced defendants. Further, acknowledging Rinaldo’s supporting certification, the judge concluded there were no exceptional circumstances, as he could not think of a “type of medical issue[] that would prevent [plaintiff’s prior counsel] from rescheduling, or sending a letter, or trying to reschedule depositions.” The judge entered a memorializing order on the same date, and this appeal followed.
On appeal, plaintiff argues the motion judge erred by: (1) dismissing his complaint for failing to provide his deposition rather than “explor[ing] alternatives to dismissal with prejudice”; (2) concluding “Rinaldo’s health problems” did not constitute “exceptional [*12] circumstances”; (3) vacating the other judge’s order granting plaintiff’s unopposed motion to reinstate the complaint and extend discovery; (4) denying plaintiff’s motion for reconsideration; and (5) not enforcing the procedural requirements of Rule 4:23-5(a)(1) and (a)(2). Based upon our review of the record, we conclude that the dismissal with prejudice under Rule 4:23-5(a)(2) was an impermissible basis and, therefore, constituted an abuse of discretion requiring reversal.
Our scope of review of a dismissal of a complaint with prejudice for failure to make discovery is limited to whether the trial court abused its discretion. Abtrax, 139 N.J. at 517. A trial court abuses its discretion when the “decision [was] made without a rational explanation, inexplicably departed from established policies, or rested on an impermissible basis.” United States v. Scurry, 193 N.J. 492, 504, 940 A.2d 1164 (2008) (alteration in original) (quoting Flagg v. Essex Cty. Prosecutor, 171 N.J. 561, 571, 796 A.2d 182 (2002)).
“The dismissal of a party’s cause of action, with prejudice, is drastic and is generally not to be invoked except in those cases in which the order for discovery goes to the very foundation of the cause of action, or where the refusal to comply is deliberate and contumacious.” Abtrax, 139 N.J. at 514 (quoting Lang v. Morgan’s Home Equip. Corp., 6 N.J. 333, 339, 78 A.2d 705 (1951)). “Since dismissal with prejudice is the ultimate sanction, it will normally be ordered only when [*13] no lesser sanction will suffice to erase the prejudice suffered by the non-delinquent party, or when the litigant rather than the attorney was at fault.” Ibid. (quoting Zaccardi v. Becker, 88 N.J. 245, 253, 440 A.2d 1329 (1982)).
The well-settled purpose of Rule 4:23-5 is to elicit outstanding discovery “rather than to punish the offender by the loss of his cause of action or defense.” Zimmerman v. United Servs. Auto. Ass’n, 260 N.J. Super. 368, 374, 616 A.2d 957 (App. Div. 1992). To that end, to succeed on a motion to dismiss with prejudice under Rule 4:23-5 for failure to make discovery, the moving party must strictly comply with the requirements of the rule, id. at 373, which “involves a two-step process.” Sullivan v. Coverings & Installation, 403 N.J. Super. 86, 93, 957 A.2d 216 (App. Div. 2008).
“First, the aggrieved party may move for dismissal for non-compliance with discovery obligations,” under paragraph (a)(1) of the rule, and “if the motion is granted, the complaint is dismissed without prejudice.” Ibid. Next,
If an order of dismissal . . . without prejudice has been entered pursuant to paragraph (a)(1) of this rule and not thereafter vacated, the party entitled to discovery may, after the expiration of [sixty] days from the date of the order, move on notice for an order of dismissal . . . with prejudice.
[R. 4:23-5(a)(2).]
However, Rule 4:23-5(a)(1) dismissals expressly apply only to non-compliance with discovery pursuant to Rule 4:17, pertaining to interrogatories, Rule 4:18, pertaining to demands for documents, and Rule 4:19, pertaining [*14] to demands for medical examinations. It does not apply to non-compliance with discovery pursuant to Rule 4:14, pertaining to depositions. That relief can be sought only after a party first fails to comply with an order to compel depositions previously issued under Rule 4:23-5(c), which states:
Prior to moving to dismiss pursuant to subparagraph (a)(1) of this rule, a party may move for an order compelling discovery demanded pursuant to [Rule] 4:14 . . . . An order granting a motion to compel shall specify the date by which compliance is required. If the delinquent party fails to comply by said date, the aggrieved party may apply for dismissal or suppression pursuant to subparagraph (a)(1) of this rule by promptly filing a motion to which the order to compel shall be annexed, supported by a certification asserting the delinquent party’s failure to comply therewith.
Alternatively, a dismissal can be granted in the court’s discretion for failure to appear for a deposition under Rule 4:23-4, but is not required in the same manner as prescribed in Rule 4:23-5(a)(2).
Here, as plaintiff’s counsel pointed out, defendants never moved for an order to compel plaintiff’s deposition prior to moving to dismiss pursuant to Rule 4:23-5(a)(1) and, in turn, Rule 4:23-5(a)(2). Therefore, [*15] defendants were not entitled to a dismissal, with or without prejudice, under Rule 4:23-5. As we stated in a related context in Colonial Specialty Foods, Inc. v. Cty. of Cape May, 317 N.J. Super. 207, 210, 721 A.2d 748 (App. Div. 1999), allowing an aggrieved party to obtain a dismissal with prejudice under Rule 4:23-5(a)(2) after obtaining a dismissal without prejudice for a discovery violation not encompassed in subparagraph (a)(1) of Rule 4:23-5 “would deprive a party of the procedural safeguards incorporated throughout [Rule] 4:23-5, and overlooks the rule’s integrated structure and purpose.”
Consequently, we are constrained to vacate the orders dismissing plaintiff’s complaint with prejudice, and denying plaintiff’s motions to reinstate the complaint and for reconsideration. We remand for reconsideration under Rule 4:23-4, mindful that “dismissal with prejudice is the ultimate sanction,” and “will normally be ordered only when no lesser sanction will suffice to erase the prejudice suffered by the non-delinquent party . . . .” Abtrax, 139 N.J. at 514 (quoting Zaccardi, 88 N.J. at 253). See Cummings v. Bahr, 295 N.J. Super. 374, 384, 685 A.2d 60 (App. Div. 1996) (holding that the decision to grant or deny a motion for reconsideration under Rule 4:49-2 falls “within the sound discretion of the [trial court], to be exercised in the interest of justice”) (quoting D’Atria v. D’Atria, 242 N.J. Super. 392, 401, 576 A.2d 957 (Ch. Div. 1990)).
Reversed and remanded for further proceedings consistent with this opinion. We do not retain jurisdiction. [*16]