Pinnacle Bank v. Fidelity and Deposit Company of MarylandPinnacle Bank v. Fidelity and Deposit Company of Maryland
MEMORANDUM OPINION
Pending before the Court is Defendant Fidelity and Deposit Company of Maryland‘s Motion to Dismiss (Doc. No. 8, “Motion“), supported by an accompanying Memorandum in Support (Doc. No. 9). Plaintiff Pinnacle Bank, litigating this case as successor trustee of the Ransom Family Trust,1 responded in opposition (Doc. No. 10, “Response“), and Defendant replied (Doc. No. 11, “Reply“). For the following reasons, the Motion will be denied.
BACKGROUND2
On October 21, 2018, an accidental fire damaged a building located on commercial property owned by the Ransom Family Trust, located at 301 N.W. Broad Street, Murfreesboro, Tennessee (the “Insured Premises“), which suffered substantial direct physical loss and damage (“Loss“). (See Doc. No. 1-1 at ¶¶ 1, 15). The Loss was a total loss to the building on the insured premises. (Id. at ¶ 16). At that time, Defendant insured the Insured Premises via an insurance policy bearing Policy No. TPP 3801411 02, obtained by Plaintiff as trustee for the Trust. (the “Policy“). (Id. at ¶¶ 5, 7). After Plaintiff promptly reported the loss, Defendant investigated the claim and determined that the loss resulted in covered damage. (Id. at ¶¶ 17-18). Defendant even opined that the Insured Premises required demolition. (Id. at ¶ 19).
Defendant sought and received from its consulting firm, J.S. Held, a reconstruction estimate (dated December 21, 2018) for the Insured Premises totaling $518,532.79 (replacement cost value). (Id. at ¶ 20). Upon receipt of the estimate, Defendant instructed J.S. Held to decrease the amount of the estimate, and accordingly, in its estimate dated December 27, 2018, J.S. Held decreased the figure to $372,298.99 (replacement cost value) / $281,696.19 (actual cash value) (the “Preliminary Estimate“). (Id. at ¶ 21). On February 13, 2019, Defendant issued a payment to Plaintiff for the actual cash value as stated in the Preliminary Estimate, less the applicable deductible, which totaled $279,196.19. (Id. at 23).
In March 2019, Defendant advised Plaintiff that it had instructed J.S. Held to re-inspect the Insured Premises. (Id. at ¶ 24). The purpose of the re-inspection was to determine the increased costs of construction due to the enforcement of applicable ordinances and laws, i.e., building codes. (Id.). Defendant unequivocally advised
Also in March 2019, Plaintiff retained a general contractor, Smith Design/Build (“Smith“), to assist in evaluating the loss and to begin the reconstruction process. (Id. at ¶ 25). Plaintiff and Smith likewise engaged an architect for the reconstruction design, and they had extensive discussions with Murfreesboro city officials concerning the approval of the construction documents. (Id. at ¶ 26). The approval process took some time, as it required approval from the Planning Commission and was complicated by numerous site conditions, such as parking, traffic patterns, architectural compliance, safety, and landscaping. (Id. at ¶ 27). The reconstruction of the Insured Premises was set to begin in late 2019 or early 2020. (Id.). In January 2020, Smith completed its bid to reconstruct the Insured Premises, which totaled more than $1.3 million (the “Smith Estimate“). (Id. at ¶ 28). Plaintiff provided the bid to Defendant, which advised that it would review the same. (Id. at ¶ 29). Then, the COVID-19 pandemic caused numerous delays. (Id. at 30).
The Policy included a “Suit Limitation Clause” that limited to a specified period the time for suit to be filed against Defendant. The Suit Limitation Clause provides:
Legal Action Against Us - No insured may bring a legal action against us under this Coverage Part unless:
- There has been full compliance with all of the terms of this Coverage Part; and
- The action is brought within 2 years after the date on which the direct physical loss or damage occurred.
(Doc. No. 1-1 at 74). In August 2020, Plaintiff requested an extension of the Policy‘s time limit for the recovery of the increased costs of construction concerning applicable building codes. (Id. at ¶ 32). On September 30, 2020, Defendant agreed to a six-month extension. (Id.).
After months of delays and numerous requests by Plaintiff for more prompt consideration of the Smith construction proposal, Defendant eventually received a revised estimate from J.S. Held dated July 30, 2020, which totaled $625,808.04 (replacement cost value) (the “Revised Estimate“). (Id. at ¶ 31). After months of additional delays and repeated assurances from Defendant that a supplemental payment would be issued, Plaintiff finally, on March 25, 2021, received an additional payment from Defendant totaling $206,757.94, which was based on the Revised Estimate from J.S. Held. (Id. at ¶¶ 33-36). Plaintiff disputed the sufficiency of this payment, which was based on the Revised Estimate from J.S. Held, giving rise to a disagreement between the parties over the value of the loss. (Id. ¶¶ 36-39). Due to the drastic disparity between J.S. Held‘s Revised Estimate and the Smith Estimate, Plaintiff was unable to begin its reconstruction of the Insured Premises. (Id. at 37).
Plaintiff filed this lawsuit in the Circuit Court for Rutherford County, Tennessee, on September 10, 2021 (Doc. No. 1-1) asserting: (i) in Count One a claims of breach of contract based on Defendant‘s alleged “failure to pay the amounts owed to Plaintiff for the Loss pursuant to the insurance coverage afforded by the Policy” (id. at ¶ 59); and (ii) in Count Two a request for a declaratory judgment, asking the “Court to declare its rights as it relates to Defendant‘s payment obligations to Plaintiff” (Count Two). (Id. at ¶ 64). On November 11, 2021, Defendant filed a Notice of Removal to this Court (Doc. No. 1). On November
LEGAL STANDARD
For purposes of a motion to dismiss under
In determining whether a complaint is sufficient under the standards of Iqbal and its predecessor and complementary case, Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), it may be appropriate to “begin [the] analysis by identifying the allegations in the complaint that are not entitled to the assumption of truth.” Iqbal, 556 U.S. at 680. This can be crucial, as no such allegations count toward the plaintiff‘s goal of reaching plausibility of relief. To reiterate, such allegations include “bare assertions,” formulaic recitation of the elements, and “conclusory” or “bold” allegations. Id. at 681. The question is whether the remaining allegations - factual allegations, i.e., allegations of factual matter - plausibly suggest an entitlement to relief. Id. If not, the pleading fails to meet the standard of
As a general rule, matters outside the pleadings may not be considered in ruling on a motion to dismiss under
On a
ANALYSIS
In a diversity action, such as this action, the district court applies the relevant state substantive law. E.g. Hisrich v. Volvo Cars of N. Am., Inc., 226 F.3d 445, 449 (6th Cir. 2000) (citing Erie R. Co. v. Tompkins, 304 U.S. 64, 78 (1938)). Here, the parties are in agreement that Tennessee law applies, and the Court agrees.3
Under Tennessee law, an insurance policy can establish an enforceable, agreed-upon limitations period within which an applicable lawsuit can be filed (or, to put it more aptly, outside of which a lawsuit cannot be filed). See, e.g., Brick Church Transmission, Inc. v. Southern Pilot Ins. Co., 140 S.W. 324, 329 (Tenn. Ct. App. 2003) (citing Hill v. Home Ins. Co., 125 S.W.2d 189, 192 (Tenn. 1938). As noted above, the Policy at issue here provides that “[n]o insured may bring a legal action against [Defendant] under this Coverage Part unless . . . the action is brought within 2 years after the date on which the direct physical loss or damage occurred.” (Doc. No. 1-1 at 72).4 The parties agree that based on this provision, a two-year limitations period applies.5 But they disagree as to when that two-year limitations period began to run.
Defendant claims that based on the provision just quoted, the limitations period
In the Response, Plaintiff asserts that Defendant “incorrectly argues that the date of loss triggers the accrual of the shortened [two-year contractual] limitations period, yet Tennessee law is clear that this position is incorrect.” (Doc. No. 10 at 6). What Plaintiff is really saying is that Defendant is incorrectly asserting that the date of loss triggers the running of the limitations period (as opposed to the ”accrual” of the limitations period or, for that matter, Plaintiff‘s cause of action) although the parties’ terminology muddies the waters on this point.6 Plaintiff is correct
It is well settled that under Tennessee law, “[a] provision in an insurance policy limiting the time for suit to be filed to a specified period “after the loss” has been construed by [Tennessee] courts [] to mean that the period of limitation commences when the right to maintain an action on the policy has accrued rather than from the date of the event causing the loss[.]” Dixon v. Thomas Jefferson Ins. Co., No. 6, 1989 WL 150720, at *4 (Tenn. Ct. App. Dec. 13, 1989) (citing Phoenix Ins. Co. v. Fidelity & Deposit Co., 37 S.W.2d 119 (Tenn. 1931)); see also Hall v. Allstate Ins. Co., No. 3:13-CV-397-CCS, 2015 WL 8492458, at *3 (E.D. Tenn. Dec. 10, 2015) (“The fire in this case occurred on June 2, 2010, and under the language of the policy the Plaintiff would have had one year from that date, in which to file her suit. However, under Tennessee law, the contractual limitation provision runs from the date on which the insurer actually denies the claim.“). Thus, the Court must and does rejects Defendant‘s contention that the limitations period began running on October 21, 2018.7
The Court understands why Defendant might have thought that the limitations period began running when the applicable Policy provision said it began running - meaning, just as Defendant said, “the date on which the direct physical loss or damage occurred.” After all, as noted above, Tennessee law directs the Court to take and use the limitations period specified in this provision (rather than the one specified by the otherwise applicable statute of limitations), so why should Tennessee law direct the Court to (i) flat-out disregard what this provision has to say about when the limitations period begins to run, and instead (ii) run the limitations period from the date of accrual? That‘s a good question, but there may be a good answer; this rule well may be justifiable, especially in particular situations.8 But in any event, whether or not the rule is a good one, it is in fact the rule, and the Court must follow it and thus recognizes that the limitations
So when did Plaintiff‘s cause of action accrue? As indicated above, this question devolves to “when did Plaintiff‘s right to maintain an action on the policy become ripe, i.e., was no longer premature?” “[Such] accrual date varies depending upon the language of the policy and the actions of the insured and insurer in relation to that policy.” Burton v. Nationwide Ins. Co., No. 1:07-CV-129, 2007 WL 3309076, at *3 (E.D. Tenn. Nov. 6, 2007). That is, policy language can dictate (and foster the delay of) the date of accrual via language that effectively presents a contractual bar to bringing suit unless and until certain prerequisites are satisfied. The period that precedes that time at which such prerequisites are satisfied (if ever) is known as the “immunity period.” “An ‘immunity period’ (or ‘settlement period‘) is a contractually-created period of time during which an insurer is immune from litigation while it investigates, evaluates, and may negotiate to settle the claim.” Id. (citing Brick, 140 S.W.3d at 329 (“All adjusted claims shall be paid or made good to the Insured within sixty (60) days after presentation and acceptance of satisfactory proof of interest and loss at the office of the Company.“); Lloyd‘s, 107 S.W.3d at 498 (“All adjusted claims shall be paid or made good to the Insured within sixty (60) days after presentation and acceptance of satisfactory proof of interest and loss at the office of the Company.“); Hill, 125 S.W.2d at 192 (“[P]rovisions for notice and proofs of loss to be furnished by the insured to the insurer within sixty days from the date of the loss, which, in effect, afforded the insurer immunity from suit for such period of sixty days . . .“)).
“Policies often include language requiring a ‘proof of loss’ to be filed” to make a claim if such a proof of loss is so requested by the insurer. Id. Such language is among the kinds of language that can trigger the immunity period. When a proof of loss is filed by the insured or requested by the insurer, “the contractual statute of limitations begins to run upon denial of liability or upon expiration of the immunity period, whichever comes first.” Certain Underwriter‘s at Lloyd‘s of London v. Transcarriers Inc., 107 S.W.3d 496, 500 (Tenn. Ct. App. 2002); Brick, 140 S.W.3d at 330. For example, the Policy at issue here states that “[i]n the event of loss or damage to Covered Property, [the insured] must . . . [s]end [the insurer] a signed, sworn proof of loss containing the information [the insurer] request to investigate the claim. [The insured] must do this within 60 days after [the insurer‘s] request.” (Doc. No. 10 at 7 (emphasis added)). Thus, the Policy in this case requires Plaintiff to submit a proof of loss claim only in response to Defendant‘s request for a proof of loss to be filed (which appears to be typical among these types of insurance policies). The Policy also contains a “Loss Payment” clause, which provides that Defendant will respond with notice of its intentions within 30 days after it receives a sworn proof of loss. (Doc. No. 1-1 at 70 (“We will give notice of our intentions within 30 days after we receive the sworn proof of loss.“)). So if a sworn proof of loss is filed, the immunity period lasts 30 days from the date of Defendant‘s reception of the proof of loss. And if a sworn proof of loss is requested but not filed - i.e., not filed despite being requested - the immunity period lasts 60 days from the date of Defendant‘s request.
On the other hand, if no proof of loss is either (1) filed by the insured or (2) requested by the insurer (at least based on the specific language of this Policy), the insured‘s cause of action accrues when the insurer denies the claim. Das v. State Farm Fire & Cas. Co., 713 S.W.2d 318, 322-24 (Tenn. Ct. App. 1986); see also Fox v. Massachusetts Bay Ins. Co., No. 2:13-CV-2567-JTF-DKV, 2015 WL 10791983, at *4 (W.D. Tenn. Feb. 23, 2015) (explaining that under Tennessee law, “when a proof of loss claim is not filed or requested by the insurer, as in this case, a cause of action does not accrue until the claim is denied“). Here, Plaintiff alleges in the Complaint that “Defendant has never requested a sworn proof of loss.” (Doc. No. 1-1 at ¶ 42). The implication from the allegation is that because Defendant did not request a sworn proof of loss, a proof of loss was not filed. And although the Complaint does not clearly state that a proof of loss was not filed, the Court will construe the Complaint (in Plaintiff‘s favor, as it must do on a
CONCLUSION
For the above-mentioned reasons, Defendant‘s Motion (Doc. No. 8) will be DENIED. An appropriate order will be entered.
ELI RICHARDSON
UNITED STATES DISTRICT JUDGE
Notes
Eli J. Richardson, Eliminating the Limitations of Limitations Law, 29 Ariz. St. L.J. 1015, 1036-37 (1997). It bears mentioning on a point that seems widely understood but rarely articulated - what it means to sue that a cause of action has accrued: that the claim is (to use a familiar metaphoric term) ripe, i.e., no longer premature as it was prior to the time of accrual. See Davidson Cty. v. Beauchesne, 39 Tenn. App. 90, 96, 281 S.W.2d 266, 269-70 (1955) (noting that “if the cause of action had not accrued[, then] the suit was premature“).A limitations period generally begins to run from the time the cause of action “accrued.” Contrary to language in some opinions, however, the date of accrual is not necessarily synonymous with the date that the limitations period begins to run; the limitations period begins to run from the date of accrual only to the extent that applicable law says so. As it turns out, applicable law usually does say so; by judicial decision, by a general statute relating to the running of limitations periods, or by language in the particular statute of limitations itself, a statute‘s limitations period usually runs from the date of accrual.
On closer inspection, it appears that Defendant is not really making an argument as to when Plaintiff‘s cause of action accrued, but rather an argument as to when the limitations period for that cause of action began running irrespective of whether that time is the time of accrual. And indeed, it is clear that Defendant is asserting a date on which the limitations began running that is not necessarily tied to the date of accrual - the date on which state law says a cause of action is ripe - but rather is tied to particular language in the Policy. (Doc. No. 11 at 4).
Finally, in another point about terminology, the Court notes that although Plaintiff referred to the accrual of the limitations period, in the Court‘s view limitations do not accrue but rather begin running. True, limitations periods usually (though not always, as discussed above) begin running when the cause of action accrues, but that is not to stay that they beginning running when they themselves “accrue” or that they ever “accrue” at all.