Manoula, LLC v. Ohio Sec. Ins. Co.

Decision Date13 January 2022
Docket Number1:21-cv-00718
CourtU.S. District Court — Middle District of North Carolina


Before the court is the motion of Defendant Ohio Security Insurance Company (Ohio Security) to dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). (Doc. 6.) Plaintiff Manoula, LLC d/b/a China Grove Family Restaurant (Manoula) filed a response in opposition (Docs. 10, 11), and Ohio Security replied (Doc 13). For the reasons set forth below, the motion will be granted and the complaint will be dismissed.


The facts, as alleged in the complaint and viewed in the light most favorable to Manoula, show the following:

From January 1, 2017, to January 1, 2018, Manoula was enrolled in a Commercial Lines Policy insurance contract issued and administered by Ohio Security. (Doc. 1-2 ¶ 4.) The policy[1] obliged Ohio Security to “pay for direct physical loss of or damage to Covered Property at the premises . . . caused by or resulting from any Covered Cause of Loss.” (Doc. 1-3 at 146.) “Covered Property” was defined as including “personal property” and “the building or structure described in the Declarations, including: . . . Fixtures, including outdoor fixtures.” (Id.) Under its “Business Income (and Extra Expense) Coverage Form, ” the policy would “pay for the actual loss of Business Income you sustain due to the necessary ‘suspension' of your ‘operations' during the ‘period of restoration.' (Id. at 45.) The policy also covered “necessary expenses you incur during the ‘period of restoration' that you would not have incurred if there had been no direct physical loss or damage to property caused by or resulting from a Covered Cause of Loss, ” including “Extra Expense[s] to [m]inimize the ‘suspension' of business if you cannot continue ‘operations' and “repair or replace property.” (Id. at 45-46.) Finally, the policy prescribed that legal action must be “brought within three years after the date on which the direct physical loss or damage occurred.” (Id. at 165.)

On August 24, 2017, China Grove Family Restaurant sustained damages, including business operations losses, from a water intrusion event. (Doc. 1-2 ¶ 5.) Upon the discovery of the water intrusion, Manoula notified Ohio Security and hired various third-party contractors to determine the source of the water intrusion, stop further damage, and remediate its effects. (Id. ¶ 6.) Actions taken by Manoula included excavating a portion of the parking lot and interior portions of the restaurant to ascertain the source of the water intrusion, reconstructing those affected areas, and taking remedial steps to prevent further damage. (Id.) As a result of the water damage, Manoula suffered damages including business interruption; payroll expenses to retain staff for cleanup, shut down, and reopening; loss of perishable food products; cost of third-party contractors to excavate and reconstruct floors, fixtures, signs, and the parking lot; and other reasonably necessary incidental expenses. (Id. ¶ 7.)

Following these events, Manoula filed a timely claim with Ohio Security under the Commercial Lines Policy. (Id. ¶ 8.) When Manoula reported the claim, Ohio Security's representative advised Plaintiff that the claim was “fully” covered. (Id. ¶ 16.) Ohio Security issued an advance partial payment to Manoula for expenses necessary to remedy the damages resulting from the water intrusion. (Id.) However, Ohio Security later “reversed course and took a position that only a portion of Plaintiff's claim was ‘covered' under the policy” and “denied responsibility for reimbursement of expenses Plaintiff had already incurred to begin the process of remediation.” (Id. ¶ 17.) Ohio Security then “sought to re-classify the advance loss payment . . . to further reduce or offset the additional amounts payable under the . . . policy based upon Defendant's incorrect, but more restrictive position regarding the extent of the loss covered by the policy.” (Id. ¶ 18.) Specifically, Ohio Security's representative “misrepresented the scope of the applicable coverages and improperly applied a loss limitation of $25, 000 broadly to multiple aspects of Plaintiff's claim that had separate coverages and coverage limits under the policy that were not subject to the $25, 000 loss limitation applied” and “classified a portion of the loss as a second loss incident, but still applied the restrictive policy loss limitation of $25, 000.” (Id. ¶ 19.) Finally, Ohio Security allegedly “conducted an improper and inadequate” claim investigation and “ignored the investigative findings of third parties regarding the true cause of the loss” in order to apply the $25, 000 loss limitation. (Id. ¶ 20.) As a result of the claim, Ohio Security made a partial payment to Manoula. (Id. ¶ 8.)

On June 26, 2018, Manoula sent a letter to Ohio Security detailing the additional sums payable under the policy. (Id. ¶ 11.) On June 25, 2021, Manoula filed suit against Ohio Security in the Rowan County Superior Court. (Id. at 1.) Ohio Security timely removed the action to this court (Doc. 1) and subsequently filed a motion to dismiss for failure to state a claim (Doc. 6), alleging that Manoula's breach of contract claim (Count I) is time-barred and the complaint fails to plead particularized facts in support of its Unfair and Deceptive Trade Practices claim (Count II) (Doc. 7). The motion is now fully briefed and ready for resolution.

A. Standard of Review

Federal Rule of Civil Procedure 8(a)(2) provides that a complaint must contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. (8)(a)(2). A motion to dismiss pursuant to Rule 12(b)(6) is meant to “test[] the sufficiency of a complaint” and not to “resolve contests surrounding the facts, the merits of a claim, or the applicability of defenses.” Republican Party of N.C. v. Martin, 980 F.2d 943, 952 (4th Cir. 1992). To survive such a motion, “a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.' Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). In considering a Rule 12(b)(6) motion, a court “must accept as true all of the factual allegations contained in the complaint, ” Erickson v. Pardus, 551 U.S. 89, 94 (2007) (per curiam), and all reasonable inferences must be drawn in the non-moving party's favor, Ibarra v. United States, 120 F.3d 472, 474 (4th Cir. 1997). With this standard in mind, the court turns to the present motion.

B. Breach of Contract

Manoula's first cause of action alleges breach of contract. Ohio Security argues that Manoula's breach of contract claim is time-barred under the three-year suit limitation provision in the policy or, alternatively, under the three-year statute of limitations for insurance policies in North Carolina. (Doc. 7 at 9 & n. 7.) Ohio Security alleges that the limitation period began to run on August 24, 2017, when Manoula sustained loss or damage stemming from a water intrusion event. (Id. at 9.) Under Ohio Security's reasoning, Manoula's claim had to be filed by August 24, 2020, and, because Manoula did not file suit until June 25, 2021, its claim is untimely. (Id.) In response, Manoula argues that the limitation provision is void under North Carolina General Statute § 58-3-35, which provides “No insurer . . . shall limit the time within any suit or action . . . may be commenced to less than the period prescribed by law.” Manoula argues its claim is timely because the three-year statute of limitations under North Carolina law did not begin to run until June 26, 2018, when Manoula's representative sent a letter demanding additional payment for losses sustained while repairing the premises and reopening its business, and any provision lessening the time Manoula had a right to bring a suit would be void pursuant to § 58- 3-35. (Doc. 11 at 5-6.)

A motion to dismiss under Rule 12(b)(6) “generally cannot reach the merits of an affirmative defense, such as the defense that the plaintiff's claim is time-barred.” Goodman v. Praxair, Inc., 494 F.3d 458, 464 (4th Cir. 2007) (en banc). But a district court may reach the merits of an affirmative defense “if all facts necessary to the affirmative defense clearly appear on the face of the complaint, ” Id. (emphasis and alteration omitted), including where “a complaint show[s] that the statute of limitations has run on the claim, ” see Brooks v. City of Winston-Salem, N.C. , 85 F.3d 178, 181 (4th Cir. 1996) (quotation omitted).

Generally a three-year statute of limitations governs breach of contract claims under North Carolina law. N.C. Gen. Stat. § 1- 52(1); Penley v. Penley, 332 S.E.2d 51, 62 (N.C. 1985). The limitations period for civil actions starts running when the plaintiff's cause of action accrues. N.C. Gen. Stat. § 1-15; McCutchen v. McCutchen, 624 S.E.2d 620, 623 (N.C. 2006). Accrual is measured “from the time when the first injury was sustained” such that [w]hen the right of the party is once violated, even in ever so small a degree, . . . the cause of action is complete.” Pearce v. N.C. State Highway Patrol Voluntary Pledge Comm., 312 S.E.2d 421, 424 (N.C. 1984); see also Christenbury Eye Ctr., P.A. v. Medflow, Inc., 802 S.E.2d 888, 892 (N.C. 2017) (“It is well settled that where the right of a party is once violated the injury immediately ensues and the cause of action arises.” (citation and quotation marks omitted)). Although “a statute of limitations should not begin running . . . until [the]...

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