United States District Court, D. Rhode Island
REPORT AND RECOMMENDATION
LINCOLN D. ALMOND, Magistrate Judge.
Pending before me for a report and recommendation (28 U.S.C. § 636(b)(1)(B)) is Defendant's Motion to Dismiss Plaintiff's Complaint pursuant to Rule 12(b)(6), Fed.R.Civ.P. (Document No. 10). Plaintiff opposes the Motion. (Document No. 14). A hearing was held on September 9, 2015. For the following reasons, I recommend that Defendant's Motion be GRANTED in part and DENIED in part as provided herein.
Plaintiff is the owner of a sixty-nine foot motor yacht known as "Comfortably Numb" (the "Yacht"). It insured the Yacht under a "Helmsman Yacht Policy" issued by Defendant. Plaintiff alleges that "[o]n or about September 12, 2013, the [Yacht] suffered loss and damage which was sudden and accidental while traveling in Vineyard Sound, Massachusetts off the coast of Martha's Vineyard." (Document No. 1, ¶ 8). Plaintiff alleges that the Yacht suffered mechanical damage "caused by striking an unknown submerged object." (Document No. 1-1 at p. 21). Following an inspection of the Yacht, Defendant informed Plaintiff by letter dated October 1, 2013 that it was "unable to provide coverage for your claim as presented" because there was "no evidence that the vessel struck a submerged object causing the transmission failure" and that the failure was caused by a corroded oil line. Id. at p. 23. (emphasis added). Defendant concluded that "it appears you failed to monitor the condition of the starboard oil line and waited too long to take the preventative maintenance step of replacing the line prior to its failure." Id . Defendant relied upon the wear and tear and failure to maintain exclusions set forth in the policy. Id.
A. Contractual Limitations Period
Defendant's primary argument is that this action is barred by the one-year limitation period contained in the policy for physical damage claims. In particular, the policy provides: "With respect to coverage provided under PHYSICAL DAMAGE, no suit or action may be brought against us unless the action is brought within 12 months after the date you first have knowledge of the loss." Defendant argues that it is undisputed that the loss occurred on September 12, 2013, and Plaintiff had knowledge of the loss and made a claim on the policy shortly thereafter. Thus, it argues, any suit or action by Plaintiff for this loss under the policy must have been brought by or before September 12, 2014. Since this suit was not filed until March 18, 2015, Defendant contends that it is time-barred pursuant to the plain terms of the policy.
Under Rhode Island law, "[a] contractual limitation found in an insurance policy which prescribes a shorter time for the bringing of suit than the applicable statute of limitations, has been upheld if the interval between the loss and the mandatory institution of litigation is reasonable." Donahue v. Hartford Fire Ins. Co., 295 A.2d 693, 694 (R.I. 1972) (enforcing one-year contractual limitations period in a homeowner's insurance policy) (citing 18 Couch, Insurance § 75.72 (2d ed. 1968); 20 Appleman, Insurance § 11601 (1963); 6 A.L.R.3d 1197). "The reasonableness of the policy's contractual limitation of action is usually determined by looking at the prescribed time interval to see if it affords the insured an adequate opportunity to investigate his claim so that he can prepare for any controversy which might arise between him and his insurer." Id.
Plaintiff does not, and effectively cannot based on Rhode Island precedent, contest the reasonableness of the one-year limitations period in the policy. Rather, Plaintiff argues that Defendant's conduct demands that it must be "estopped" from asserting the limitations period and that Defendant "waived" the limitations period by its conduct. (Document No. 14-1 at pp. 3-4).
In Nat'l Refrigeration, Inc. v. The Travelers Indemn. Co. of Am., 947 A.2d 906, 911 (R.I. 2008), the Rhode Island Supreme Court recognized that an insurer may, under certain "exceptional circumstances, " be estopped by its conduct from invoking a contractual limitation period to defeat a claim under the policy. It stated as follows:
[I]n exceptional circumstances, settlement negotiations can estop a party from invoking the statute of limitations if accompanied "by certain statements or conduct calculated to lull the claimant into a reasonable belief that his claim will be settled without a suit." McAdam v. Grzelczyk, 911 A.3d 255, 259 (R.I. 2006) (quoting Gagner v. Strekouras, 423 A.2d 1168, 1169 (R.I. 1980)). This Court has emphasized, however, the exceptional nature of this principle. Indeed, "[m]ere negotiations between [an] insurer and a claimant cannot alone justify the application of estoppel." Id . (quoting Greater Providence Tr. Co., 116 R.I. at 272, 355 A.2d at 720). If we were to hold otherwise, "settlement negotiations would be frustrated and impeded." Id.
Estoppel can arise, however, if "(1) the insurer, by his actions or communications, has assured the claimant that a settlement would be reached, thereby inducing a late filing, or (2) the insurer has intentionally continued and prolonged the negotiations in order to cause the claimant to let the limitation pass without commencing suit." McAdam, 911 A.2d at 260 (quoting Gagner, 423 A.2d at 1170).
Id. Furthermore, in the McAdam case, the Rhode Island Supreme Court also explained as follows:
When deciding whether a claimant has been lulled into believing that filing suit is unnecessary, courts must look for any evidence that would support a reasonable belief that the matter would be settled. Gagner, 423 A.2d at 1170. We have emphasized that "[t]here must be a showing of an express representation or other affirmative conduct which amounts to a representation that could reasonably deceive another and induce a reliance that would work to the disadvantage of the individual relying upon the representation." Gross v. Glazier, 495 A.2d 672, 674 (R.I. 1985). An insurer's ...