Failure to Respond to Complaint was Deemed Culpable and Willful.

Newly Acquired Auto Not Insured if Insurer not Notified Within 30 Days of Acquisition
Post 5244

Insured's Error Eliminated Coverage

In Selective Insurance Company Of South Carolina v. KS Automotive, LLC d/b/a KS Automotive, et al., No. 2:25-cv-02985-JDW, United States District Court, E.D. Pennsylvania (December 8, 2025) Selective Insurance Company of South Carolina issued a commercial auto insurance policy to KS Automotive LLC (and its related entities) for the period September 27, 2023, to September 27, 2024. The policy covered three types of vehicles: those specifically listed, hired vehicles, and non-owned vehicles used in KS Auto’s business. If KS Auto acquired a new vehicle, it had to notify Selective within 30 days for coverage to apply.

On November 11, 2023, KS Auto’s owner, James Colson, bought a 2004 Dodge Dakota for use as a shop truck but failed to notify Selective within the required 30 days.

The Dakota was involved in an accident on February 6, 2024. Selective was first notified of the Dakota’s existence on February 9, 2024, after the accident. Selective denied coverage for the accident because the Dakota was neither listed on the policy nor timely reported.

The accident led to a lawsuit in state court by David Haley and his wife against Colson, KS Auto, and Alexia Stipa (who had some connection to KS Auto). Selective agreed to defend the state court action under a reservation of rights but then filed this federal case seeking a declaration that it had no duty to defend or indemnify the defendants in the state court action.

All defendants were served but failed to respond, leading Selective to seek and obtain a default judgment.

Law - Default Judgment Standard:

Under Federal Rule of Civil Procedure 55(b)(2), a court may enter default judgment against a properly served defendant who fails to appear. The court considers three factors (1) prejudice to the plaintiff if default is denied, (2) whether the defendant has a litigable defense, and (3) whether the delay is due to culpable conduct. Not all factors must be satisfied.

The court also considers six factors when default judgment is a sanction: personal responsibility, prejudice to the adversary, history of delay, willfulness/bad faith, effectiveness of alternative sanctions, and the merits of the claim or defense.

Duty to Defend/Indemnify:

Under Pennsylvania law, the duty to defend is broader than the duty to indemnify. The duty to indemnify depends on the existence of a duty to defend. Determining the duty to defend requires comparing the insurance contract with the complaint’s allegations. There is no duty to defend if the claim clearly falls outside the policy’s coverage.

In this case, the court found the Dakota was not covered under any of the policy’s categories, and KS Auto failed to notify Selective within the required time. Therefore, Selective had no duty to defend or indemnify.

The court found all required factors favored default judgment: Selective was prejudiced by having to defend the state action, defendants had no apparent defense, and their failure to respond was deemed culpable and willful.

Conclusion

The court granted Selective a default judgment, declaring that Selective has no duty to defend or indemnify KS Auto, Colson, or Stipa in the underlying state court action and may withdraw its defense.

ZALMA OPINION

The person most dangerous to an insured is the insured's who will, by action or inaction, destroy his, her or its right to coverage. Buying a new pickup requires the insured to advise the insurer of its existence and pay a premium within 30 days of the purchase and before any accident. The Insured, KS Auto failed to advise Selective of the pickup until after the accident and more than 30 days after the purchase of the pickup. KS knew it had a losing case and did not respond to the declaratory relief and default was entered.

(c) 2025 Barry Zalma & ClaimSchool, Inc.

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