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Penn v. 1St Southern Insurance Services, Inc.

United States District Court, E.D. Virginia, Richmond Division

July 18, 2018

DENISE A. PENN, et al., Plaintiffs,



         This matter is before the Court on DEFENDANTS' RULE 12(b)(6) MOTION TO DISMISS (ECF No. 7) . For the following reasons, the motion will be granted.


         Plaintiffs Denise Penn and Houstonia Clymer filed this action against Defendants, 1st Southern Insurance Services, Inc., George Roberts, and Fran Pless, for their failure to procure proper insurance coverage for Jimmy Barker and Barker & Son Forestry Services, Inc. Defendants have moved for dismissal of the Complaint (ECF No. 1) pursuant to Fed.R.Civ.P. 12(b)(6).

         I. Factual Context (As Set Forth in the Complaint)

         The following factual overview is based on the allegations in the Complaint.

         This case arises out of an insurance policy selected and placed by Defendants on behalf of Jimmy Barker and Barker & Son Forestry Services, Inc. (collectively "Barker"). Compl. *1-3.

         Defendants contracted with Barker to advise as to the kinds and amount of insurance that Barker had to purchase under applicable law (i.e., for a trucking business operating in at least four states) and to select and place that insurance. Compl. *6-8. Barker had no special experience in insurance matters and therefore relied entirely on Defendants and their promised expertise for the selection and placement of insurance. Compl. *4. Barker's reliance arose, at least in part, from Defendants' claimed experience in insuring truckers. Compl. *4. Defendants were aware that Barker counted on them to secure all required insurance. Compl. *5.

         Nevertheless, Defendants selected and placed a policy that did not meet mandatory minimum financial responsibility federal trucking standards. Compl. *5. That policy did not contain a MCS-90 endorsement, and it failed to satisfy coverage minimums. Compl. *5. As to the latter deficiency, the minimum financial responsibility protection required under federal law is $750, 000 in liability coverage, but the policy provided only $100, 000. Compl. *2.

         Penn and Clymer were severely injured in an accident caused by Justin Colvard, while he was driving a truck for Barker. Compl. *2. That accident occurred while the policy at issue here was in effect. See Compl. *2-5. Thereafter, Penn and Clymer secured judgments against the Barker & Son business in the Circuit Court of Brunswick County, Virginia. Compl. *2. Penn was awarded damages in the amount of $2, 4 50, 000. Compl. *2. Clymer was awarded damages in the amount of $275, 000. Compl. *2.

         The insurer refused to pay the additional amount required to meet minimum insurance standards under federal law ($650, 000). See Compl. *2-3. Barker, therefore, assigned all of its rights against Defendants to Penn and Clymer, who now sue Defendants for their failure to provide proper guidance and for failure to obtain proper coverage for Barker. Compl. *2-3.

         II. Additional Factual Context

         Defendants allege that the Complaint omits a substantial amount of relevant information. Defs.' Br. 2, 4-5. This information is discussed here, although whether it can be considered in resolving Defendants' motion shall be addressed below.

         Defendants observe that the policy at issue was "procured and issued in 2004 for a policy period that terminated in 2005." Defs.' Br. 2. Furthermore, they claim that the accident in which Penn and Clymer were injured occurred on August 2, 2005. Defs.' Br. 2, 4-5. And, they note that the policy at issue was previously considered by this Court in a declaratory judgment action in 2007 (to which Penn and Clymer were parties) . See Defs.' Br. 5. In a ruling affirmed by the Fourth Circuit in 2009, this Court found that the policy provided only $100, 000 in liability coverage. See Defs.' Br. 2, 5. To support those factual claims, Defendants attach as exhibits: (1) the declarations pages of the policy at issue; (2) the complaint in the declaratory judgment action (which itself includes a copy of the policy); (3) the answers filed by Penn and Clymer in that action; (4) the district court's final order in that action; and (5) the Fourth Circuit's opinion affirming the district court's ruling. See Defs.' Br. 2, 2 n.l, 4-5; Defs.' Br. Exs. A-F.[1]

         III. Procedural History

         The procedural history in this case is short. Penn and Clymer filed their Complaint on November 11, 2017. They alleged six claims: Count I-breach of contract; Count II-breach of oral contract; Count Ill-breach of implied contract; Count IV-negligence; Count V-professional negligence; and Count Vl-direct negligence (against Penn and Clymer personally). After Defendants filed their motion to dismiss, Counts IV (negligence) and VI (direct negligence) were dismissed by agreement. ORDER (ECF No. 20).


         The standards governing motions to dismiss under Fed.R.Civ.P. 12(b)(6) are clear:

Federal Rule of Civil Procedure 8(a)(2) requires only "a short and plain statement of the claim showing that the pleader is entitled to relief." When ruling on a motion to dismiss [pursuant to Fed.R.Civ.P. 12(b)(6)], courts must accept as true all of the factual allegations contained in the complaint and draw all reasonable inferences in favor of the plaintiff.
To survive a motion to dismiss, Plaintiffs' factual allegations, taken as true, must "state a claim to relief that is plausible on its face." The plausibility standard is not a probability requirement, but "asks for more than a sheer possibility that a defendant has acted unlawfully." Although it is true that "the complaint must contain sufficient facts to state a claim that is plausible on its face, it nevertheless need only give the defendant fair notice of what the claim is and the grounds on which it rests." Thus, we have emphasized that "a complaint is to be construed liberally so as to do substantial justice."

Hall v. DIRECTV, LLC, 846 F.3d 757, 765 (4th Cir. 2017) (citations omitted).


         Defendants argue, inter alia, that all counts are barred by applicable statutes of limitations. See Defs.' Br. 2. The Court agrees and therefore grants Defendants' motion on that ground.

         I. Choice of Law

         A preliminary matter involves which state's law governs the relevant issues in this case. There is no dispute between the parties that Virginia law governs the statutes of limitations questions at issue here (including when a claim accrues), and the Court concurs in the parties' assessment. See Defs.' Br. 5; Pls.' Opp'n 4 n.8.

         II. The Relevant Statutes of Limitations

         Under Virginia law, for actions upon a written contract, the limitations period is five years. See Va. Code Ann. § 8.01-246(2). For actions upon an unwritten contract, the statute of limitations is three years. See id. § 8.01-246(4). For professional negligence claims, the limitations period is the same as for breach of contract. See Browning v. Tiger's Eye Benefits Consulting, 313 Fed.Appx. 656, 664 (4th Cir. 2009); White v. BB & T Ins. Servs., Inc., 7:10-cv-467, 2012 WL 3018048, at *5, 7 (W.D. Va. July 23, 2012).

         The remaining claims involve only breach of contract and professional negligence. Consequently, the applicable limitations period is, at most, five years. The parties do not dispute this conclusion. See Defs.' Br. 7-8, 13; Pls.' Opp'n 4 n.8.

         III. Accrual

         A. The Parties' Arguments

         The main dispute in this case involves when the claims accrued. Defendants argue that the statutes of limitations began to run no later than 2004, when the inadequate policy was issued. Defs.' Br. 8, 12-13. They also note that, even using the date of Penn and Clymer's accident (in 2005) or the date that the declaratory judgment action was resolved (in 2009) as the accrual date, Penn and Clymer's claims are time barred. See Defs.' Br. 9, 12-13.

         Penn and Clymer respond that injury is necessary for a claim to accrue, and they contend that no injury occurred until the judgments in their favor were entered against Barker & Son (less than one year before this action was filed) because, before that time, the insurer provided all that it ...

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