Judge Davis Grants Defendant’s Motion to Dismiss by Applying a Contractually Shortened Limitations Period

July 13, 2017

Publication

In Bedrock Leasing Corp. v. Lexington Ins. Co., C.A. No. N16C-08-084-EMD-CCLD, Judge Davis granted defendant Lexington Insurance Company’s (“Lexington”) motion to dismiss, and held that the claims asserted by plaintiffs Bedrock Leasing Corporation, WFNY I, LLC, and BulGroup Colorado LLC (collectively, “Bedrock”) were untimely under a suit limitation clause in the parties’ property insurance contract.

Bedrock initiated the lawsuit on August 9, 2016 and claimed that Lexington breached an insurance contract by denying coverage for property damage caused by Superstorm Sandy. Lexington moved to dismiss the claims as untimely because the contract contained a provision requiring that any legal action be commenced within a 24-month period after the date of loss, and Bedrock had failed to file within the contractual window. In response, Bedrock argued that it never received notice of the contractual limitations period, and because Lexington failed to give such notice, Lexington could not invoke the shortened period as a defense to the action. Bedrock argued that the Court should apply Delaware’s statute of limitations as opposed to the contractually shortened limitations period in analyzing Lexington’s motion.

Ultimately, the Court held that the contractual limitations period applied. In so holding, Judge Davis recognized that Delaware courts have previously upheld shortened contractual limitations periods and that Lexington was not required to give Bedrock notice under either 18 Del. C. § 3914 or § 4129 (which require notice of statutes of limitations, not contractual limitations periods).

Analysis: This decision highlights the willingness of Delaware courts to uphold contractually shortened limitations periods. In rendering his decision, Judge Davis relied on other authorities reaching the same conclusion. See Woodward v. Farm Family Cas. Ins. Co., 796 A.2d 638, 641 (Del. 2002) (upholding a shortened, one-year statute of limitations provision). Moreover, contractually shortened limitations periods are frequently found in other types of contracts. For example, in asset purchase or stock purchase agreements, parties will frequently limit the time within which claims can be brought. See GRT, Inc. v. Marathon GTF Technology, Ltd., 2011 WL 2682898 (Del. Ch. July 11, 2011) (“To wit, Delaware courts have interpreted contractual provisions that limit the survival of representations and warranties as evidencing an intent to shorten the period of time in which a claim for breach of those representations and warranties may be brought, i.e., the statute of limitations.”).