Opinion
Civil Action No. 3:02CV200
June 8, 2002
MEMORANDUM OPINION
This matter is before the Court by consent of the parties pursuant to 28 U.S.C. § 636(c)(1) on Defendant Hartford Fire Insurance Company's motion to dismiss which the Court may treat as a motion for summary judgment pursuant to Fed.R.Civ.P. 56. Fed.R.Civ.P. 12(b)(6). Because both parties have relied on matters outside the pleadings and there is no dispute as to any issue of material fact with judgment available as a matter of law, summary judgment is proper.
Undisputed Material Facts and Reasonable Inferences
Hartford issued an inland marine policy to AGM Development Corporation (AGM) with the effective dates of April 1, 1999, to April 1, 2000, under which United Leasing Corporation and Resource Bank were named as additional insureds and loss payees for equipment United Leasing leased to AGM. (Motion for Judgment (MFJ) at ¶¶ 1-4). On or about August 6, 1999, Resource Bank exercised its rights as a secured creditor and took control and possession of AGM's assets including all of the equipment leased to AGM by United Leasing. (MFJ ¶ 5). Although AGM ceased doing business in August of 1999, it continued to exist as a corporation until January 31, 2000, when its status was automatically terminated by the State Corporation Commission for failure to pay an annual registration fee. (Notice of Termination of Corporate Existence, attached as ex. 3 to Def's Reply in Further Supp. Mot. Dismiss).
Sometime between August 5, 1999, and August 7, 1999, various items of equipment owned by United Leasing were apparently stolen from various AGM construction sites. (MFJ ¶ 12). Within approximately a week of the thefts, Michael Agnew, the president of AGM, learned from an AGM employee that "some of the General Contractor's people had broken into some of the job trailers, which made us think that some equipment might be missing" and although he did not know any specifics, he immediately alerted Resource Bank "that some of their collateral may be disappearing." (Agnew Aff. ¶¶ 6-8). Additionally, James Lehner, the United Leasing employee responsible for searching for the missing equipment, testified that he learned of the loss from AGM on August 15, 1999, and was in contact with AGM through Mr. Agnew several times a day concerning the loss. (Dep. of James Lehner at 7, 12, attached as ex. 2 to Def.'s Reply).
In September of 1999, United Leasing made its claim under the Hartford Policy for the loss of the equipment. (MFJ ¶ 13). In accordance with the policy, United Leasing filed its proof of claim on June 1, 2001. (MFJ ¶ 15). On June 8, 2001, United Leasing received a complete copy of the insurance policy. (MFJ ¶ 16). United Leasing was informed that Hartford had neither accepted nor rejected its claim and that the investigation was ongoing. (Letter from Reverski to Washington of 6/08/2001, attached as ex. 4 to Def.'s Reply). On June 28, 2001, United Leasing discovered that its proof of claim did not reflect everything that was covered by the complete policy and informed Hartford it would file an amended proof of claim. On November 30, 2001, United Leasing filed its amended proof of claim. (MFJ ¶¶ 17, 19).
The policy contains a suit limitations clause which provides in pertinent part:
No one may bring a legal action against us under this Coverage Part unless . . . [t]he action is brought within 2 years after you first have knowledge of the "loss."
(Commercial Inland Conditions at 2, attached as ex. A to MFJ).
The policy also contains a provision defining the terms "you" and "yours" as the "Named Insured shown in the Declarations." The only named insured are AGM Development Corporation and AGM Precast Corporation.
On December 28, 2001, Hartford informed United Leasing that it rejected the amended proof of loss as untimely, but had neither accepted nor rejected coverage. (MFJ ¶ 20). On March 4, 2002, United Leasing filed a motion for judgment based on breach of contract in state court. (MFJ). The case was properly removed to this Court under 28 U.S.C. § 1441 based on complete diversity of citizenship and the amount in controversy as required under 28 U.S.C. § 1332.
Question Presented
Whether United Leasing's suit is time-barred by the terms of the insurance contract between AGM and Hartford?
Standard of Review
Summary judgment is only to be granted when there is no genuine dispute as to any issue of material fact when all justifiable inferences are drawn in favor of the non-moving party and the movant is entitled to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Anderson v. Liberty Lobby. Inc., 477 U.S. 242, 255 (1986). However, unsupported conclusory allegations by the nonmoving party are not sufficient to create a genuine dispute of material fact so as to withstand the granting of relief Celotex Corp. v. Catrett, 477 U.S. at 327 (White, J., concurring). The Court must decide if the evidence, when viewed in the light most favorable to the nonmoving party, "presents a sufficient disagreement to require submission to the [factfinder] or whether it is so one-sided that one party must prevail as a matter of law." Anderson v. Liberty Lobby. Inc., 477 U.S. at 25 1-252.
In this case, the question is whether a two-year limitations period incorporated in an insurance contract applies to a plaintiff that is not the named insured but an additional insured and loss payee. un a contract dispute, "only an unambiguous writing justifies summary judgment . . ." World-Wide Rights Ltd. v. Combe. Inc., 955 F.2d 242, 245 (4th Cir. 1992). Therefore, as a threshold consideration, a court must find as a matter of law that a contract is unambiguous on its face in order to grant summaryjudgment. For the writing to be unambiguous, there must not be "more than one permissible inference as to intent to be drawn from the language employed," otherwise "the question of the parties' actual intention is a triable issue of fact." Bear Brand Hosiery Co. v. Tights. Inc., 605 F.2d 723, 726 (4th Cir. 1979).
The insurance contract in this case is unambiguous on its face. The limitations clause bars a suit for coverage by anyone if it is not brought within two years from the time the named insured first learned of the loss. Plain and simple, Agnew's affidavit and deposition testimony disclose that he and his employee, Shep Shipp, first learned of the loss within a week of AGM's cessation of operations and therefore AGM knew of the loss in August of 1999. The deposition testimony of United Leasing's employee Lehner confirms that he was working with AGM on or about August 15, 1999, to identify and locate the universe of stolen equipment owned by United Leasing and insured by the Hartford policy. Moreover, when United Leasing entered into the leaseback arrangement with AGM that required AGM to secure coverage as an additional insured or loss payee in its insurance policy at some previous time, it was United Leasing's responsibility to determine what equipment was covered as well as the terms of the policy.
There is no legal justification not to apply the policy's time-limitation provision in this case and United Leasing has not sufficiently pled facts that estop Hartford from invoking the suit limitations period, as it asserts. The elements necessary to invoke estoppel are: (1) there must have been a false representation or concealment of a material fact; (2) the representation must have been made with knowledge of the true facts; (3) that party to whom it was made must have been ignorant of the truth of the matter; (4) it must have been made with the intention that the other party should act upon it; and (5) the other party must have been induced to act upon it. American Sec. Trust Co. v. Fletcher, 490 F.2d 481, 485 (1974). Even accepting as true United Leasing's claim that Hartford secreted the results of its investigation as to the loss, such an allegation does not meet the elements of estoppel. There was simply no false representation or concealment of material facts made with respect to the date AGM learned of the loss, nor was there any misrepresentation or concealment relating to the policy's suit limitation provision.
Even though it only provided a complete copy of the policy to United Leasing on June 8, 2001, Hartford is not estopped from invoking the limitations clause because United Leasing's failure to obtain a copy of the policy with all endorsements cannot be imputed to Hartford and Hartford's tardiness fails to meet the required elements of estoppel.
United Leasing also argues that because Hartford agreed to permit an amended proof of claim to be submitted — without reminding United Leasing that the two-year limitation period was about to run — Hartford is estopped from relying on the limitations clause. This argument is also without merit because Hartford was under no duty to apprise United Leasing of the impending deadline, especially in light of the fact that United Leasing had a copy of the policy containing the limitations provision within the allotted time period. Boykins Narrow Fabric Corp. v. Weldon Roofing Sheet Metal. Inc., 221 Va. 81, 87, 266 S.E.2d 887 (1980). At a minimum, United Leasing had the complete policy by June of 2001 — still well within the limitations period to bring suit if deemed necessary.
At the hearing on the motion for summary judgment, United Leasing argued that the limitations provision must be interpreted differently under Virginia law where Virginia law requires a breach before a suit on the contract can be maintained. Va. Code Ann. § 8.01-230. United Leasing argues that it had no cause of action within the two years immediately following the date AGM knew of the loss because its cause of action accrued from the date that Hartford rejected its amended proof of claim. United Leasing also argues that the action is not time-barred because Virginia law provides that in a policy that "requires a proof of loss, damage or liability to be filed within a specified time, all time consumed in an effort to adjust the claim shall not be considered part of such time." Va. Code Ann. § 38.2-314.
The accrual of a right of action "for which a limitation period is prescribed . . . shall be deemed to accrue and the prescribed limitation period shall begin to run from the date . . . when the breach of contract occurs in actions ex contractu and not when the resulting damage is discovered, except where the relief sought is solely equitable . . ." Va. Code Ann. § 8.01-230.
The code section also provides "[n]o provision in any insurance policy shall be valid if it limits the time within which an action may be brought to less than one year after the loss occurs or the cause of action accrues." Va. Code Ann. § 38.2-314.
First, while section 8.01-230 requires that there be an actual breach before a suit may be maintained ex contractu, section 38.2-314 is a more specific provision with respect to insurance policies that allows an insurance policy to have a valid limitations period that accrues from the date of the loss. It is a basic tenet of statutory construction that "statutes narrowly applicable to the circumstances at hand control over more generalized provisions." Farmer v. Employment Sec. Comm'n of North Carolina, 4 F.3d 1274, 1283 (4th Cir. 1993) (in order to determine which statute controls, the court must ask which provision is more closely associated with the controversy at hand). Therefore, assuming arguendo that the two statutory provisions conflict, section 38.2-314 is more closely associated with the controversy in this case so as to necessitate the conclusion that when a contract for insurance contains a suit limitations policy and the insurer has not paid the claim, an insured must file a timely suit in order to preserve its rights.
Next, the policy provides that no one may sue for coverage under the policy unless an action is brought within two years of the named insured's knowledge of the loss. Section 38.2-314 allows the suit limitations period to run either from the date the loss occurs or from the date the cause of action accrues as long as it is not less than one year from whichever event is the limitations starting point. In this case, the policy limitations clause started the clock on the date AGM knew of the loss. A policy limitations clause "should be held to mean what it says." Virginia Fire Marine Ins. v. Wells, 83 Va. 736, 3 S.E. 349 (1887). Contractual limitations provisions have long been enforced in Virginia. Koonan v. Blue Cross Blue Shield, 802 F. Supp. 1424, 1425 (E.D. Va. Sept. 30, 1992) (citing Bd. Supervisors v. Sampson, 235 Va. 516, 369 S.E.2d 178 (1988) for the rule that parties may even contract for limitations periods shorter than that fixed by law unless it is against public policy or unreasonably short). There is simply nothing ambiguous about the limitations provision in the policy and therefore the two-year limitation period bars this suit. See, e.g. Payne v. Blue Cross Blue Shield, 1992 WL 235537 (4th Cir. Sept. 24, 1992)(unpublished).
Section 38.2-314 also provides that if the policy requires a proof of loss to be filed within a specified period of time, "all time consumed in an effort to adjust the claim shall not be considered part of such time." Va. Code Ann. § 38.314. This sentence taken alone may seem unclear on its face and may appear to toll a limitations period while the insurer adjusts a claim. However, when the statute is read as a whole, it must be read to mean that the time an insurer reserves to adjust a claim shall not be charged against the time period in which the insured has to file a suit. Ramsey v. The Home Ins. Co., 203 Va. 502, 504, 125 S.E.2d 201, 203 (Va. 1962) (comparing the function of section 38.2-341 to the more specific provision period prescribed by statute covering losses resulting from fire). As an example, where an insurance policy reserved to the insurer 60 days to pay a claim after a proof of loss was filed, the 60 days reserved to the insurer would not run against the one-year limitation period set by the statute or any longer period set by the parties in the policy. Id. In this case, although a proof of loss was required to be filed "promptly" or within 60 days if requested by Hartford, there is no time specified in which Hartford must pay the claim once the proof of claim was filed. United Leasing has presented no argument nor authority that permits an interpretation of the statute to mean that an insurer waives the limitations provision as long as it takes to investigate and make a decision on whether it will pay a claim. Moreover, to interpret the statute as urged by United Leasing would invite abuse where the insured could file suit at any point in the indefinite future if the insurer, for whatever reason, had failed to act on the proof of claim.
The policy in this case contains a valid limitations period of not less than one year that runs from the date the named insured became aware of the loss and there is no proviso that Hartford reserved a specified time to adjust the claim after the proof of loss was to be filed. Because neither sentence in section 38.2-314 is applicable in this case, United Leasing's argument that the policy suit limitations provision is invalid or tolled is without merit.
The Court interprets the limitations clause to mean what it says and, consistent with Virginia law, it will enforce the two-year limitations period embodied in the policy.
Conclusion
For the foregoing reasons, Defendant's Motion for Summary Judgment is GRANTED and this case is dismissed.
Let the Clerk of the Court send a copy of this memorandum opinion to all counsel of record. An appropriate Order shall issue.