Cunningham Bros. Used Auto Parts, Inc. v. Zurich American Insurance Co.

          MEMORANDUM OPINION

          NORMAN K. MOON JUDGE

         Defendant Arrowhead General Insurance Agency (“Arrowhead”) seeks dismissal of Plaintiff's, Cunningham Brothers Used Auto Parts, Inc. (“Cunningham”), complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) for (1) failure to state a claim and (2) statute of limitations bar. (Dkt. 14). Because the complaint fails to allege a contract between Plaintiff and Arrowhead and, even if it did, this action would be barred by the three year statute of limitations, ^[1] the Court will grant Arrowhead's motion.

         I. Standard of Review

          “In ruling on a 12(b)(6) motion, a court must accept as true all of the factual allegations contained in the complaint and draw all reasonable inferences in favor of the plaintiff.” Kensington Volunteer Fire Dep't, Inc. v. Montgomery Cty., Md., 684 F.3d 462, 467 (4th Cir. 2012); see also Erickson v. Pardus, 551 U.S. 89, 94 (2007). “While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal citations and quotation marks omitted). Stated differently, in order to survive a motion to dismiss, “a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570).

         II. Facts as Alleged

         A. Contract Allegations

         Plaintiff alleges that it contracted with Defendant Zurich American Insurance Company (“Zurich”) for “Business Income Continuation” coverage. (Dkt. 1-1 ¶¶ 15, 18). It further alleges that it only contracted with Zurich because its agent promised that its coverage would be better at less cost than Plaintiff's existing coverage. Zurich's policy (“Initial Policy”) was issued effective January 15, 2012. (Id. ¶ 18).

         Zurich later notified Plaintiff by an email, dated October 8, 2012, that Arrowhead would “be handling all client customer service requests” for Zurich. (Dkt. 1-1 at ECF 16). The email stated Arrowhead, Zurich's largest partner, would be handling the “Sales, Underwriting, and Customer Service.” (Id.) Plaintiff also received a “Customer Service Contacts Sheet, ” advising it of Arrowhead's relationship with Zurich as servicer of its policy, and containing the phrase, “We appreciate your business and look forward to talking with you soon.” (Id. at ECF 17). Another letter from an Arrowhead underwriter, dated November 9, 2012, addressed Cunningham as a “Dear Valued Customer, ” and stated “I would like to take this opportunity to thank you for your business.” (Id. at ECF 34).

         B. The Coverage

         The Initial Policy contained Business Income Continuation coverage that provided two methods of calculating loss.^[2] The formula resulting in the largest payment was to be used in paying a valid claim.

         The aforementioned November 2012 letter regarded renewal of the policy effective January 15, 2013. (Dkt. 1-1 ¶ 22; id. at ECF 34-37). The letter contained a warning stating: “Important Notice” - “Endorsement 0128, BIC-Restricted Form, will be added to your Policy as we do not have a current financial statement. . . . This restricts coverage to the lesser of 1/30 of the monthly limit or the average daily gross profit for the preceding four months.” (Id. ¶ 23-24 (emphasis original)). Thus, while Endorsement 0128 maintained the calculations utilized in the Initial Policy's original Business Income Continuation coverage, it notably changed the coverage formula from using the greater of two values to the lesser of two values. Endorsement 0128 remained part of the policy as it was renewed in January 2013 and again in January 2014. (Id. ¶ 30).

         C. The Loss

         On November 2, 2014, a fire at Plaintiff's facilities caused business disruptions for over six months. (Id. ¶ 34). The Endorsement 0128 Business Income Continuation coverage (lesser formula) yielded no payment for the Plaintiff. (Id. ¶ 35). Plaintiff, however, would have received $865, 000 under the original Business Income Continuation coverage (greater formula). (Id.)

         III. ...