Balt. Scrap Corp. v. Exec. Risk Specialty Ins. Co., Civil Action No. ELH-18-cv-2743

Citation388 F.Supp.3d 574
Decision Date17 June 2019
Docket NumberCivil Action No. ELH-18-cv-2743
CourtU.S. District Court — District of Maryland

Angela Davis Pallozzi, Offit Kurman P.A., Baltimore, MD, for Plaintiff.

John L. Doran, Pessin Katz Law, PA, Towson, MD, for Defendants.


Ellen L. Hollander, United States District Judge

In this contract case, Baltimore Scrap Corporation ("Baltimore Scrap"), a scrap metal recycling business, has filed suit against Executive Risk Specialty Insurance Company ("Executive Risk") and RLI Insurance Company ("RLI"), alleging that defendants wrongfully denied insurance coverage "for a series of thefts that occurred at one of its scrap yards." ECF 1 (the "Complaint"), ¶ 1.1 The Complaint asserts claims for breach of contract against RLI (Count I) and Executive Risk (Count II). Id. ¶¶ 31-44. Plaintiff has appended to the Complaint a copy of the Executive Risk Policy (ECF 1-1) as well as the RLI Policy (ECF 1-2).2

On October 11, 2018, Executive Risk moved to dismiss Count II of the Complaint, pursuant to Fed. R. Civ. P. 12(b)(6). ECF 16.3 The motion is supported by memorandum of law (ECF 16-1) (collectively, the "Motion") and an exhibit. ECF 16-2 (Denial Letter, dated May 1, 2015). According to Executive Risk, plaintiff's claim is subject to Maryland's three-year statute of limitations, set forth in Md. Code (2013 Repl. Vol., 2018 Supp.), § 5-101 of the Courts and Judicial Proceedings Article ("C.J."). Because plaintiff did not file suit until September 5, 2018, i.e. , more than three years after Executive Risk denied coverage on May 1, 2015, Executive Risk maintains that plaintiff's suit is time-barred.

Plaintiff opposes the Motion, asserting that the Court should not consider the Denial Letter of May 1, 2015 (ECF 16-2) in ruling on the Motion. ECF 18 at 3-4. Alternatively, plaintiff argues that "its cause of action for breach of contract did not accrue on May 1, 2015." Id. at 7. Executive Risk has replied. ECF 19.

No hearing is necessary to resolve the Motion. Local Rule 105.6. For the reasons that follow, I shall grant the Motion (ECF 16).

I. Factual Background4

Baltimore Scrap "purchases scrap metal from industry, government, auto salvage yards, demolition contractors, and farms, as well as from the general public." Id. ¶ 7. The Complaint lays out one of the ways in which Baltimore Scrap purchases scrap from a customer, id. ¶ 8: "[A]n individual drives into the facility, has his or her vehicle weighed upon entry, receives instructions to drop the metal being purchased by Baltimore Scrap at a particular area of the scrapyard, and then returns to have the vehicle weighed again." Id. Then, "the customer receives a ticket with a value that is based upon the type of material in the load and the weight difference of their vehicle at departure." Id. The ticket is "scanned by the customer at an ATM-like machine onsite, in exchange for cash." Id.

On October 24, 2014, a Baltimore Scrap employee "discovered that a regular customer, Kenneth Grimes, entered the yard with a loaded truck, had the truck weighed by the company scales, but then instead of dropping the metal within the yard, proceeded to drive out a back gate." Id. at 9. About 30 minutes later, Mr. Grimes "returned to the yard through the back gate with an empty truck." Id. When Mr. Grimes "attempt[ed] to weigh-out with the empty truck" to receive compensation for the scrap, the employee "escorted" Mr. Grimes "off the premises." Id.

After reviewing footage from "security cameras [that] were first installed at the yard in July 2014," Baltimore Scrap discovered that "over a period of three months, Mr. Grimes entered the yard 23 times with a full truck, and after having the truck weighed, drove out a back gate on the property without unloading scrap." Id. ¶ 10. Each time, he "returned to the yard, and had his truck weighed again so that he was being paid for scrap that he was stealing from the yard." Id. In each instance, Mr. Grimes signed a "slip on behalf of his employer, Otis Elevator[.]" Id. ¶ 11. The Complaint asserts that "over the course of those 23 transactions," Grimes "was paid approximately $23,000 for material he did not leave at the yard." Id. Further, "Otis Elevator has confirmed that it did not receive any money from Mr. Grimes for the Baltimore Scrap tickets, and had no knowledge of Mr. Grimes's activity." Id.

As a result of the employee's discovery, the State of Maryland charged Mr. Grimes with a theft offense, and he was subsequently convicted. ECF 1, ¶ 12. As a part of his sentence, the court ordered payment of restitution, which plaintiff claims has since been paid. Id.5

However, Baltimore Scrap "reviewed all of its records for payment for Mr. Grimes from the time that he was hired by his employer, Otis Elevator, in 2011." Id. ¶ 13.

According to the Complaint, "the tickets reflected payments for Otis Elevator's scrap," but "Otis Elevator disclosed that they never received cash on any Baltimore Scrap tickets from Mr. Grimes." Id. In total, Baltimore Scrap claims that it "discovered approximately $200,000 worth of scrap that Mr. Grimes stole out the back door of the property ...." Id. ¶ 14.

Thereafter, "Baltimore Scrap brought a civil suit for fraud against Mr. Grimes." Id. ¶ 15. The Complaint asserts, id. ¶ 16: "On March 7, 2016, a Baltimore Circuit Court jury found Mr. Grimes liable for fraud, and a judgment was entered against him in the amount of $196,081.05 plus costs" (the "Grimes Loss"). And, "Mr. Grimes has begun making small payments on the judgment." Id. In pursuing legal action against Mr. Grimes, Baltimore Scrap avers that it has "incurred legal costs in excess of $55,000 ...." Id. ¶ 17.

At the relevant times, Baltimore Scrap "was covered under a comprehensive insurance program," including a "Crime Policy with Executive Risk" (ECF 1-1) and a "Commercial Property Coverage Policy with RLI" (ECF 1-2). ECF 1, ¶ 18.6 The Executive Risk Policy "had a policy period of October 1, 2014 through October 1, 2016." Id. ¶ 23. It included, inter alia , the "Crime Coverage Part," which provided "Premises Coverage" under "Insuring Clause (B)." ECF 1-1 at 3-4.

The provision states, in relevant part, that Executive Risk "shall pay" Baltimore Scrap "for direct loss ... resulting from: (1) Robbery, Safe Burglary , or unlawful taking of Money or Securities committed by a Third Party ; or (2) actual destruction or disappearance of Money or Securities , within or from the Premises ...." Id. at 4. Coverage also included "(3) loss of or damage to Property which results from Robbery or attempted Robbery within the Premises ; ... committed by a Third Party ." Id.

Further, in the Section titled "Exclusions," the Executive Risk Policy contains the following provision in Exclusion (A)(11), id. at 10:

Voluntary Exchange or Purchase
loss due to an Insured knowingly having given or surrendered Money, Securities or Property in any exchange or purchase with a Third Party , not in collusion with an Employee , provided that this Exclusion (A)(11) shall not apply to otherwise covered loss ....

The Executive Risk Policy defines "Third Party" as "a natural person other than: (A) an Employee ; or (B) a natural person acting in collusion with an Employee ." Id. at 8. And, "Robbery" is defined as "the unlawful taking of Money , Securities or Property from the custody of an Employee or other person (except a person acting as a watchman, porter or janitor) duly authorized by an Organization to have custody of such Money , Securities or Property , by violence or threat of violence, committed in the presence and cognization of such Employee or other person." Id.

Under the Policy, "Theft" is defined as "the unlawful taking of Money, Securities or Property to the deprivation of: (A) an Insured , solely for the purposes of Insuring Clause (A), Employee Theft Coverage; or (B) a Client , solely for the purposes of Insuring Clause (I), Client Coverage." Id. Insuring Clause (A) provides that Executive Risk "shall pay ... for direct loss of Money, Securities or Property sustained by" Baltimore Scrap "resulting from Theft or Forgery committed by an Employee acting alone or in collusion with others."

Id. at 4. And, Insuring Clause (I) states that Executive risk "shall pay" Baltimore Scrap "for direct loss of Money, Securities or Property sustained by a Client resulting from Theft or Forgery committed by an Employee not in collusion with such Client's employees." Id. at 5.

The Executive Risk Policy also includes an "Expense Coverage" provision. Id. It requires Executive Risk to pay Baltimore Scrap for "Investigative Expenses resulting from any direct loss covered under Insuring Clauses...." Id.

Plaintiff maintains that "the Grimes Loss necessarily constitutes a loss" under both policies. ECF 1, ¶ 26. Further, plaintiff asserts that it submitted timely notice of the Grimes Loss to both insurers. Id. ¶ 28. However, according to plaintiff, the insurers have wrongfully denied coverage for the Grimes Loss." Id. ¶ 29.

Additional facts are included, infra .

II. Legal Standards
A. Rule 12(b)(6)

A defendant may test the legal sufficiency of a complaint by way of a motion to dismiss under Rule 12(b)(6). In re Birmingham , 846 F.3d 88, 92 (4th Cir. 2017) ; Goines v. Valley Cmty. Servs. Bd. , 822 F.3d 159, 165-66 (4th Cir. 2016) ; McBurney v. Cuccinelli , 616 F.3d 393, 408 (4th Cir. 2010), aff'd sub nom. McBurney v. Young , 569 U.S. 221, 133 S.Ct. 1709, 185 L.Ed.2d 758 (2013) ; Edwards v. City of Goldsboro , 178 F.3d 231, 243 (4th Cir. 1999). A Rule 12(b)(6) motion constitutes an assertion by a defendant that, even if the facts alleged by a plaintiff are true, the complaint fails as a matter of law "to state a claim upon which relief can be granted."

Whether a complaint states a claim for relief is assessed by reference to the pleading requirements of Fed. R. Civ. P. 8(a)(2). That rule provides that a...

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