Yit Chee Wah v. Great Am. Ins. Co.

1

YIT CHEE WAH, a/k/a/ Steven Yit, on Behalf of and Solely in His Capacity as the Liquidator of RHODIUM INTERNATIONAL TRADING USA, INC., Plaintiff, v. GREAT AMERICAN INSURANCE COMPANY f/k/a FCIA MANAGEMENT COMPANY, INC., Defendant.

Civil Action No. 1:23-cv-00918-SDG

United States District Court, N.D. Georgia, Atlanta Division

March 28, 2024

OPINION AND ORDER

Steven D. Grimberg, United States District Court Judge

This matter is before the Court on Defendant Great American Insurance Company's motion to dismiss [ECF 14]. For the following reasons, Great American's motion is DENIED.

I. BACKGROUND

This is a dispute over insurance coverage. Rhodium International Trading USA, Inc. (represented in this litigation by its liquidator, Yit Chee Wah^[1]) is an international trader of commodities like sugar, copper, and coal.^[2] Rhodium buys these commodities and resells them for profit,^[3] sometimes on credit with payment scheduled for weeks or even months after delivery.^[4] Because Rhodium stands to lose millions if a credit buyer becomes insolvent before payment,^[5] it protects itself through trade credit risk insurance.^[6]

At issue in this case is a trade credit risk insurance policy (the Policy) that Rhodium bought from Great American.^[7] The Policy was in effect for one year from August 1, 2019, to August 1, 2020; it provided “comprehensive” trade credit risk insurance for “[agricultural commodities, ferrous and non-ferrous metals, and coal;” and it had a credit limit of $27.9 million (plus interest).^[8] Rhodium submitted eight claims^[9] under the Policy for losses totaling over $20 million.^[10] Great American denied the claims,^[11] and this suit followed. Great American now moves to dismiss under Fed.R.Civ.P. 12(b)(6).^[12]

II. LEGAL STANDARD

To survive a motion to dismiss under Rule 12(b)(6), a complaint must allege facts that, when taken to be true, plausibly entitle the plaintiff to relief. Ingram v. Kubik, 30 F.4th 1241, 1255 (11th Cir. 2022). The Eleventh Circuit uses a two-step process to evaluate complaints under Rule 12(b)(6). First, courts must identify purported factual allegations that merely assert legal conclusions, and disregard them. McCullough v. Finley, 907 F.3d 1324, 1333 (11th Cir. 2018). Second, courts must assume the truth of all non-conclusory allegations and determine whether they can support a reasonable inference of the defendant's liability. Id. at 1335. The plaintiff's non-conclusory allegations must be construed “in the light most favorable to the plaintiff.” Henley v. Payne, 945 F.3d 1320, 1326 (11th Cir. 2019). Where, as here, the complaint is accompanied by exhibits, the exhibits are considered part of the complaint for purposes of the Rule 12(b)(6) motion. Griffin Indus., Inc. v. Irvin, 496 F.3d 1189, 1205 (11th Cir. 2007) (citing Fed.R.Civ.P. 10(c)).

III. ANALYSIS

Yit's complaint contains two counts under Georgia law.^[13] Count One alleges that Great American's denial of Rhodium's claims under the Policy was a breach of contract.^[14] Count Two alleges that Great American breached the Policy in bad faith in violation of O.C.G.A. § 33-4-6.^[15] The Court concludes that both counts survive Great American's motion to dismiss.

A. Count One: Breach of Contract

To prove breach of contract under Georgia law, a plaintiff must establish three elements: 1) the contract was breached; 2) the plaintiff suffered damages from the breach; and 3) the plaintiff has the right to sue for the breach. CoreVest Am. Fin. Lender LLC v. Stewart Title Guar. Co., 358 Ga.App. 596, 599 (2021). Here, the complaint alleges that Great American is liable for breach of contract because 1) it wrongfully denied coverage on eight claims under the Policy;^[16] 2) Rhodium suffered over $20 million in damages from Great American's denial;^[17] and 3) Rhodium, as the Policy's holder, has the right to sue for the wrongful denial of coverage.^[18] In moving to dismiss, Great American asserts two fatal deficiencies in the complaint: first, that none of the eight transactions for which Rhodium submitted claims were covered by the Policy;^[19] and second, that Rhodium assigned its benefits under the Policy to non-party White Oak Trade Finance, LLC, meaning Rhodium lacks the right to sue for breach.^[20] Great American's assertions are addressed in turn.

1. The Policy's Unambiguous Language Does Not Preclude Great American's Liability for Breach of Contract.

Great American asserts that it is not liable for breach of contract because Rhodium's allegations, even assumed to be true, do not establish that Rhodium submitted claims triggering Policy coverage. To determine whether Rhodium's claims could have triggered coverage, the Court must interpret the Policy's relevant terms in accordance with Georgia contract law. Ace Am. Ins. Co. v. Wattles Co., 930 F.3d 1240, 1252 (11th Cir. 2019) (“Under Georgia law, an insurance policy is a contract and subject to the ordinary rules of contract construction.”).

The “cardinal rule” of contract interpretation is “to determine and carry out the intent of the parties.” Nat'l Cas. Co. v. Ga. Sch. Bds. Ass'n-Risk Mgmt. Fund, 304 Ga. 224, 228 (2018). In divining the parties' intent, courts should “consider the insurance policy as a whole” and do their best both to “give effect to each provision” and to “harmonize” all provisions together. Id.

Georgia courts interpret contracts in three steps. At the first step, courts determine whether a contract's language, under the “commonly accepted” or dictionary meaning of its words, is “clear and unambiguous.” State Farm Mut. Auto. Ins. Co. v. Staton, 286 Ga. 23, 25 (2009); Am. Empire Surplus Lines Ins. Co. v. Hathaway Dev. Co., 288 Ga. 749, 751 (2011). If the contract is clear and unambiguous, courts fix the contract's meaning using the contract's language alone. Am. Empire, 288 Ga. at 750. But, if the contract is ambiguous, courts move to the second step and attempt to resolve the ambiguity by applying Georgia's principles of contract interpretation. RLI Ins. v. Highlands on Ponce, LLC, 280 Ga Ap. 798, 800 (2006). Only if ambiguity remains after step two do courts move to step three and submit the issue of the contract's meaning (as a dispute of fact) to a jury for resolution. Id. at 800-01.

An insurance policy is ambiguous where “its terms are subject to more than one reasonable interpretation.” Whether a policy is ambiguous is an important question because, once a policy is deemed ambiguous, it is subject to the interpretive principle that ambiguities are “construed liberally against the insurer and most favorably for the insured.” Staton, 286 Ga. at 25; Hurst v. Grange Mut. Cas. Co., 266 Ga. 712, 716 (1996). Thus, while bearing in mind the “low threshold for establishing ambiguity in an insurance policy,” St. Paul Mercury Ins. Co. v. FDIC, 774 F.3d 702, 709 (11th Cir. 2014), courts must also take care not “to create an ambiguity where none, in fact, exists.” Staton, 286 Ga. at 25. When a policy can only be reasonably read one way, courts must enforce that reading, regardless of whom it favors. Id.

Turning then to the Policy: the parties agree that it provides coverage only for “Insured Transactions,”^[21] which by definition must satisfy certain criteria - shipment within a certain time period, for example, or payment in a certain currency.^[22] Where the parties disagree is over the interpretations of four criteria, listed below (here, “you” is Rhodium and “the Buyer” is Rhodium's buyer for a given transaction):

1. The transaction must involve a “shipment and sale” of products;^[23]

2. The transacted-for products must be “placed en route to the Buyer on the order of you” or an agent;^[24]

3. The transaction must be “evidenced by” an “agreement ... set forth” in either (a) a “negotiable instrument” or (b) “open account documents” that “indicate your name and the name of the Buyer”;^[25]and

4. “[T]he Buyer must be located” in China, Hong Kong, Malaysia, or Singapore.^[26]

Great American's position is that the unambiguous meanings of these four criteria exclude all of Rhodium's claims from coverage as a matter of law.^[27]

First, according to Great American, the Policy covers none of Rhodium's eight claimed transactions because no “shipment” of products occurred.^[28] To be clear, Great American does not deny that products were, in fact, physically shipped,^[29] nor can they: “shipment” is “[t]he transportation of goods by sea, road, or air; esp., the delivery of goods to a carrier and subsequent issuance of a bill of lading,”^[30] and Great American agrees that goods were transported by sea, upon delivery to a carrier and issuance of a bill of lading.^[31] Great American nevertheless believes that “shipment” under the Policy requires something more, namely, the shipment of products that Rhodium owned at the time of departure .^[32] Great American thus reads into “shipment” a requirement that Rhodium have purchased shipped products at a certain time. But “shipment,” by itself, does not impose such a requirement, and neither does the Court.

Second according to Great American, the Policy covers none of Rhodium's eight claimed transactions because products were never “placed en route” to a buyer on Rhodium's order.^[33] This argument is much like the first. “En route” means “[o]n the way; in the course of transportation or travel.”^[34] Rhodium's claim documents establish that, in each claimed transaction, shipped products were placed “on the way” to Rhodium's buyers pursuant to a sales contract executed by Rhodium.^[35] Great American nevertheless believes that “placed en route” under the Policy requires something more, namely, that products be placed en route to Rhodium's buyer directly from the departure port .^[36] Great American thus reads into...