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Club Caribe Condominium, Association, Inc. v. Travelers Excess and Surplus Lines Company

February 17, 2012



THIS CAUSE is before the Court upon Defendant's Motion to Dismiss [DE 5], Plaintiff's Response in Opposition [DE 19], and Defendant's Reply [DE 28]. The Court has carefully considered the motion, response and reply, has heard the argument of counsel at today's hearing, and is otherwise fully advised in the premises.


Club Caribe Condominium Association, Inc. ("Plaintiff" or "Club Caribe") filed this action in state court on October 21, 2010, against its property insurer, Travelers Excess and Surplus Lines Company ("Defendant" or "Travelers"), for breach of an insurance contract (Count I), for a declaratory judgment that the insurance contract is valid and enforceable (Count II), and to compel an appraisal on damages (Count III). First Amended Complaint [DE 1-1] (hereinafter, "FAC"). The action was served on Defendant over one year later on November 23, 2011. Travelers timely removed this action to federal court and moved to dismiss the action as time-barred under New Jersey law allowing a two year contractual statute of limitations provision.

Plaintiff, a condominium association in Florida, alleges in its complaint that its predecessor in interest obtained a commercial property insurance policy from Defendant on May 1, 2005. FAC ¶ 9. On or about October 24, 2005, the property suffered "extensive physical damage as a result of Hurricane Wilma," a peril covered under the policy. Id., ¶ 13. Plaintiff alleges that on or about October 27 or 31, 2005, its predecessor provided "proper and timely notice to Defendant of the subject loss and that damage was sustained to the Property as a result of Hurricane Wilma." Id., ¶ 14.*fn1

Plaintiff further alleges that Defendant opened a claim on January 14, 2010 with regard to the subject loss and never inspected the damage before that date. Id., ¶¶ 18-19. Plaintiff alleges that it has provided "copious information and documentation demonstrating proof of the covered loss(es) to Defendant," and has repeatedly requested payment of the insurance proceeds. Id., ¶¶ 42-43. Plaintiff claims Defendant breached the contract by failing or refusing to fully adjust the claim within the time contemplated by the policy, and by denying coverage for the losses. Id., ¶¶ 49-50.

The insurance policy itself is attached to the complaint.*fn2 The policy states that no one may bring a legal action against Travelers unless it is filed "within 2 years after the date on which the direct physical loss or damage occurred." Exhibit F to FAC [DE 1-2 at p. 8]. The policy lists the insured as "Garden Homes Management" with a New Jersey address, an insurance broker with a New Jersey address, and is stamped "This Insurance Is Issued Pursuant to the New Jersey Surplus Lines Law." Id. [DE 1-1 at p. 131-133].*fn3 In addition, the policy contains a "Sole Agent Provision" stating that Garden Homes Management "shall act on behalf of all insureds with respect to the giving and receiving of notice of cancellation or non-renewal, the payment of premiums and the receiving of return premiums, and accepting of any endorsement issued to form a part of this policy." Id. at 158. Perhaps most importantly, the policy not only covered Plaintiff's condominium complex in Florida, but also dozens of other apartment and condominium complexes in New Jersey, Pennsylvania, New York, Connecticut, Maryland, California and Florida. Id. [DE 1-2 at pp. 57-78].


Defendant has moved to dismiss for failure to state a claim because this action is time barred under New Jersey law. Plaintiff opposes the motion, asserting that Florida law must apply, and Florida's five year statute of limitations for breach of insurance contract actions controls this case.*fn4 On the choice of law issue, Defendant urges the Court to apply the regular lex loci contractus test, while Plaintiff seeks the Court to use the significant relationships test.

A. Motion to Dismiss Standard

Pursuant to the United States Supreme Court decision in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), to survive a motion to dismiss, a complaint must contain factual allegations which are "enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact)." 550 U.S. at 555. "While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the 'grounds' of his 'entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Id. Taking the facts as true, a court may grant a motion to dismiss when, "on the basis of a dispositive issue of law, no construction of the factual allegations will support the cause of action." Marshall Cty. Bd. of Educ. v. Marshall Cty. Gas Dist., 992 F.2d 1171, 1174 (11th Cir. 1993). In Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949-50 (2009), the Supreme Court further stated that a court need not accept legal conclusions as true, but only well-pleaded factual allegations are entitled to an assumption of truth.

B. Choice of Law -- Lex Loci Contractus

"In determining which law applies, a federal district court sitting in diversity must apply the choice of law rules of the forum state." Trumpet Vine Investments, N.V. v. Union Capital Partners I, Inc., 92 F.3d 1110, 1115 (11th Cir. 1996); Klaxon Co. v. Stentor Electrical Manufacturing Co., 313 U.S. 487, 496 (1941). Florida generally applies the rule of lex loci contractus in determining what law applies in contract claims. State Farm Mutual Automobile Ins. Co. v. Roach, 945 So.2d 1160, 1163 (Fla. 2006). Defendant urges the Court to follow the traditional rule and apply New Jersey law, while Plaintiff contends that Florida law has been migrating to the use of the significant relationship test and limiting the rule of lex loci contractus to insurance contracts involving mobile risks.

In Roach, the Florida Supreme Court stated that it considered and rejected the significant relationships test for contracts in Sturiano v. Brooks, 523 So.2d 1126, 1128-29 (Fla. 1988). Roach, 945 So. 2d at 1163. Rather, the court reaffirmed that lex loci contractus controls. As applied to insurance contracts, "the law of the jurisdiction where the contract was executed governs the rights and liabilities of the parties in determining an issue of insurance coverage." Id. The court concluded that to "abandon this principle and permit a party to change or modify contract terms by moving to another state would unnecessarily disrupt the stability of contract." Id. at 1164. The court went on to discuss a narrow public policy exception to the rule containing three requirements:

1) a Florida citizen in need of protection; 2) to enforce some paramount rule of public policy; and 3) the insurer must be on reasonable notice that the ...

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