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Romfo v. Scottsdale Insurance Co.

United States District Court, E.D. North Carolina, Western Division

December 27, 2017

RANDY R. ROMFO, Plaintiff,



         On September 25, 2017, Scottsdale Insurance Company ("Scottsdale" or "defendant") moved to dismiss Randy Romfo's ("Romfo" or "plaintiff') complaint for failure to state a claim upon which relief can be granted [D.E. 9] and filed a memorandum in support [D.E. 10]. Scottsdale contends that the statute of limitations bars Romfo's breach of contract claim and that Romfo lacks standing to seek declaratory relief. On October 10, 2017, Romfo responded in opposition [D.E. 11]. On October 24, 2017, Scottsdale replied [D.E. 12]. As explained below, the court denies Scottsdale's motion to dismiss.


         On January 10, 2007, Romfo sued Stephen J. Witt ("Witt") and C&S Tree Service Inc. ("C&S Tree") in Wayne County Superior Court for negligence. See Compl. [D.E. 1-1] ¶¶ 7-8. Romfo alleged that he sustained severe injuries on January 30, 2004, due to Witt's negligent removal of a tree that occurred on a job site where Romfo was working as an independent contractor. See id. ¶¶ 8-9. On June 24, 2008, in Wayne County Superior Court, Witt and C&S Tree were found liable to Romfo. See Id. ¶ 42. On August 11, 2008, Wayne County Superior Court conducted a hearing on damages, and on August 12, 2008, that court entered judgment against Witt and C&S Tree in the amount of $1.5 million plus costs. See Id. ¶¶ 43-44.

         On June 1, 2017, the Wayne County Clerk of Court issued a writ of execution for the judgment See Id. ¶ 47. On June 30, 2017, the writ of execution was returned unsatisfied. See Id. ¶ 49. Romfo then asked Scottsdale (who insured Witt on January 30, 2004) to pay the judgment and Scottsdale refused. See Id. ¶¶ 49-50. Scottsdale's commercial general liability insurance policy provided coverage in the amount of $500, 000 per occurrence and up to $5, 000 for medical expenses. See id. ¶¶ 15-17.

         Romfo seeks a declaratory judgment that Scottsdale is responsible for paying the judgment. See id ¶ 53. Romfo also asserts a breach of contract claim. See id. ¶¶ 72-76. Both claims arise under North Carolina law. Romfo contends that Scottsdale breached its duties under the insurance policy, which required it to defend and indemnify Witt. See Id. ¶ 73. Romfo states that he is an intended third-party beneficiary of the insurance policy and has suffered damages due to the breach of contract. See id. ¶ 74-75. Romfo requests relief for the entire amount of judgment entered against Witt plus interest and costs. See id. ¶ 76.

         Scottsdale responds that the three-year statute of limitations under North Carolina law bars Romfo's breach of contract claim because the statute of limitations began to run on August 12, 2008, when Romfo obtained the judgment against Witt. See [D.E. 10] 4-5. Scottsdale also contends that Romfo lacks standing to seek declaratory relief because the statute of limitations bars bis third-party beneficiary claim, and he has no direct cause of action under the insurance policy because he was not in privity with Scottsdale. See [D.E. 9] ¶¶ 3-4. Romfo replies that the three-year statute of limitations did not begin to run until the judgment against Witt was returned unsatisfied on June 30, 2017. See [D.E. 1115.


         This court has subject-matter jurisdiction based on diversity. Thus, the court applies state substantive law and federal procedural rules. See Erie R.R. v. Tompkins, 304 U.S. 64, 78-80 (1938); Dixon v. Edwards. 290 F.3d 699, 710 (4th Cir. 2002).

         A motion to dismiss under Rule 12(b)(6) tests the legal and factual sufficiency of the complaint. See Fed.R.Civ.P. 12(b)(6); Ashcroft v. Iqbal. 556 U.S. 662, 678 (2009); Bell Atl. Corp. v. Twombly. 550 U.S. 544, 570 (2007); Coleman v. Md. Court of Appeals. 626 F.3d 187, 190 (4th Cir. 2010), affd, 566 U.S. 30 (2012); Giarratano v. Johnson. 521 F.3d 298, 302 (4th Cir. 2008); accord Erickson v. Parous. 551 U.S. 89, 93-94 (2007) (per curiam). The court "accepts all well-pled facts as true and construes these facts in the light most favorable to the plaintiff in weighing the legal sufficiency of the complaint." Nemet Chevrolet Ltd. v. Inc., 591 F.3d 250, 255 (4th Cir. 2009); see Burbach Broad. Co. of Del, v. Elkins Radio Corp.. 278 F.3d 401, 405-06 (4th Cir. 2002). The court need not, however, accept as true a complaint's "legal conclusions, elements of a cause of action, and bare assertions devoid of further factual enhancement." Nemet Chevrolet Ltd.. 591 F.3d at 255. Moreover, this court can consider documents if they are integral to and explicitly relied on in the complaint, and their authenticity is undisputed. See Occupy Columbia v. Haley. 738 F.3d 107, 117 n.7 (4th Cir. 2013).

         A motion to dismiss under Rule 12(b)(6) "generally cannot reach the merits of an affirmative defense, such as the defense that the plaintiffs claim is time-barred." Goodman v. Praxair. Inc.. 494 F.3d 458, 464 (4th Cir. 2007) (en banc). Nevertheless, a district court may reach the merits of an affirmative defense "if all facts necessary to the affirmative defense clearly appear on the face of the complaint." Id. (emphasis and alteration omitted). "A complaint showing that the statute of limitations has run on the claim is the most common situation in which the affirmative defense appears on the face of the pleading, rendering dismissal appropriate." Brooks v. City of Winston-Salem. N.C. . 85 F.3d 178. 181 (4th Cir. 1996) (quotation omitted). Thus, failure to comply with the statute of limitations is "a recognized basis for dismissal" under Rule 12(b)(6). Evans v. Trinity Indus.. Inc.. 137 F.Supp.3d 877, 881 (E.D. Va. 2015); see Brooks. 85 F.3d at 181; West v. ITT Cont'1 Baking Co., 683 F.2d 845, 846 (4th Cir. 1982).

         Scottsdale's motion to dismiss requires the court to consider the parties' state-law claims and defenses, and the parties agree that North Carolina law applies. Accordingly, this court must predict how the Supreme Court of North Carolina would rule on any disputed state-law issue. See Twin City Fire Ins. Co. v. Ben Arnold-Sunbelt Beverage Co. of S.C.. 433 F.3d 365, 369 (4th Cir. 2005). In doing so, the court must look first to opinions of the Supreme Court of North Carolina. See Stahle v. CTS Corp.. 817 F.3d 96, 100 (4th Cir. 2016). If there are no governing opinions from that court, this court may consider the opinions of North Carolina Court of Appeals, treatises, and "the practices of other states." Twin City Fire Tns. Co., 433 F.3d at 369 (quotation and citation omitted).[1] In doing so, this court "should not create or expand a [s]tate's public policy." Time Warner Enrm't-Advance/Newhouse P'ship v. Carteret-Craven Elec. Membership Corp.. 506 F.3d 304, 314 (4th Cir. 2007) (alteration and quotation omitted); see Wade v. Danek Med.. Inc.. 182 F.3d 281, 286 (4th Cir. 1999). Moreover, in predicting how the highest court of a state would address an issue that it has not yet resolved, this court must "follow the decision of an intermediate state appellate court unless there is persuasive data that the highest court would decide differently." Toloczko, 728 F.3d at 398 (quotation omitted).

         Under North Carolina law* the statute of limitations for breach of contract is three years and begins to run "as soon as the right to institute and maintain a suit arises." Penley v. Penley. 314 N.C. 1, 20, 332 S.E.2d 51, 62 (1985). Thus, the dispute about the statute of limitations turns on when Romfo's right to institute and maintain this action against Scottsdale arose.

         In Taylor v. Green. the plaintiff sued the defendant for negligence arising from an automobile accident. 242 N.C. 156, 157, 87 S.E.2d 11, 12-13 (1955). The plaintiff sought to join the defendant's automobile insurer as a party defendant. See Id. at 157-58, 87 S.E.2d at 13. The Supreme Court of North Carolina rejected the joinder and discussed why an insurer may not be made a party "in an action in tort against its insured." Id. at 15 8, 87 S .E.2d at 13. First, the Supreme Court of North Carolina observed that no privity exists between the insurer and the injured third party. See id. The Supreme Court of North Carolina then held that absent "an enabling statute... or a policy provision having that effect, the [third party] may not proceed against the insurer, at least not until he has secured a judgment against the insured with an execution thereon returned unsatisfied." Id., 87 S.E.2d. at 13; see Small v. Morrison. 185 N.C. 577, 118 S.E. 12, 12 (1923); Selective Ins. Co. v. Mid-Carolina Insulation Co..126 N.C.App. 217, 220, 484 S.E.2d 443, 445 (1997). Thus, this court predicts that the ...

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