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June 25, 2004.

G.A.S./Wilson, Limited Partnership, Plaintiff,
Insurance Company of North America, Defendant.

The opinion of the court was delivered by: MARK FILIP, District Judge

Before the Court is Defendant's Rule 12(b)(6) motion to dismiss the Plaintiff's third amended complaint. As explained below, Defendant's motion to dismiss is denied.


  Plaintiff, G.A.S./Wilson, Limited Partnership ("Plaintiff" or "G.A.S."), is an Illinois Limited Partnership. (D.E. 19 ¶ 1.)*fn1 It is comprised of two Illinois corporations (whose principal places of business are both in Illinois) and a California corporation (whose principal place of business is also in California). (Id. ¶¶ 1-4.) Defendant, Insurance Company of North America ("Defendant" or "INA"), is a Pennsylvania corporation with its principal place of business in Pennsylvania. (Id. ¶ 5.)

  G.A.S. leased an aircraft to a Panamanian company ("lessee") on June 24, 1998, and that lease was scheduled to terminate on June 23, 2001. (Id. ¶¶ 6, 7.) As a result of a dispute between the lessee and its creditors, a Panamanian court ordered the attachment of the leased aircraft on January 24, 2001. (Id. ¶¶ 8, 9.) Following expiration of the lease on June 23, 2001, G.A.S. inspected the aircraft and noted that the aircraft did not meet Federal Aviation Administration standards for airworthiness because of allegedly poor maintenance by the lessee. (Id. ¶ 10.) In addition, the aircraft was not returned to G.A.S. when the lease terminated because of the attachment ordered by the Panamanian court. (Id. ¶ 11.)

  On August 9, 2001, G.A.S. made a claim on the lessee's insurance policy as a beneficiary under it; however, the claim was denied for two reasons. (Id. ¶¶ 13, 15.) First, the claim was made outside the lessee's policy period. (Id. ¶ 15.) Second, the lessee's policy excluded indemnification for repairs arising from "wear and tear." (Id.) There is no indication that G.A.S. appealed that denial or has instituted litigation concerning it; at a minimum, that claim denial has not produced litigation in this Court.

  At some point thereafter, G.A.S. made a claim against INA on its insurance policy covering the aircraft (policy number AVF011123). (Id. ¶ 20.) G.A.S. asserts (this is the subject of a dispute between the parties, as discussed later) that it was not entitled to make a claim under the INA policy until benefits were denied under the lessee's policy. (Id. ¶ 17.) G.A.S. further asserts that it fully complied with all the terms of the INA policy. (Id. ¶ 18.) Although G.A.S. does not specifically address this issue in its complaint, one of the terms of the INA contract is the policy condition that the insured may not institute any suit "on this policy or for the recovery of any claim hereunder . . . unless commenced within twelve (12) months after the happening of the loss." (D.E. 19, Ex. A, ¶ 23.) This condition further provides that "where such time limitation [that is, the one-year-after-loss limitation] is prohibited by the law of the state . . . wherein this policy is issued, then and in that event, no suit or action under this policy shall be sustainable unless commenced within the shortest limitation permitted under the laws of such state." (Id.)

  On June 24, 2002, INA denied G.A.S.'s claim for coverage. (D.E. 19 ¶ 21.) Although G.A.S. does not purport to quote the claim denial or attach a copy of the denial among the attachments to its complaint, G.A.S. avers that INA denied the claim for the following reasons:
1. A judicial attachment does not constitute a "seizure" as the term is used in the subject policy.
2. G.A.S. had not met the conditions of the "single interest — physical damage" coverage provided by the subject policy.
3. The loss of use of the aircraft, if any, was specifically excluded under the terms of the subject policy.
4. There was no indication that the damage at issue occurred during the policy period.
5. Any damage other than those alleged as a result of the judicial attachment constituted "wear and tear" and also fell within exclusion "g" of the subject policy.
(Id. ¶ 23.) By the instant lawsuit, G.A.S. seeks a declaration of its rights under its insurance policy with INA, a declaration of bad faith claim practices by INA, compensatory and punitive damages, and attorney fees. (Id. at 6-7.)

  INA has moved to dismiss the case. It contends that G.A.S. suffered its loss when the subject aircraft was seized on January 24, 2001, which thereby caused a loss of the use of the aircraft. (D.E. 9 ¶ 5.) INA contends that as of January 24, 2001, there was potential coverage for the loss occasioned by the Panamanian government's order of attachment and seizure but that coverage was subject to the exclusions, conditions, and other terms of the policy. (Id. ¶¶ 7-9.) Among other arguments, INA asserts that G.A.S. did not comply, as it must, with all of the terms and conditions of the policy. INA argues that G.A.S. did not file a sworn proof of loss as required by the policy, that G.A.S. never gave INA timely notice of the loss as required by the policy, and that G.A.S. did not commence this suit within twelve months of the happening of the loss, as required by the policy. (Id. ¶¶ 10, 11.) More specifically, INA contends that G.A.S. failed to meet the policy's twelve month time limitation clause for filing suit and that this is a contractually required condition precedent to G.A.S.'s ability to sue. (Id. ¶ 12.) In this regard, INA highlights that G.A.S. filed this suit on May 5, 2003, which was two and a half years after the loss date as argued by INA. (Id.) In addition, INA asserts that G.A.S. never filed a proof of loss with INA as required by the policy. (E.g., D.E. 20 at 2-3.) With respect to the notice issue, INA contends that the date of loss was January 24, 2001 and that G.A.S. gave untimely notice a year and a half later, on or about June 24, 2002. (D.E. 9 ¶ 12.) INA also asserts that any failure by the lessee to adequately maintain the aircraft was simple "wear and tear" or "mechanical, structural . . . breakdown or failure" for which coverage does not apply by the terms of the INA policy. (Id. ¶¶ 5, 6.)


  "A motion to dismiss under Rule 12(b)(6) challenges the sufficiency of a complaint for failure to state a claim upon which relief may be granted." Johnson v. Rivera, 272 F.3d 519, 520-21 (7th Cir. 2001). In ruling on the motion, the Court accepts as true all well-pleaded facts alleged in the amended complaint and draws all reasonable inferences from those facts in favor the plaintiff. See, e.g., Jackson v. E.J. Brach Corp., 176 F.3d 971, 977-78 (7th Cir. 1999). However, while the Court must give the pleadings a generous construction, the Court is not required to accept legal conclusions alleged in the pleaded facts. See, e.g., First Ins. Funding Corp. v. Fed. Ins. Co., 284 F.3d 799, 804 (7th Cir. 2002). Dismissal for failure to state a claim is not appropriate unless "`it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.'" Lee v. City of Chicago, 330 F.3d 456, 459 (7th Cir. 2003) (quoting Conley v. Gibson, 355 U.S. 41, 45-46 (1957)).

  The claims in this case are based on a contract of insurance between the parties. Under Illinois law,*fn2 when interpreting an insurance agreement, the Court must give effect to the "true intentions of the contracting parties." First Ins. Funding Corp., 284 F.3d at 804 (citing Fid. & Cas. Co. v. Merridew, 762 N.E.2d 570, 571 (Ill. 2001)). In doing so, a court must consider and construe the agreement as a whole and give effect to the purpose of the entire contract. 284 F.3d at 804 (citing Maremont Corp. v. Cont'l Cas. Co., 760 N.E.2d 550, 554 (Ill. 2001)). The interpretation of an unambiguous contract poses a question of law. 284 F.3d at 804. Undefined and unambiguous terms are assigned their plain and ordinary meaning and ambiguity exists only if the insurance policy is susceptible to reasonable alternative interpretations. Id. at 804-5 (collecting Illinois authorities). Illinois law provides that a contract's meaning must be determined from the language used and a court cannot place a construction on the contract which is contrary to the plain meaning of the language. See, e.g., Johnstowne Ctr. P'ship v. Chin, 458 N.E.2d 480, 481 (Ill. 1983).


  The first issue in dispute between the parties regards when the loss occurred. This is significant to determining coverage because insurance policies only cover a specified period of time and many duties of the insured and insurer are defined by the date the loss occurred. INA contends that loss occurred on January 24, 2001, the date when the subject aircraft was seized by the Panamanian court.*fn3 G.A.S. proposes a loss date much later in time — as it must do, given that it did not file suit until some two and a half years after the plane was seized by the Panamanian court. Although G.A.S.'s theory appears to vacillate somewhat, G.A.S. asserts in its Complaint that "on June 24, 2002, [G.A.S.] suffered a loss pursuant to Policy No. AVF11123 as the Insurance Company of North America denied the claim for coverage," which seems to indicate that the insurable "loss" occurs under the INA policy when INA denies a claim. (D.E. 19 ¶ 21.) Perhaps in recognition of the implausibility of that position (that is, that the loss covered by an insurance policy occurs only when a claim under that policy is denied), G.A.S., in its response to the motion to dismiss, appears alternatively to contend that the loss perhaps occurred a bit earlier, when G.A.S.'s claim against the lessee's insurer was denied. (See D.E. 12 at 4 (G.A.S. asserting that the INA policy's "use of this term [loss] in relation to both the time for filing suit and the requirement for filing a proof of loss does not make it clear that loss means the date on which the physical loss of property occurred, rather than the date on which the primary coverage is denied and Plaintiff actually sustained a loss").)

  The Court will not hold G.A.S. to the position it appears to take in the Complaint and instead will analyze both alternatives that G.A.S. proposes. As explained below, the INA policy might be read to mean that loss did not occur until G.A.S.'s lease for the airplane (and receipt of payments thereunder) ended on June 24, 2001; however, the INA policy cannot be fairly construed to extend the date of insurable loss forward to the time when a claim was denied ...

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