The opinion of the court was delivered by: MARK FILIP, District Judge
MEMORANDUM OPINION DENYING DEFENDANT'S MOTION TO DISMISS THE
PLAINTIFF'S THIRD AMENDED COMPLAINT
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
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
3. The loss of use of the aircraft, if any, was
specifically excluded under the terms of the subject
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
(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
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 ...