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Bedrock Leasing Corp. v. Lexington Insurance Co.

Superior Court of Delaware

April 27, 2017

BEDROCK LEASING CORP., WFNY I, LLC, and BULGROUP COLORADO LLC, Plaintiffs,
v.
LEXINGTON INSURANCE COMPANY, Defendant.

          Submitted: January 10, 2017

         Upon Defendant Lexington Insurance Company's Motion to Dismiss Pursuant to Rule 12(b)(6)

          Edward M. McNally, Esquire, and Jason C. Jowers, Esquire, Morris James LLP, Wilmington, Delaware. Attorneys for Bedrock Leasing Corp., WFNY I, LLC, and Bulgroup Colorado LLC.

          Carmella P. Keener, Esquire, Rosenthal, Monhait & Goddess, P.A., Wilmington, Delaware, Wayne R. Glaubinger, Esquire, and William D. Wilson, Esquire, Mound Cotton Wollan & Greengrass LLP, New York, New York. Attorneys for Lexington Insurance Company.

          Eric M. Davis, Judge

         This insurance coverage case is assigned to the Complex Commercial Litigation Division of the Court. Plaintiffs Bedrock Leasing Corp. and its affiliates WFNY I, LLC and Bulgroup Colorado LLC (collectively, "Bedrock"), bring this action against Defendant Lexington Insurance Company ("Lexington"). Bedrock contends Lexington breached its contract by denying coverage for property damage caused by Superstorm Sandy. Lexington moved to dismiss, arguing the contract's suit limitations clause prohibits Bedrock's late-filed claim.

         I. INTRODUCTION

         A. Factual Background[1]

         Bedrock Leasing Corp. is a New York corporation with its principal place of business in New York, New York.[2] WFNY I, LLC and Bulgroup Colorado LLC are Delaware limited liability companies.[3] WFNY I, LLC and Bulgroup Colorado LLC are affiliated companies of Bedrock Leasing.[4] Bedrock owns commercial property in New York, New York.

         Lexington is a Delaware corporation.[5] Lexington is an insurance company. [6] According to the Complaint, Lexington is an insurance company licensed to do business in Delaware and has written policies covering risks for "Delaware citizens and/or is otherwise transacting business in Delaware." [7]

         Lexington insured Bedrock for property damage under Lexington Insurance Company Policy 066095771 (the "Policy"), for the policy period of April 26, 2012-April 26, 2013.[8] The Policy provided up to $10 million for "actual loss" during a "Period of Interruption" of Bedrock's business.[9]

         Superstorm Sandy damaged Bedrock's property.[10] Bedrock incurred $3, 273, 494 in damages.[11] In September 2013, Lexington denied coverage.[12] Bedrock filed this lawsuit on August 9, 2016. Bedrock contends Lexington's denial is incorrect, given this Court's Almah LLC v. Lexington Insurance Company[13] decision.

         B. Procedural History

         On October 12, 2016, Lexington moved to dismiss, and filed Defendant Lexington Insurance Company's Opening Brief in Support of its Motion to Dismiss Pursuant to Rule 12(b)(6) (the "Motion"). On November 8, 2016, Bedrock filed Plaintiffs' Answering Brief in Opposition to Defendant Lexington Insurance Company's Motion to Dismiss Pursuant to Rule 12(b)(6) (the "Opposition"). On November 22, 2016, Lexington filed its Defendant Lexington Insurance Company's Reply Brief in Support of its Motion to Dismiss Pursuant to Rule 12(b)(6) (the "Reply"). On January 10, 2017, the Court held a hearing on the Motion, Opposition, and Reply. At the conclusion, the Court took the matter under advisement. This is the Court's decision. For the reasons set forth, the Court will GRANT Defendant's Motion.

         II. PARTIES' CONTENTIONS

         A. Lexington

         Lexington contends the Policy's suit limitations clause shortened Bedrock's period to file a lawsuit to two years.[14] The Policy's suit limitations clause is entitled "SUIT AGAINST COMPANY, " and provides:

No suit, action or proceeding for the recovery of any claim under this Policy shall be sustainable in any court of law or equity unless the Insured shall have fully complied with all the requirements of this Policy, nor unless the same be commenced within twenty four (24) months next after the date of the loss, provided however, that if under the laws of the jurisdiction in which the property is located such time limitation is invalid, then any such claims shall be void unless such action, suit or proceedings is commenced within the shortest limit of time permitted by the laws of such jurisdiction.[15]

         Lexington argues Bedrock failed to sue Lexington within two years, regardless of Bedrock's choice of date of loss. First, Lexington claims that if Superstorm Sandy is used as the date of loss, then Bedrock's contractual two year limitations period ran in October 2014.[16] Second, Lexington contends that if the date of Lexington's denial is used, then Bedrock's contractual two year limitations period ran in September 2015.[17]

         B. Bedrock

         Bedrock argues it never received notice of the shortened statute of limitations.[18] Bedrock argues that Lexington cannot raise a statute of limitations argument without first notifying Bedrock of the contractual or statutorily-imposed statute of limitations; Lexington's argument is "repugnant against Delaware public policy."[19] Finally, Bedrock argues that it filed this action within Delaware's statute of limitations for breach of contract actions.[20]

         III. STANDARD OF REVIEW

         Upon a motion to dismiss under Superior Court Civil Rule 12(b)(6), the Court (i) accepts all well-pleaded factual allegations as true, (ii) accepts even vague allegations as well-pleaded if they give the opposing party notice of the claim, (iii) draws all reasonable inferences in favor of the non-moving party, and (iv) only dismisses a case where the plaintiff would not be entitled to recover under any reasonably conceivable set of circumstances.[21] However, the Court must "ignore conclusory allegations that lack specific supporting factual allegations."[22]

         IV. DISCUSSION

         A. Suit Limitations Provision validly shortens Notification Period

         The Court will determine the scope of the coverage obligation by looking at the language of the applicable insurance policy.[23] Where the language is unambiguous, the parties are bound by its clear meaning.[24] If the language is ambiguous, it will be construed "most strongly against the insurance company that drafted it."[25] The language in a policy is ambiguous only if the provision in controversy is "ʿreasonably or fairly susceptible of different interpretations or may have two or more different meanings.'"[26] An ambiguity does not exist when a court can determine the meaning of an insurance contract "without any other guide than a knowledge of the simple facts on which, from the nature of language in general, its meaning depends."[27]

         Delaware Courts have upheld shortened limitation periods.[28] In Woodward v. Farm Family Cas. Ins. Co, homeowners filed a complaint for alleged structural and cosmetic damage to their home two and one-half years after the damage occurred.[29] The homeowners' policy contained a one-year provision, stating: "No action can be brought unless the policy provisions have been complied with and the action is started within one year after the date of loss."[30]

         The insurance company moved for summary judgment based on that shortened period.[31]The trial court agreed, and granted defendant's motion for summary judgment.[32] ...


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