United States District Court, W.D. Virginia, Lynchburg Division
Cunningham Bros. Used Auto Parts, Inc., Plaintiff,
Zurich American Insurance Co., et al, Defendant.
K. MOON JUDGE
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,  the Court will grant Arrowhead's
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).
Facts as Alleged
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).
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).
Initial Policy contained Business Income Continuation
coverage that provided two methods of calculating
loss. The formula resulting in the largest
payment was to be used in paying a valid claim.
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).
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).