United States District Court, D. Maryland
L. HOLLANDER UNITED STATES DISTRICT JUDGE.
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. 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
October 11, 2018, Executive Risk moved to dismiss Count II of
the Complaint, pursuant to Fed.R.Civ.P. 12(b)(6). ECF
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
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.
hearing is necessary to resolve the Motion. Local Rule 105.6.
For the reasons that follow, I shall grant the Motion (ECF
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.
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
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.
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.
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.
“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.
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. 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.
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
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 . . . .
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
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.
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.
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.
facts are included, infra.
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 (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.”
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 complaint must contain a
“short and plain statement of the claim showing that
the pleader is entitled to relief.” The purpose of the
rule is to provide the defendants with “fair
notice” of the claims and the “grounds” for
entitlement to relief. Bell Atl. Corp. v. Twombly,
550 U.S. 544, 555-56 (2007).
survive a motion under Rule 12(b)(6), a complaint must
contain facts sufficient to “state a claim to relief
that is plausible on its face.” Twombly, 550
U.S. at 570; see Ashcroft v. Iqbal, 556 U.S. 662,
684 (2009) (“Our decision in Twombly expounded
the pleading standard for ‘all civil actions' . . .
.” (citation omitted)); see also Paradise Wire
& Cable Defined Benefit Pension Fund Plan v. Weil,
918 F.3d 312, 317 (4th Cir. 2019); Willner v. Dimon,
849 F.3d 93, 112 (4th Cir. 2017). But, a plaintiff need not
include “detailed factual allegations” in order
to satisfy Rule 8(a)(2). Twombly, 550 U.S. at 555.
Moreover, federal pleading rules “do not countenance
dismissal of a complaint for imperfect statement of the legal
theory supporting the claim asserted.” Johnson v.
City of Shelby, Miss., 574 U.S. ___, 135 S.Ct. 346, 346
(2014) (per curiam).
mere “‘naked assertions' of wrongdoing”
are generally insufficient to state a claim for relief.
Francis v. Giacomelli, 588 F.3d 186, 193 (4th Cir.
2009) (citation omitted). The rule demands more than bald
accusations or mere speculation. Twombly, 550 U.S.
at 555; see Painter's Mill Grille, LLC v. Brown,
716 F.3d 342, 350 (4th Cir. 2013). If a complaint provides no
more than “labels and conclusions” or “a
formulaic recitation of the elements of a cause of action,
” it is insufficient. Twombly, 550 U.S. at
555. Put another way, “an unadorned,
the-defendant-unlawfully-harmed-me accusation” does not
state a plausible claim for relief. Iqbal, 556 U.S.
at 678. Rather, to satisfy the minimal requirements of Rule
8(a)(2), the complaint must set forth “enough factual
matter (taken as true) to suggest” a cognizable cause
of action, “even if . . . [the] actual proof of those
facts is improbable and . . . recovery is very remote and
unlikely.” Twombly, 550 U.S. at 556 (internal
quotation marks omitted).
reviewing a Rule 12(b)(6) motion, a court “must accept
as true all of the factual allegations contained in the
complaint” and must “draw all reasonable
inferences [from those facts] in favor of the
plaintiff.” E.I. du Pont de Nemours & Co. v.
Kolon Indus., Inc., 637 F.3d 435, 440 (4th Cir. 2011)
(citations omitted); see Reyes v. Waples Mobile Home Park
Ltd. P'ship, 903 F.3d 415, 423 (2018); Semenova
v. Md. Transit Admin., 845 F.3d 564, 567 (4th Cir.
2017); Houck v. Substitute Tr. Servs., Inc., 791
F.3d 473, 484 (4th Cir. 2015); Kendall v. Balcerzak,
650 F.3d 515, 522 (4th Cir. 2011), cert. denied, 565
U.S. 943 (2011). But, a court is not required to accept legal
conclusions drawn from the facts. See Papasan v.
Allain, 478 U.S. 265, 286 (1986). “A court decides
whether [the pleading] standard is met by separating the
legal conclusions from the factual allegations, assuming the
truth of only the factual allegations, and then ...