The insurer moved to dismiss, contending that the policy's suit limitations clause shortened Bedrock's period to file a lawsuit to two years and that it had not sued Lexington within two years. It argued that if Superstorm Sandy was used as the date of loss, then Bedrock's contractual two year limitations period ran in October 2014, and that if the date of Lexington's denial was used, then Bedrock's contractual two year limitations period ran in September 2015.

For its part, Bedrock argued that it never had received notice of the shortened limitations period, that Lexington's argument was “repugnant against Delaware public policy,” and that it had filed its action within Delaware's three year statute of limitations for breach of contract actions.

The Lexington Policy

The Lexington policy provided:

This Policy is extended to cover the actual loss by the Insured during the period of Interruption directly resulting from a Covered Cause of Loss to insured Property…. In determining the amount payable under this coverage, the Period of Interruption shall be:  1.  The period from the time of direct physical loss or damage insured against by this Policy to the time when, with the exercise of due diligence and dispatch, either:  a.  normal operations resume, or b.  physically damaged buildings and equipment could be repaired or replaced and made ready for operations under the same or equivalent physical and operating conditions that existed prior to such loss or damage, whichever is less.  Such period of time shall not be cut short by the expiration or earlier termination date of the Policy.

The policy's suit limitations clause was entitled:

SUIT AGAINST COMPANY

and it provided:

No suit, action or proceeding for the recovery of any claim under this Policy shall be sustainable in any court of law or equity unless the Insured shall have fully complied with all the requirements of this Policy, nor unless the same be commenced within twenty four (24) months next after the date of the loss, provided however, that if under the laws of the jurisdiction in which the property is located such time limitation is invalid, then any such claims shall be void unless such action, suit or proceedings is commenced within the shortest limit of time permitted by the laws of such jurisdiction. 

Delaware law states:

A [casualty] insurer shall be required during the pendency of any claim received pursuant to a casualty insurance policy to give prompt and timely written notice to claimant informing claimant of the applicable statute of limitations regarding actions for his or her damages.

Del. C. § 3914.

It also provides:

During the pendency of any claim received pursuant to a property insurance policy, the insurer shall be required to give prompt and timely written notice to a policyholder making a claim informing the policyholder of the applicable state statute of limitations or any contractual period of limitations regarding the filing of an action for the claimant's damages under the contract.

Del. C. § 4129.

The Court's Decision

The court granted Lexington's motion.

In its decision, the court first ruled that the suit limitations provision in Lexington's policy was “unambiguous” and that it validly shortened the notification period.

Moreover, the court ruled, Lexington did “not have to give Bedrock notice” of the limitations period under Delaware law, ruling that Section 3914 required casualty insurers, not property insurers, to provide notice of the “applicable statute of limitations” to insureds. Here, the court noted, Lexington was depending on the policy's “SUIT AGAINST COMPANY” clause, not a statute of limitations.

The court also found that Section 4129 was inapplicable because Bedrock's covered property was commercial property located in New York and not personal or residential property located in Delaware.

Concluding that the SUIT AGAINST COMPANY clause was not repugnant to Delaware's public policy, the court granted Lexington's motion to dismiss.

The case is Bedrock Leasing Corp. v. Lexington Ins. Co., No. N16C-08-084 EMD CCLD (Del. Super. Ct. April 27, 2017). Attorneys involved include: Edward M. McNally, Esquire, and Jason C. Jowers, Esquire, Morris James LLP, Wilmington, Delaware. Attorneys for Bedrock Leasing Corp., WFNY I, LLC, and Bulgroup Colorado LLC. Carmella P. Keener, Esquire, Rosenthal, Monhait & Goddess, P.A., Wilmington, Delaware, Wayne R. Glaubinger, Esquire, and William D. Wilson, Esquire, Mound Cotton Wollan & Greengrass LLP, New York, New York. Attorneys for Lexington Insurance Company.