NAOMI REICE BUCHWALD UNITED STATES DISTRICT JUDGE
MEMORANDUM AND ORDER
NAOMI REICE BUCHWALD UNITED STATES DISTRICT JUDGE
This is a coverage dispute between Polcom USA, LLC (“Polcom” or “plaintiff”), a creator, manufacturer, shipper, and installer of modular hospitality spaces, and Affiliated FM Insurance Company (“AFM” or “defendant”), its property insurer, arising from a 2018 shipment of modules of pre-manufactured hotel rooms from Chojnice, Poland to Seattle, Washington. According to Polcom, the modules sustained significant damage while at the port of Seattle, and Polcom filed a claim for the damage with AFM. Within one year after AFM denied coverage, Polcom sued AFM. AFM now moves to dismiss the lawsuit, arguing that this action is untimely pursuant to the terms of the insurance policy, and that, even if it is timely, the complaint fails to state a claim for breach of the implied covenant of good faith and fair dealing.
Background
On October 24, 2016, Polcom, a Delaware company with its principal place of business in New York, entered into a Marine Open Cargo Policy (the “Policy”) with AFM, a Rhode Island corporation with its principal place of business in Rhode Island. The Policy, drafted by AFM, provided insurance for overseas shipments. Coverage under the Policy was made on a “warehouse to warehouse” basis, thus attaching to the cargo from the time the insured goods left the point of origin and continuing until the goods reached their final destination. Pertinent to the instant case, the Policy contained a clause that limited the time period to initiate litigation arising from the Policy (the “Timeliness Provision”), which reads:
No suit or action on this Policy shall be sustainable in any court of law or equity . . . unless same shall be commenced within twelve (12) months next after the happening of the loss or from when the goods arrived or should have arrived at their final destination in the ordinary course whichever is sooner ....
The shipment at issue had its origin in a contract Polcom entered into with M.A. Mortenson Company (“Mortenson”) in 2017 to provide 228 modular units (the “Modules”) for the construction of a hotel in Seattle (the “Hotel”). Following construction of the Modules, the Modules were shipped from Chojnice, Poland to Seattle, Washington between June and August 2018.
Upon arrival at the port in Washington (“Port”), between August 11 and 13, 2018, the Modules were unloaded. Following unloading, a labor strike delayed the transport of the Modules from the Port to the Hotel. The Modules were staged outside at the Port without cover for the duration of the strike. After the strike resolved on or about October 1, 2018, transport of the Modules to the Hotel began, and concluded on December 29, 2018.
Between the arrival of the Modules at the Port in August 2018 and the delivery of the final Modules to the Hotel on December 29, 2018, the Port received over seven inches of rain. At the Hotel, the Modules were staged outside until on or about February 19, 2019, when a temporary roof was installed to cover them.
When the first Modules arrived at the Hotel in October 2018, excess moisture was detected inside the Modules. Between October and December 2018, Mortenson hired several moisture remediation specialists and consultants. In January 2019, Polcom notified AFM about the moisture-related issues. AFM sent a marine surveyor to assess the Modules that same month. AFM's surveyor observed the presence of water damage and mold formation and ran various tests to determine the source of the water damage. On February 21, 2019, Mortenson and Polcom, in consultation with their experts, determined that substantial demolition and rebuilding of the Module interiors was necessary for remediation.
Mortenson, Polcom, and the hotel company undertook the remediation throughout 2019 and into 2020. Ultimately, Polcom sustained remediation costs in excess of $17.3 million. Polcom alleges that the loss attributable to the time period that the Modules were held at the Port, i.e., from August 2018 until December 29, 2018, the final date of delivery, exceeds $4 million. Polcom also alleges that the Policy covers any loss attributable to damage that occurred prior to August 2018, when the Modules arrived at the Port.
On November 5, 2019, over nine months after AFM sent a surveyor to assess the Modules, AFM sent Polcom's broker a letter totally denying coverage under the Policy for the losses incurred due to the damage to the Modules (the “November 5, 2019 Letter”).After receipt of the November 5, 2019 Letter, Polcom retained Aeskay Average Adjusters (New York) Ltd. (“AAA”) to challenge AFM's positions on the denial of coverage. AAA did so via letters dated January 27, 2020 and May 26, 2020. On May 1, 2020 and June 10, 2020, however, AFM “cursorily” reiterated its denial of coverage. Complaint, ECF No. 5 (“Compl.”), ¶¶ 40, 42. Between January 27 and May 26, the parties also engaged in email correspondence, during which AFM allegedly ignored the facts raised by AAA on Polcom's behalf. Polcom alleges that AFM's coverage denial was made in bad faith, that AFM relied on erroneous bases for denial, and that AFM failed to investigate the detailed facts and arguments raised by AAA.
Polcom initiated suit on November 3, 2020 - just within one year after AFM denied coverage via the November 5, 2019 Letter. Polcom brings a breach of contract claim and also brings a claim for breach of the implied covenant of good faith and fair dealing, alleging that AFM exhibited bad faith in rejecting any coverage obligation whatsoever. On January 19, 2021, AFM filed a motion to dismiss, seeking to dismiss both counts on the basis that the action was untimely pursuant to the Timeliness Provision and on the further ground that the breach of implied covenant claim is duplicative of the breach of contract claim. Polcom opposed the motion on February 18, 2021, and AFM filed a reply in further support of its motion to dismiss on March 8, 2021.
Discussion
I. Timeliness
The threshold issue on this motion is one of timeliness and specifically the meaning of the Timeliness Provision. There are two issues. First, what is the meaning of “happening of the loss”? Second, to which portion of the Timeliness Provision does the term “whichever is sooner” apply? Plaintiff's complaint was timely only if the Court concludes that (1) the meaning of “happening of the loss” refers to the date on which a legal claim accrued, and (2) the phrase “whichever is sooner” applies only to the second prong of the Timeliness Provision.
At the outset, we note that while under New York law, a six-year statute of limitations typically applies to breach of contract actions, see N.Y. C.P.L.R. § 213, parties to a contract may agree, as here, on a limitation period shorter than that provided by statute. N.Y. C.P.L.R. § 201; see also Burke v. PriceWaterHouseCoopers LLP Long Term Disability Plan, 537 F.Supp.2d 546, 548 (S.D.N.Y. 2008). Dismissal is appropriate where suit is initiated beyond the contractual limitations period. Blake v. Prudential Ins. Co. of Am., No. 14 Civ. 7042, 2016 WL 1301183, at *3 (S.D.N.Y. Mar. 31, 2016).
In this case, the parties dispute whether the Timeliness Provision is ambiguous. “[A] contract is ambiguous if the provisions in controversy are reasonably or fairly susceptible of different interpretations or may have two or more different meanings.” Riverside S. Plan. Corp. v. CRP/Extell Riverside, L.P., 60 A.D.3d 61, 66 (2008), aff'd, 13 N.Y.3d 398, 920 N.E.2d 359 (2009) (citation omitted). “[P]recedent establishes that ambiguities in an insurance policy should be construed in favor of the insured and against the insurer, the drafter of the policy language . . . .” No Hero Enterprises B.V. v. Loretta Howard Gallery Inc., 20 F.Supp.3d 421, 426 (S.D.N.Y. 2014) (citing Matter of Mostow v. State Farm Ins. Cos., 88 N.Y.2d 321, 326 (1996)).
a. “Happening of the Loss”
The main focus on the parties' dispute is the meaning of “happening of the loss.” “[T]he word ‘loss' is ambiguous standing alone, because it can refer either to the damage incurred or to the accrual of the claim.” Franco Apparel Grp., Inc. v. Nat'l Liab. & Fire Ins. Co., No. 10 Civ. 8205, 2011 WL 2565287, at *3 (S.D.N.Y. June 28, 2011), aff'd, 481 Fed.Appx. 694 (2d Cir. 2012) (citing Fabozzi v. Lexingtion Ins. Co., 601 F.3d 88, 90-91 (2d Cir. 2010)). Polcom maintains that “happening of the loss” refers to the date on which AFM denied coverage and a legal claim accrued, i.e., November 5, 2019, whereas AFM argues that “happening of the loss” refers to the date on which the loss occurred, i.e., February 21, 2019, when Polcom, Mortenson, and the experts ascertained how to remediate the damage.
“New York law treats insurance contracts similarly to other contracts, in that a plaintiff's claim accrues ‘in the absence of any provision regarding accrual in the contract of insurance . . . upon breach.'” Cont'l Cas. Co. v. Stronghold Ins. Co., 866 F.Supp. 143, 145 (S.D.N.Y. 1994), aff'd, 77 F.3d 16 (2d Cir. 1996). “Whether a contractual time limitation contained in a property insurance policy begins to run from the occurrence of the specific event insured against or from a later date depends upon the precision of the language used.” 71 N.Y. Jur. 2d Insurance § 2562. As the parties recognize through their references to ample precedent, we are not writing on a blank slate: the meaning of “happening of the loss” is governed by law that pre-dates the execution of the Policy at issue here. We therefore resolve this motion based on that precedent.
Polcom relies primarily on the case Fabozzi v. Lexington Ins. Co., 601 F.3d 88 (2d Cir. 2010) (“Fabozzi”). There, a homeowner's policy required that a plaintiff bring suit within two years “after the date of the loss.” The parties disputed whether this language referred to the date on which the cause of action accrued, i.e., the date on which all conditions precedent to bringing suit had been met following the insurance company's two-year investigation, or the date that the damage occurred. Id. at 89. The Court explained that in New York courts, generic language such as “the date of loss” typically refers to the “date on which the claim accrues, not the date on which damage was incurred.” Id. at 91, 93. By contrast, more specific language, such as “after the inception of the loss, ” has been construed as a term of art referring to the date of “the occurrence of the insured peril.” Id. at 91.
AFM relies predominantly on a case from two years later, Franco Apparel Grp., Inc. v. Nat'l Liab. & Fire Ins. Co., 481 Fed.Appx. 694 (2d Cir. 2012) (“Franco”). There, the parties disputed the meaning of policy language requiring suit “within one year from the date of the happening of the loss out of which the said claim arose.” Id. In a summary order, the Court concluded that the language was sufficiently precise to tie the limitations period to the date of actual damage, i.e., the date on which the goods at issue were stolen. Id. at 1. In so doing, the Court explained that the policy language was “of equal precision” to the language “inception of the loss.” Id.
Fabozzi, Franco, and other relevant precedent compel the conclusion that Polcom's position is correct. As the language “the happening of the loss” does not clearly link the limitations period to the occurrence of the damage itself, “happening of the loss” must be construed to refer to the date on which the claim accrued, i.e., November 5, 2019, the date of the denial letter. See, e.g., Mercedes-Benz Fin. Servs. USA, LLC v. Allstate Ins. Co., 162 A.D.3d 1183, 1184-85 (2018) (finding that generic “date of loss” language “does not evince an unmistakable intention that the one-year limitations period be measured from the occurrence underlying the event, ” and therefore tying the limitations period to the date of denial of coverage); Sassi v. Jersey Trucking Serv., Inc., 283 A.D. 73, 77 (1st Dep't 1953) (finding that period of limitation language “after the happening of the loss” “did not begin to run until the assured was in a position to institute action against the insurance company”).
Franco does not persuade us otherwise. As the District Court's decision makes clear, the term “happening of the loss” was not the pivotal phrase in the case, as the policy's time limitation contained additional, more precise language absent here. There, the District Court observed that the “‘date of the happening of the loss out of which the said claim arose' . . . pegs the ‘loss' at issue to the actual damage[.]” Franco, 2011 WL 2565287, at *3. To adopt the alternate meaning, the District Court explained, “would be to contort the final phrase of the limitations provision, which would effectively read: ‘the date of the happening of the [accrual of the claim] out of which the said claim arose.'” Id. Obviously, such an interpretation would be nonsensical. That conclusion has no bearing on significantly sparser language in the instant case, which is itself defined by precedent, and which does not place “the happening of the loss” within any larger context. See Flat Ridge 2, 2014 WL 3373435, at *6 (distinguishing Franco).
b. “Whichever is Sooner”
The parties also dispute the proper application of “whichever is sooner” in the Timeliness Provision. Given the lack of commas and the repeated use of the conjunction “or, ” we see three possibilities:
Option 1: “[W]hichever is sooner” could apply to each occurrence individually. Thus, a lawsuit must be initiated within twelve months of:
a. The happening of the loss, or
b. When the goods arrived, or
c. When the goods should have arrived, whichever is sooner.
Option 2: “[W]hichever is sooner” could apply to both the first and second prongs of the Timeliness Provision. Thus, a lawsuit must be initiated within twelve months of:
a. The happening of the loss, or
b. When the goods arrived or should have arrived, whichever is sooner.
Option 3: “[W]hichever is sooner” could apply only to the second prong of the Timeliness Provision. Thus, a lawsuit must be initiated within twelve months of:
a. The happening of the loss, or
b. When the goods arrived or should have arrived, whichever is sooner.
Applied to the facts here, as established above, the “happening of the loss” occurred on November 5, 2019; the goods arrived between October and December 29, 2018; and the goods should have arrived in about August 2018. Thus plaintiff's complaint was timely filed only if the Court concludes that Option 3 is correct - in other words, if a lawsuit was considered timely within twelve months of the happening of the loss on November 5, 2019.
As the list of options makes clear, the Timeliness Provision is ambiguous: the phrase “whichever is sooner” could apply to each occurrence in the provision, to both the first and second prong, or only to the second prong. As the Court has resolved that precedent defines “happening of the loss” as the date on which defendant denied coverage, it follows that only Option 3 gives meaning to the clause “after the happening of the loss” in the Timeliness Provision. As a Court must “strive to ‘give meaning to every sentence, clause, and word'” in an insurance contract, Zurich Am. Ins. Co. v. ABM Indus., Inc., 397 F.3d 158, 165 (2d Cir. 2005) (quoting Travelers Cas. & Sur. Co. v. Certain Underwriters at Lloyd's of London, 96 N.Y.2d 583, 594 (2001)), we adopt the reading set forth in Option 3. Any other reading would read “happening of the loss” out of existence.
As we hold that the Timeliness Provision permitted Polcom to initiate its action within one year of the accrual of the claim, we conclude that Polcom's complaint was timely filed - 363 days after AFM denied its insurance claim on November 5, 2019.
II. Breach of Implied Covenant of Good Faith and Fair Dealing
AFM moves to dismiss Polcom's claim for breach of the implied covenant of good faith and fair dealing, arguing that it duplicates Polcom's breach of contract claim. Polcom disputes this, arguing that its breach of contract claim is premised on AFM's failure to cover damage to the Modules despite its agreement, whereas its breach of implied covenant claim alleges that AFM acted in bad faith and seeks consequential damages.
“Implicit in every contract is a promise of good faith and fair dealing.” Skillgames, LLC v. Brody, 1 A.D.3d 247, 252 (2003). “This covenant embraces a pledge that neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract.” Fleisher v. Phoenix Life Ins. Co., 858 F.Supp.2d 290, 298-99 (S.D.N.Y. 2012) (citing Harris v. Provident Life & Accident Ins. Co., 310 F.3d 73, 80 (2d Cir. 2002)) . In order to avoid redundancy, claims of breach of the implied covenant must be premised on a distinct set of facts from those underlying a claim for breach of contract. Deutsche Bank Sec., Inc. v. Rhodes, 578 F.Supp.2d 652, 664 (S.D.N.Y. 2008). Therefore, a claim for breach of the implied covenant “will be dismissed as redundant where the conduct allegedly violating the implied covenant is also the predicate for breach of covenant of an express provision of the underlying contract.” Fleisher, 858 F.Supp.2d at 299 (citation omitted).
We agree with AFM that the breach of implied covenant claim is duplicative of the breach of contract claim. Stripped of its conclusory references to good and bad faith conduct, Polcom's breach of implied covenant claim ultimately alleges that AFM failed to cover Polcom's damages, in violation of their agreement. Further, both the breach of contract claim and the breach of implied covenant claim allege that AFM failed to properly engage in Polcom's claim for coverage. Compare Compl. ¶ 50 (breach of contract claim) (“Defendant made no attempt to respond to the facts Polcom and AAA raised . . . Defendant's denial of the claim was so lacking in support and redolent of bad faith that no reasonable carrier would . . . be expected to assert it and maintain a nopay posture”) with ¶ 56 (breach of implied covenant claim) (“no reasonable insurer would take the posture that [AFM] has taken here of no negotiation, no engagement, and no willingness to pay any amount . . .”). As the conduct at issue here is the predicate for the breach of contract claim, the breach of implied covenant claim must be dismissed. Fleisher, 858 F.Supp.2d at 299 (citation omitted).
Conclusion
For the foregoing reasons, the Court grants in part and denies in part AFM's motion to dismiss. The Court concludes that this suit is not time-barred, however dismisses plaintiff's breach of implied covenant of good faith and fair dealing claim. The Clerk of Court is respectfully directed to terminate docket entry 21.
SO ORDERED.