Polcom USA, LLC v. Affiliated FM Insurance Company

Background

Polcom, a creator, manufacturer, shipper, and installer of modular hospitality spaces, insured overseas shipments under a marine cargo policy issued by Affiliated FM Insurance Company. The dispute concerned modular hotel-room units shipped from Poland to Seattle in 2018. The units were exposed to rain while stored at the Seattle port during a labor strike and later at the hotel site. Moisture and mold were found, and Polcom alleged remediation costs exceeding $17.3 million, including more than $4 million attributable to the period when the units were held at the port.

Polcom notified Affiliated FM of the problems in January 2019. After investigating, Affiliated FM denied coverage in a November 5, 2019 letter. Polcom filed suit on November 3, 2020, asserting breach of contract and breach of the implied covenant of good faith and fair dealing. Affiliated FM moved to dismiss both claims, arguing that the suit violated the policy’s 12-month deadline and that the implied-covenant claim duplicated the contract claim.

Timeliness

The policy required a suit to be brought within 12 months after “the happening of the loss” or when the goods arrived or should have arrived at their destination, “whichever is sooner.” The court considered whether “the happening of the loss” meant the date of physical damage or the date when Polcom’s claim accrued after Affiliated FM denied coverage. It also considered whether “whichever is sooner” applied to every date listed in the provision, to both main alternatives, or only to the arrival dates.

Applying New York law, the court held that “the happening of the loss” referred to the date Polcom’s claim accrued—November 5, 2019, the date of Affiliated FM’s denial letter. The court found the provision ambiguous because its wording did not clearly tie the deadline to the date of physical damage. It further adopted the reading under which “whichever is sooner” applied only to the alternative dates for the goods’ arrival. Under that interpretation, Polcom’s November 3, 2020 complaint was filed 363 days after the claim accrued and was timely.

Implied-Covenant Claim

The implied covenant of good faith and fair dealing is a promise contained in every contract that the parties will not act to undermine the other party’s contractual benefits. The court explained that this claim must be based on facts distinct from those supporting a breach-of-contract claim. Polcom alleged that Affiliated FM improperly denied coverage, failed to address the facts and arguments presented on Polcom’s behalf, and maintained an unreasonable refusal to pay.

The court concluded that these allegations were not distinct from the contract claim. Both claims alleged that Affiliated FM failed to properly handle Polcom’s coverage claim and failed to provide coverage required by the policy. The court therefore dismissed the implied-covenant claim as duplicative.

Disposition

The court granted in part and denied in part Affiliated FM’s motion to dismiss. It concluded that the suit was not time-barred and dismissed Polcom’s breach-of-the-implied-covenant claim. The opinion does not state that the breach-of-contract claim was dismissed; that claim remained after the ruling. The clerk was directed to terminate the motion docket entry.