Bennett International Group, LLC v. Allied World Specialty Insurance Company

Filing 17

OPINION & ORDER: The Court DENIES Plaintiff's Motion for Leave to File Surreply. (Dkt. 11 .) The Court DENIES Defendant's Motion to Dismiss. (Dkt. 3 .) Signed by Judge Michael L. Brown on 1/10/2022. (tmf)

Case 1:21-cv-02190-MLB Document 17 Filed 01/10/22 Page 1 of 20

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF GEORGIA
ATLANTA DIVISION
Bennett International Group, LLC,
Plaintiff,
Case No. 1:21-cv-2190-MLB

v.
Allied World Specialty Insurance
Company,
Defendant.
________________________________/

OPINION & ORDER
Plaintiff Bennett International Group, LLC sued Defendant Allied
World Specialty Insurance Company claiming breach of contract and bad
faith under O.C.G.A. § 33-4-6. (Dkt. 1-1.) Defendant moves to dismiss.
(Dkt. 3.) Plaintiff moves to file a surreply. (Dkt. 11.) The Court denies
both motions.
I.

Background
In February 2020, Plaintiff was storing 25 travel trailers for a

customer at its facility in Pendleton, Oregon. (Dkt. 1-1 at ¶¶ 13-14.) On
February 7, 2020, a nearby river flooded Plaintiff’s property and damaged

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the trailers. (Id.) Plaintiff had the trailers inspected and determined
they were a total loss with a value of $481,387.00. (Id. at ¶¶ 18-19.)
Plaintiff paid its customer for the trailers. (Id.)
At the time of the flood, Plaintiff had an insurance policy with
Defendant. (Dkt. 1-1 at 4.) The Policy provides that “in return for the
payment of the premium, and subject to all the terms of this policy,
[Defendant] agree[s] with [Plaintiff] to provide the insurance as stated in
this policy.” (Id. at 12.) Plaintiff filed a claim with Defendant under to
Policy for the money it paid its customer. Defendant denied the claim.
(Id.)

Plaintiff asked for reconsideration on several occasions, which

Defendant refused. (Id.) Plaintiff’s counsel sent Defendant a demand
letter. (Id. at 9.) Defendant’s counsel responded and, again, denied the
claim. (Id.) On April 15, 2021, Plaintiff filed suit alleging (1) breach of
contract and (2) bad faith and attorneys’ fees under O.C.G.A. § 33-4-6.
(Id. at 7–11.)
Defendant moves to dismiss pursuant to Rule 12(b)(6). (Dkt. 3.)
Plaintiff moves for leave to file a surreply to address issues Defendant
allegedly raised for the first time in its reply brief. (Dkt. 11.)

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II.

Motion to File Surreply
A.

Legal Standard

“Although the Court may in its discretion permit the filing of a
surreply, this discretion should be exercised in favor of allowing a
surreply only where a valid reason for such additional briefing exists,
such as where the movant raises new arguments in its reply brief.”
Fedrick v. Mercedes-Benz USA, LLC, 366 F. Supp. 2d 1190, 1197 (N.D.
Ga. 2005) (citation omitted).

Where a reply merely responds to

arguments in the other party’s response brief and “does not advance new
arguments,” or where the motion for surreply “does not specially identify
[the other party’s] new arguments,” the Court will likely deny the motion
for surreply. Henley v. Turner Broad. Sys., Inc., 267 F. Supp. 3d 1341,
1349 (N.D. Ga. 2017).
B.

Discussion

Plaintiff contends a surreply is warranted to respond to Defendant’s
arguments about the existence of flood coverage and the application of
the Policy’s flood exclusion which Plaintiff argues were presented for the
first time in Defendant’s reply. (Dkt. 11 at 1.) But the Court finds
Defendant did not raise new arguments. Rather, Defendant directly

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responded to the flood coverage argument Plaintiff raised in its
opposition brief. (See Dkt. 5 at 11 (“It is clear, then, that [the Policy]
contains flood coverage.”).) See Roelle v. Cobb Cnty. Sch. Dist., 1:13-CV3045, 2014 WL 4457235, at *9 (N.D. Ga. Sept. 10, 2014) (“If the new
arguments raised in a reply brief directly address arguments raised in
the non-movant’s response, no surreply is warranted.”) The Court thus
denies Plaintiff’s motion for leave to file surreply.
III. Motion to Dismiss
A.

Legal Standard

A court may dismiss a pleading for “failure to state a claim upon
which relief can be granted.” Fed. R. Civ. P. 12(b)(6). “At the motion to
dismiss stage, all well-pleaded facts are accepted as true, and the
reasonable inferences therefrom are construed in the light most favorable
to the plaintiff.” Bryant v. Avado Brands, Inc., 187 F.3d 1271, 1273 n.1
(11th Cir. 1999) (citing Hawthorne v. Mac Adjustment, Inc., 140 F.3d
1367, 1370 (11th Cir. 1998)). Even so, a complaint offering mere “labels
and conclusions” or “a formulaic recitation of the elements of a cause of
action” is insufficient. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)).

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“To survive a motion to dismiss, a complaint must contain sufficient
factual matter, accepted as true, to ‘state a claim to relief that is plausible
on its face.’” Id. (quoting Twombly, 550 U.S. at 570). Put another way, a
plaintiff must plead “factual content that allows the court to draw the
reasonable inference that the defendant is liable for the misconduct
alleged.”

Id. (citing Twombly, 550 U.S. at 556).

This so-called

“plausibility standard” is not a probability requirement. Id. Even if a
plaintiff will probably not recover, a complaint may still survive a motion
to dismiss for failure to state a claim, and a court reviewing such a motion
should bear in mind that it is testing the sufficiency of the complaint, not
the merits of the case. Twombly, 550 U.S. at 556.
A “district court generally must convert a motion to dismiss into a
motion for summary judgment if it considers materials outside the
complaint.” Day v. Taylor, 400 F.3d 1272, 1275–76 (11th Cir. 2004); see
also Fed. R. Civ. P. 12(d). “But a court may consider exhibits attached to
the complaint. And the exhibits a plaintiff attaches to its complaint
governs when they contradict the allegations of the complaint.” Pepper
v. Prime Rate Premium Fin. Co., No. 1:17-cv-03871, 2019 WL 6272874,
at *3 (N.D. Ga. Nov. 25, 2019) (internal citation omitted). A district court

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can also consider “documents referenced in the complaint, even if they
are not physically attached, if the documents are central to the complaint
and no party questions their authenticity.” Id. A document is central if
it is a “necessary part of [the plaintiff’s] effort to make out a claim.” Day,
400 F.3d at 1276; see also Bryant v. Citigroup Inc., 512 F. App’x 994, 995
(11th Cir. 2013) (“Although ordinarily nothing beyond the face of the
complaint and the attached documents are considered in analyzing a
motion to dismiss, [courts] make an exception where the plaintiff refers
to a document in his complaint, it is central to his claim, the contents are
not disputed, and the defendant attaches it to his motion to dismiss.”)
B.

Documents and Judicial Notice

Defendant asks the Court to consider a property loss notice (Dkt. 31), May 21, 2020 Disclaimer Letter (Dkt. 3-2), February 24, 2020
Appraisal Report (Dkt. 3-3), Appraisal Photos (Dkt. 3-4), Plaintiff’s
Picture of Travel Trailers (Dkt. 3-5), and the National Oceanic and
Atmospheric Administration (“NOAA”) Website, Storm Information for
Pendleton, Oregon (Dkt. 3 at 3). (Id. at 2–5.) As noted above, a court
may consider a document attached to a motion to dismiss if it is (1)
referred to in the complaint and (2) central to the plaintiff’s claim.

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Bryant, 512 F. App’x at 995. “A document is central to the plaintiff’s case
if the plaintiff would have to offer the document to prove his case.” Black
v. Bank of Am., N.A., No. 1:15-cv-2339, 2016 WL 11569315, at *7 (N.D.
Ga. July 13, 2016).
Plaintiff argues the loss notice, appraisal report, appraisal
photographs, and Plaintiff’s picture of travel trailers are either not
referred to in the complaint or not central to Plaintiff’s claims. (Dkt. 5 at
3–6.)

While Defendant disagrees with Plaintiff’s opposition to

consideration of the loss notice, appraisal report, and appraisal
photographs, Defendant “respectfully states that the Court need not
consider those documents because Plaintiff does not contest that melting
rain and snow caused the Umatilla River to flood which led to the loss of
the RVs, the reason [Defendant] cited the documents in the first place.”
(Dkt. 10 at 13–14.)

As to Plaintiff’s picture of the travel trailers,

Defendant also states, “because Plaintiff concedes that snow and rain
cause the Umatilla River to flood which led to the loss of the RVs, the
Court need not consider [the picture] to find that the loss is excluded.”
(Id. at 13 n.3.) The Court thus will not consider any of these documents.

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As to the NOAA website, the Court may take judicial notice of the
contents of federal agency websites because the “accuracy cannot
reasonably be questioned.” Fed. R. Evid. 201; see also Stafford v. Grifols
Int’l S.A., No. 1:18-CV-321, 2019 WL 3521957, at *2 n.4 (N.D. Ga. Feb.
25, 2019) (taking judicial notice of U.S. Department of State website);
Gardner v. Starkist Co., 418 F. Supp. 3d 443, 452 n.2 (N.D. Cal. 2019)
(taking judicial notice of two NOAA webpages). The Court will thus take
judicial notice of the webpage.
C.

Breach of Contract

Plaintiff sued Defendant for breach of contract. (Dkt. 1-1 at 7–8.)
To state such a claim, a plaintiff in Georgia must allege three elements:
(1) the parties had a contract, (2) which the defendant breached, and (3)
the plaintiff suffered damages. Law Officers of Robert R. Pagniello, P.C.
v. Amguard Ins. Co., No. 1:20-CV-2714, 2020 WL 8182214, at *2 (N.D.
Ga. Sept. 18, 2020) (internal quotation marks omitted). Defendant moves
to dismiss claiming the Policy does not cover the flood damage to the
travel trailers. Defendant advances three arguments in support of its
motion to dismiss.

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Defendant contends the Policy specifically excludes coverage for
flood damage. (Dkt. 10 at 4–5.) In making this argument, Defendant
cites a provision stating the Policy does “not pay for loss caused by flood.”
(Dkt. 10 at 7 (citing Dkt 1-1 at 70).) That provision appears in the portion
of the Policy entitled “Commercial Output Program Property Coverage
Part.” (Dkt. 1-1 at 52.) It starts with a section entitled “Agreement” that
states “in return for [Plaintiff’s] payment of the premium, [Defendant]
will provide the coverage described” in the Commercial Output Program.
(Id.) That would seem to favor Defendant, since the Commercial Output
Program excludes coverage for flood damages. But, immediately after
the above-quoted language the Commercial Output Program states
“[t]his coverage is also subject to the ‘schedule of coverages.’” (Id.) The
schedule of coverages includes a detailed list of the items covered under
the policy, the extent of coverages, and many other particulars. It has a
section entitled “Flood Coverage” with boxes labeled “Not Covered,”
“Scheduled Flood Coverage,” and “Blanket Flood Coverage.” (Id. at 5,
35.) The box for “Scheduled Flood Coverage” was selected. (Id. at 35.) It
also states that the “catastrophe limit” for flood coverage is $1,000,000
and that the flood deductible can be found in the deductible endorsement.

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(Id.) The schedule of coverages thus unequivocally provides $1 million in
flood coverage.
Under Georgia law insurance policies must be read in pari materia.
Martin v. Massachusetts Mut. Life Ins. Co., 686 F. App’x 639, 643 (11th
Cir. 2017). This means
the insurance policy is construed according to the entirety of
its terms and conditions as set forth in the policy and as
amplified, extended, or modified by any rider, endorsement or
application made a part of the policy. When the language in
an endorsement or rider conflicts with the policy, the rider
controls.
Id. (internal citations and quotation marks omitted); see also B. L. Ivey
Const. Co. v. Pilot Fire & Cas. Co., 295 F. Supp. 840, 848 (N.D. Ga. 1968)
(“[I]t is a general principle of wide application in Georgia that when an
endorsement or rider and a policy conflict, the former controls the latter,
since it is a later expression of intent.”).
While the Policy excludes flood coverage in the Commercial Output
Program provision, the Policy also includes the schedule of coverages that
contains an endorsement adding flood coverage.

That endorsement

supersedes the language of the flood exclusion. It does so, not only by
operation of Georgia law, but also pursuant to the plain language of the

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Coverage Output Program, which states it is subject to the schedule of
coverages. The Court rejects Defendant’s first argument.
Defendant next refers to a subsection of the Commercial Output
Program entitled “Additional Property Not Covered or Subject to
Limitations,” specifically a provision stating:
Personal Property in the Open – “We” do not cover loss to
personal property in the open caused by rain, snow, ice, or
sleet.
This exclusion does not apply to “mobile equipment” or to
property in the custody of carriers for hire.
(Id. at 74.) Defendant says this provision precludes the loss at issue here
since the trailers were in the open and were damaged by excessive rain
and snow melt. (Dkt. 3 at 9.) Plaintiff disagrees and points to another
provision in the Commercial Output Program that defines “Flood” to
mean “flood, surface water, waves, tidal water, or the overflow of a body
of water, all whether driven by wind or not.” (Dkt. 1-1 at 54.)
Under Georgia law, insurance contracts “are interpreted by
ordinary rules of contract construction.”

Boardman Petrol., Inc. v.

Federated Mut. Ins. Co., 498 S.E.2d 492, 494 (Ga. 1998).

The

“[c]onstruction and interpretation of an insurance contract are matters
of law for the court.” Landmark Am. Ins. Co. v. Khan, 705 S.E.2d 707,
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710 (Ga. Ct. App. 2011). “The cardinal rule of contractual construction is
to ascertain the intent of the parties.” Knott v. Knott, 589 S.E.2d 99, 101
(Ga. 2003) (citing O.C.G.A. § 13-2-3). Contract interpretation requires
three steps:
First, the trial court must decide whether the language is
clear and unambiguous. If it is, the court simply enforces the
contract according to its clear terms; the contract alone is
looked to for its meaning. Next, if the contract is ambiguous
in some respect, the court must apply the rules of contract
construction to resolve the ambiguity. Finally, if the
ambiguity remains after applying the rules of construction,
the issue of what the ambiguous language means and what
the parties intended must be resolved by a jury.
City of Baldwin v. Woodard & Curran, Inc., 743 S.E.2d 381, 389 (Ga.
2013).
With respect to the first step, “[t]he court [initially] looks to the four
corners of the agreement to ascertain the meaning of the contract from
the language employed.” Brogdon v. Pro Futures Bridge Cap. Fund, L.P.,
580 S.E.2d 303, 306 (Ga. Ct. App. 2003). In that analysis, “[w]ords
generally [are ascribed] their usual and common signification.” O.C.G.A.
§ 13-2-2(2). An insurance contract is considered ambiguous “only if its
terms are subject to more than one reasonable interpretation.” State
Farm Mut. Auto. Ins. Co. v. Staton, 685 S.E.2d 263, 265 (Ga. 2009) (“The

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policy should be read as a layman would read it and not as it might be
analyzed by an insurance expert or an attorney.”). Put another way,
“[w]here the terms are clear and unambiguous, and capable of only one
reasonable interpretation, the court is to look to the contract alone to
ascertain the parties’ intent.” Boardman, 498 S.E.2d at 494. Although
the insurance contract should “be read in accordance with the reasonable
expectations of the insured where possible,” id., the Court has no more
right to afford the contract a “strained construction to make the policy
more beneficial by extending the coverage contracted for than [it] would
have had to increase the amount of the insurance.” Ga. Farm Bureau
Mut. Ins. Co. v. Smith, 784 S.E.2d 422, 426 (Ga. 2016); see also Henry’s
La. Grill, Inc. v. Allied Ins. Co. of Am., No. 1:20-cv-2939, 495 F. Supp. 3d
1289, 1293 (N.D. Ga. Oct. 6, 2020) (“Georgia courts will not strain to
extend coverage where none was contracted or intended.” (internal
quotation marks omitted)); Staton, 685 S.E.2d at 265–66 (“[T]his court
may not strain the construction of the policy so as to discover an
ambiguity. . . . [T]he rule of liberal construction of an insurance policy
cannot be used to create an ambiguity where none, in fact, exists.”).

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Even if a court finds the contract ambiguous, a jury question does
not automatically arise. See Envision Printing, LLC v. Evans, 786 S.E.2d
250, 252 (Ga. Ct. App. 2016). Instead, the court must first apply the rules
of construction to resolve the ambiguity. Id. To that end, “[e]nforcement
of the parties’ intent is superior to the other rules of construction.” St.
Charles Foods, Inc. v. America’s Favorite Chicken Co., 198 F.3d 815, 820
(11th Cir. 1999).

Courts also analyze the contract as a whole and

interpret it to give the greatest effect possible to all provisions and avoid
rendering any provisions meaningless. See Young v. Stump, 669 S.E.2d
148, 150 (Ga. Ct. App. 2008). Any “ambiguities in the contract are strictly
construed against the insurer as drafter of the document.” Boardman,
498 S.E.2d at 494.
As explained, Plaintiff says the trailers were damaged when the
Umatilla River overflowed its banks, a covered loss under the definition
of “Flood.” Defendant acknowledges the damage to the travel trailers
was caused by the Umatilla River “overflow[ing] its riverbanks.” (Dkt. 3
at 12.) Defendant, however, contends that the river did this because of
rain and snow, thus precluding coverage under the rain and snow
exclusion.

(Id. at 13.)

Plaintiff contends this interpretation is

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unreasonable given the flood coverage provided by the Policy and the lack
of any reference to flood in the rain and snow exclusion. (Dkt. 5 at 13–
14.) Plaintiff claims the more reasonable interpretation is that the rain
and snow exclusion applies to property left outside and damaged by the
elements, such as falling rain and snow.

(Id. at 14.)

It argues, if

Defendant wished to take flood coverage away by the subject exclusion,
it would have specifically referenced damage caused by floods. (Id.)
The Court concludes the language is unambiguous and provides
coverage for the damage caused by the flooding of the Umatilla River.
The Policy defines “Flood” (a covered loss) to include the “overflow of a
body of water [] whether caused by wind or not.” (Dkt. 1-1 at 54.) The
Umatilla River is a body of water. It overflowed, that is, left its banks
and flooded Plaintiff’s location. By its clear terms, the policy covered
damage caused by the river exceeding its banks and damaging Plaintiff’s
property.

The exclusion Defendant relies upon refers to damage to

property “in the open caused by rain, snow, ice or sleet.” The inclusion of
the words “in the open” was clearly meant to exclude losses due to rain,
snow, ice, or sleet that fell from the sky onto Plaintiff’s personal property,
thereby damaging it. That is its plain meaning. Otherwise, why identify

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the property as that “in the open.”

It was not intended to exclude

damages for rain that fell—not on property left in the open—somewhere
else, flowed across some other land into the river, combined with rain
from all over the place, and caused the river to overflow. Rivers carry
water. Most (or perhaps all) of that water comes from rain and snow. To
say that damage from an overflowing river is excluded if that body of
water contains rain water would completely due away with the flood
coverage. And finally, the definition of “Flood” states that it includes the
overflowing of a body or water “whether driven by wind or not.” That
means whether the overflow is caused by wind or another cause. It does
not exclude overflows caused by rain. The Court concludes the plain
language of the term “Flood” includes the overflowing of a river as a
result of rain.

Defendant’s tortured reading of the rain and snow

exclusion is inconsistent with that provision’s plain meaning.
Even if the Court were to conclude the rain and snow exclusion was
somehow ambiguous and susceptible to either party’s interpretation, that
would not change the result. When an exclusion is susceptible to two
reasonable interpretations and is thus ambiguous, a court applies three
well-known rules:

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any ambiguities in the contract are strictly construed against
the insurer as drafter of the document; any exclusion from
coverage sought to be invoked by the insurer is likewise
strictly construed; and the insurance contract is to be read in
accordance with the reasonable expectations of the insured
where possible.
Am. Strategic Ins. Corp. v. Helm, 759 S.E.2d 563, 567 (Ga. Ct. App. 2014).
Under these rules, the Court alternatively construes the exclusion
against Defendant and not to exclude coverage from flooding caused by
rain.
Finally, Defendant argues that, even if there is flood coverage, the
loss to the RVs was caused by rain and snow, so coverage is excluded
under the efficient proximate cause doctrine.

(Dkt. 10 at 1.)

“The

efficient proximate cause doctrine applies when two or more identifiable
causes contribute to a single property loss-at least one of them covered
under the policy and at least one of them excluded under the policy.”
Burgess v. Allstate Ins. Co., 334 F. Supp. 2d 1351, 1260 (N.D. Ga. 2003).
The doctrine of efficient proximate cause governs situations
where a risk specifically insured against sets other causes in
motion in an unbroken sequence between the insured risk and
the ultimate loss. In such situations, the insured risk is
regarded as the proximate cause of the entire loss, even if the
last step in the chain of causation was an excepted risk. When
an insured can identify an insured peril as the proximate
cause, then there is coverage even if subsequent events are
specifically excluded from coverage.
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Id. (internal citation omitted).

Under an efficient proximate cause

analysis, the question becomes whether a covered event is the efficient
and proximate cause of the plaintiff’s loss even though an excluded event
contributed to the loss as well. See id. at 1361.
As explained above, the Court concludes the excluded event (rain
or snow falling on property left in the open) is not the cause of the loss at
issue.

The proximate cause (indeed sole proximate cause) was the

overflow of the Umatilla River and that was a covered event. This is not
a situation in which two events—one covered and one not covered—
caused the loss.

The efficient proximate cause doctrine is thus

inapplicable. And, as also explained above, to the extent this language is
in any way ambiguous, the Court will strictly construe it against
Defendant. See Young, 669 S.E.2d at 150; Helm, 759 S.E.2d at 567. That
would lead to the same outcome, a determination the rain and snow
provision does not exclude a flood caused by rain and snow falling other
than on personal property left in the open.

So again, the efficient

proximate cause doctrine does not apply.
For all of these reasons, the Court denies Defendant’s motion to
dismiss Plaintiff’s breach of contract claim.
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D.

Bad Faith

Plaintiff also files a claim of bad faith. (Id. at 8–11.) To prevail on
a claim of bad faith under O.C.G.A. § 33-4-6, “the insured must prove: (1)
that the claim is covered under the policy, (2) that a demand for payment
was made against the insurer within 60 days prior to filing suit, and (3)
that the insurer’s failure to pay was motivated by bad faith.” AutoOwners Ins. Co. v. Hale Haven Props., LLC, 815 S.E.2d 574, 585 (Ga. Ct.
App. 2018). Thus, to recover damages, there must be “a loss which is
covered by a policy of insurance.” O.C.G.A. § 33-4-6; see State Farm Fire
& Cas. Co. v. Diner Concepts, Inc., 370 F. App’x 56, 58 (11th Cir. 2010)
(in the absence of coverage, there can be no finding of bad faith); BayRock
Mortg. Corp. v. Chicago Title Ins. Co., 648 S.E.2d 433, 435 (Ga. Ct. App.
2007) (“To prevail on a claim for an insurer’s bad faith under OCGA § 334-6, the insured must prove . . . that the claim is covered under the
policy.” (footnote omitted)).

Defendant argues “[b]ecause there is no

coverage for the RVs, [it] cannot be held liable for bad faith for declining
Plaintiff’s request for benefits.” (Dkt. 3 at 9, 17.) Because the Court finds
there is coverage, the Court denies Defendant’s motion as to Plaintiff’s
bad faith claim.

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IV.

Conclusion
The Court DENIES Plaintiff’s Motion for Leave to File Surreply.

(Dkt. 11.)
The Court DENIES Defendant’s Motion to Dismiss. (Dkt. 3.)
SO ORDERED this 10th day of January, 2022.

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MICH"K E L L. B R O W N

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