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Lowcountry Block LLC v. Cincinnati Insurance Co.

United States District Court, D. South Carolina, Beaufort Division

August 1, 2017

Lowcountry Block LLC; Lowcountry Paver LLC, and Thomas Curry, Plaintiffs,
The Cincinnati Insurance Companies, the Cincinnati Insurance Company, and the Cincinnati Insurance Group, Defendants.


          Richard Mark Gergel United States District Court Judge

         This matter is before the Court on Defendants' motion to dismiss the amended complaint. For the reasons set forth below, the Court grants the motion to dismiss.

         I. Background

         Plaintiffs Lowcountry Block, Lowcountry Paver, and Thomas Curry filed suit in the Jasper County Court of Common Pleas on December 23, 2016, alleging Defendant Cincinnati Insurance Company failed to pay a claim arising from a theft on September 23, 2013, as required under an insurance policy it issued to Lowcountry Block, and asserting claims for breach of contract, bad faith denial of insurance benefits, and a statutory claim under South Carolina Code § 38-59-20. The complaint identifies Lowcountry Paver and Thomas Curry as additional Plaintiffs, and the Cincinnati Insurance Group and the Cincinnati Insurance Companies as additional Defendants, but those parties' relationship to the dispute is unclear. The complaint was served on or about April 8, 2017, and Cincinnati removed to this Court on May 3, 2017.

         On May 10, 2017, Defendants moved to dismiss the complaint. Defendants argue that the complaint is barred by a three-year statute of limitations, which is also an express contractual term of the insurance policy, and that the complaint lacks sufficient allegations to state a plausible claim for breach of an insurance contract or for bad faith denial of insurance benefits. In addition to opposing Defendants' motion, Plaintiffs moved for leave to amend the complaint on June 2, 2017.

         The Court granted leave to amend the complaint, noting that the original "three-page complaint is obviously deficient." (Dkt. No. 17.) On July 24, 2017, Defendants moved to dismiss the amended complaint.

         II. Legal Standard

         Rule 12(b)(6) of the Federal Rules of Civil Procedure permits the dismissal of an action if the complaint fails "to state a claim upon which relief can be granted." Such a motion tests the legal sufficiency of the complaint and "does not resolve contests surrounding the facts, the merits of the claim, or the applicability of defenses. . . . Our inquiry then is limited to whether the allegations constitute 'a short and plain statement of the claim showing that the pleader is entitled to relief."' Republican Party of N.C. v. Martin, 980 F.2d 943, 952 (4th Cir. 1992) (quotation marks and citation omitted). In a Rule 12(b)(6) motion, the Court is obligated to "assume the truth of all facts alleged in the complaint and the existence of any fact that can be proved, consistent with the complaint's allegations." E. Shore Mkts., Inc. v. J.D. Assocs. Ltd. P'ship, 213 F.3d 175, 180 (4th Cir. 2000). However, while the Court must accept the facts in a light most favorable to the non-moving party, it "need not accept as true unwarranted inferences, unreasonable conclusions, or arguments." Id

         To survive a motion to dismiss, the complaint must state "enough facts to state a claim to relief that is plausible on its face." BellAtl. Corp. v. Twombly, 550 U.S. 544, 570(2007). Although the requirement of plausibility does not impose a probability requirement at this stage, the complaint must show more than a "sheer possibility that a defendant has acted unlawfully." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). A complaint has "facial plausibility" where the pleading "allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id.

         III. Discussion

South Carolina law provides a three-year limitations period for breach of contract. S.C. Code § 15-3-530(1). South Carolina law also allows contracting parties to set their own limitations periods so long as the agreed period does not shorten the statutory limitations period. Scott v. Guardsmark Sec, 874 F.Supp. 117, 121 (D.S.C. 1995). The insurance contract at issue here provides that actions must commence "within 3 years after the date on which the direct physical loss ('loss') or damaged occurred." (Dkt. No. 18-1 at 16.) Bad faith denial of insurance benefits is a tort claim also subject to a three-year statute of limitations. (See Dkt. No. 21-1 (Plaintiffs conceding bad faith claims are subject to the three-year statute of limitations provided by S.C. Code § 15-3-530(5)).) Thus, the applicable limitations period in this case is three years.

         Plaintiffs, however, correctly argue the limitations period accrues from the date of the breach and not the date of the loss. See Maher v. Tietex Corp., 500 S.E.2d 204, 207 (S.C. Ct. App. 1998). This is as true in insurance actions as in other breach of contract actions. See S.C. Farm Bureau Mut. Ins. Co. v. Kelly, 547 S.E.2d 871, 873 (S.C. Ct. App. 2001); see also Dilmar Oil Co. v. Federated Mut. Ins. Co., 129 F.3d 116, 1997 WL 702267, at *3 (4th Cir. Nov. 5, 1997) (unpublished decision applying South Carolina law). Contractual language providing for accrual from the date of loss is ineffective to the extent it results in a shorter limitations period than South Carolina contract law provides. See Johnston v. Commercial Travelers Mut. Accident Ass 'n of Am., 131 S.E.2d91, 94(S.C. 1963). Further, "[p]ursuant to the discovery rule, a breach of contract action accrues not on the date of the breach, but rather on the date the aggrieved party either discovered the breach, or could or should have discovered the breach through the exercise of reasonable diligence." CoastalStates Bank v. Hanover Homes of S.C, LLC, 759 S.E.2d 152, 156 (S.C. Ct. App. 2014) (citation and internal quotation marks omitted). Tort claims are also subject to the discovery rule. S.C. Code § 15-3-535.

         When a defendant raises an affirmative defense, like a statute of limitations, on a Rule 12(b)(6) motion to dismiss, all facts necessary for the Court to draw a conclusion that the claims are barred must appear on the face of the Complaint. Healey v. Abadie, 143 F.Supp.3d 397, 402-03 (E.D. Va. 2015). "In order to rule in Defendant's favor on a statute of limitations defense brought pursuant to Rule 12(b)(6), the Complaint must conclusively foreclose a finding that the action is not time barred." Id. at 403.

         In the present case, Plaintiffs amended complaint does not allege a date of breach other than the date of loss-even though the Court observed the same when ruling on Defendants' motion to dismiss the original complaint. (See Dkt. No. 17 (this Court noting, "the complaint does not provide any allegations from which a date of an alleged breach, other than the September 23, 2013 date of loss, could be inferred").) The only dates appearing in the complaint are September 23, 2013 (the date of loss) and July 1, 2016 (when Plaintiffs provided certain information to Defendants, presumably at Defendants' request). In opposition to the motion to dismiss, Plaintiffs offer two possible accrual dates for their claims: September 2016, when Defendants closed the claims file upon the expiration of the statute of limitations, or in January 2017, when the insurer refused to re-open the claim file (January 2017 is after the filing of the present action). ...

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