Berrylane Trading, Inc. v. Transportation Insurance Company, 110218 FED6, 18-3144

Docket Nº:18-3144
Opinion Judge:JULIA SMITH GIBBONS, CIRCUIT JUDGE.
Party Name:BERRYLANE TRADING, INC. Plaintiff-Appellant, v. TRANSPORTATION INSURANCE COMPANY Defendant-Appellee.
Judge Panel:BEFORE: GIBBONS, SUTTON and McKEAGUE, Circuit Judges.
Case Date:November 02, 2018
Court:United States Courts of Appeals, Court of Appeals for the Sixth Circuit
 
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BERRYLANE TRADING, INC. Plaintiff-Appellant,

v.

TRANSPORTATION INSURANCE COMPANY Defendant-Appellee.

No. 18-3144

United States Court of Appeals, Sixth Circuit

November 2, 2018

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION

ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF OHIO

BEFORE: GIBBONS, SUTTON and McKEAGUE, Circuit Judges.

JULIA SMITH GIBBONS, CIRCUIT JUDGE.

After a thief broke into Berrylane Trading Inc.'s ("Berrylane") warehouse and stole $1, 654, 860 worth of iPhones, Berrylane submitted an insurance claim to Transportation Insurance Company ("TIC"). TIC denied the claim, contending that its insurance policy (the "Policy") did not cover loss at the warehouse. Berrylane sued, alleging breach of contract and bad faith. The district court dismissed Berrylane's complaint under Fed.R.Civ.P. 12(b)(6). It found that the Policy did not provide coverage for the theft because the warehouse was not a covered location under the Policy's Schedule of Locations. It also found that the theft was not covered under the Policy's Newly Acquired or Constructed Property endorsement (the "Endorsement") because the warehouse was not acquired during the requisite time period. We agree that the Policy does not cover loss at the warehouse and affirm the district court's dismissal of Berrylane's complaint under Fed.R.Civ.P. 12(b)(6).

I.

Berrylane buys and sells cell phones, including iPhones, to companies and individuals across the United States. Berrylane's principal place of business is in Bedford, Ohio, 1 and it insures its property through TIC, an Illinois-based insurance company. The insurance contract at issue began on April 7, 2015 and ran for the subsequent year. The Policy covered "business personal property" at the only location described in the contract's "Schedule of Locations and Coverage": Berrylane's Bedford, Ohio location at 24300 Solon Road. In addition, the Policy included a "Newly Acquired or Constructed Property" endorsement. The Endorsement included the following provision:

  1. Business Personal Property

a. When a Limit of Insurance is shown in the declarations for Business Personal Property at any described premises, we will pay for direct physical loss of or damage to the following property caused by or resulting from a Covered Cause of Loss:

(1) Business Personal Property, including such property that you newly acquire, at a building you acquire by purchase or lease at any premises, including those premises shown in the Declarations; and

(2) Business Personal Property that you newly acquire at a described premises.

. . .

3. Period of Coverage

a. With respect to Insurance under this Additional Coverage, coverage will end when any of the following first occurs:

. . .

(2) 180 days expire after you acquire the property or begin to construct the property[.]

DE 1-1, Compl., Newly Acquired Property Endorsement Form, Page ID 67 (emphasis added.).

The Policy was implicated when, on December 7, 2015, a thief broke into Berrylane's warehouse in Doral, Florida and stole approximately $1, 654, 860 worth of iPhones. Immediately following the break-in, Berrylane submitted a claim for coverage to TIC. The Policy could have covered the loss in two ways: (1) if the theft occurred at a location specifically listed in the Schedule of Locations or (2) if the newly acquired iPhones were stolen at a location to which the Endorsement applied. TIC found that neither provision applied and therefore rejected Berrylane's claim for coverage. First, in a letter dated October 27, 2016, CNA Financial Corporation ("CNA") General Adjuster David Reitzel wrote Berrylane that the warehouse was not listed as a covered location under the Policy. He wrote: "The policy provides coverage for personal property at 24300 Solon Road, Bedford, Ohio. There is no coverage for personal property at 2602 N.W. 72nd Ave., Doral." DE 1-1, Compl. Ex. C, Letter, Page ID 247. Second, in a letter dated March 1, 2017, CNA closed the second possible avenue of coverage, informing Berrylane that its loss was also not covered under the Endorsement. The denial stated that: [T]he Doral, Florida, location was not newly acquired or constructed, according to the terms of the endorsement, because it was acquired before the Policy ever was incepted and not acquired during the course of the Policy. . . . There is no coverage at the Doral, Florida property location because it was not included on the policy as a described premises and that property was not newly acquired or constructed during the policy term.

DE 1-1, Compl., Ex. F, Letter, Page ID 258.

Berrylane disagreed that the Endorsement did not cover loss at the warehouse and, in October 2017, it filed a complaint alleging breach of contract and bad faith and requesting declaratory judgment on the parties' rights and obligations under the Policy, in the Cuyahoga County Court of Common Pleas in Ohio. Berrylane named three defendants: (1) CNA Financial Corporation ("CNA"); (2) Transportation Insurance Company ("TIC"); and (3) Busha-Okeson Insurance. In November 2017, TIC, with the other defendants' consent, removed the case on federal diversity jurisdiction grounds to the United States District Court for the Northern District of Ohio. A week later, each defendant filed a motion to dismiss Berrylane's complaint for failure to state a claim under Fed.R.Civ.P. 12(b)(6).

In December 2017, Berrylane voluntarily dismissed its claims against CNA. And in January 2018, the district court dismissed Berrylane's remaining claims against TIC and Busha-Okeson Insurance. The district court held that the Policy did not provide coverage for the theft because the Endorsement did not cover losses at the warehouse. It found that "Berrylane did not 'acquire' the [w]arehouse during the Policy period and [the Newly Acquired Property endorsement] does not provide coverage." DE 22, Order, Page ID 472.

Berrylane timely appealed the district court's dismissal with respect to TIC.

II.

This court reviews de novo a district court's grant of a motion to dismiss under Fed.R.Civ.P. 12(b)(6). Heinrich v. Waiting Angels Adoption Services, Inc., 668 F.3d 393, 403 (6th Cir. 2012). In reviewing a motion to dismiss under Fed.R.Civ.P. 12(b)(6), "this court construes the complaint in the light most favorable to the plaintiff, accepts the plaintiff's factual allegations as true, and determines whether the complaint 'contain[s] sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.'" Heinrich, 668 F.3d at 403 (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft, 556 U.S. at 678 (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007)). The plausibility standard "asks for more than a sheer possibility that a defendant has acted unlawfully" but is "not akin to a probability requirement." Id. (internal citations omitted). Determining whether a complaint states a plausible claim for relief is a "context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. at 679. In conducting this analysis, a court "primarily considers the allegations in the complaint, although matters of public record, orders, items appearing in the record of the case, and exhibits attached to the complaint, also may be taken into account." Amini v. Oberlin College, 259 F.3d 493, 502 (6th Cir. 2001) (quoting Nieman v. NLO, Inc., 108 F.3d 1546, 1554 (6th Cir. 1997)).

III.

On appeal, Berrylane posits three arguments. First, Berrylane contends that the Endorsement did not require it to acquire the warehouse during the Policy period; rather, Berrylane only had to acquire the iPhones during the policy period. Second, Berrylane asserts in the alternative that even if the warehouse had to be acquired during the period, this requirement was met because the warehouse was physically acquired after the Policy began even though the lease became effective prior to the Policy period. Berrylane argues that while the lease became effective in February 2015, before the Policy period, it did not begin using the warehouse until the summer of 2015, during the Policy period. Third, Berrylane contends that the district court incorrectly concluded that Berrylane's failure to report the acquisition of the warehouse, so TIC could adjust its premium, precluded the warehouse from coverage under the Policy. As to Berrylane's first two arguments, we conclude that the Endorsement required the warehouse to be acquired during the Policy period and that acquisition occurred when the lease became effective. We therefore conclude that the Policy did not cover loss at the warehouse. We decline to reach the third issue because it is unnecessary to decide the case.

A.

Berrylane's complaint raises state law claims under Ohio law, and the defendants removed to federal court on the basis of diversity of citizenship. Thus, this court applies the substantive law of Ohio and federal procedural law. Biegas v. Quickway Carriers, Inc., 573 F.3d 365, 374 (6th Cir. 2009) ("Under the Erie doctrine, federal courts sitting in diversity apply the substantive law of the forum state and federal procedural law.") (citing Erie R. Co. v. Tompkins, 304 U.S. 64 (1938)). In applying Ohio law, this court "must follow the decisions of the state's highest court when that court has addressed the relevant issue." Savedoff v. Access Group, Inc., 524 F.3d 754, 762 (6th Cir. 2008) (quoting Talley v. State Farm Fire & Cas. Co., 223 F.3d 323, 326 (6th Cir. 2000)). Thus, this court must...

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