MEMORANDUM OPINION AND ORDER
THOMAS B. RUSELL, District Judge.
This matter is before the Court upon Defendant Assurance Company of America's ("Assurance") Motion for Summary Judgment. (Docket No. 29.) Plaintiff Wehr Constructors, Inc. ("Wehr") has responded. (Docket No. 35.) Defendant Assurance has replied. (Docket No. 40.) Plaintiff Wehr has filed a surreply. (Docket No. 42.) Defendant Assurance has filed a response to this surreply. (Docket No. 46.) This matter is now fully briefed and ripe for adjudication. For the following reasons and consistent with the below opinion, the Court will GRANT in part and DENY in part Defendant Assurance's Motion for Summary Judgment.
The Court ORDERS the telephone conference on December 20th cancelled. A telephone conference is set for December 9th at 10:30 AM central time. Pretrial filing deadlines are vacated at this time and will be set by the Court at the conference. The Court will place the call.
This action involves a suit by Plaintiff Wehr against Defendant Assurance seeking a declaration that Assurance-as an insurer-owes a duty under a Builder's Risk and Installation Insurance Policy to pay all of Murray-Calloway County Hospital's ("MCCH") losses arising out of the damage to the hospital floors. Wehr has standing to assert MCCH's claims by virtue of an assignment by MCCH to Wehr. As will be discussed in more detail below, Wehr received this assignment as a result of a settlement between Wehr and MCCH of claims asserted against each other. A background of the events predating this current suit by Wehr against Assurance is necessary for understanding the issues involved in this case.
Background of Events Predating Current Suit
On November 13, 2007, Wehr entered into a construction contract with MCCH to essentially be the general contractor for the expansion of MCCH. Under the contract, Wehr was responsible for installing floor surfaces and concrete subsurfaces in different floors and rooms of the expansion. The floors were installed from February to October of 2009. It was later discovered that certain portions of these floors were damaged through bubbling, pop-outs, and/or dimpling. It was subsequently determined that this damage was due to the presence of shale/low grade coal particles at or near the surface of the installed light-weight concrete floor slabs. When exposed to high moisture levels these particles were prone to swelling, thereby causing surface dimples or bumps beneath the floor covering.
Subsequently, a dispute arose between Wehr and MCCH about the money that was due and owing under the contract, resulting in Wehr initiating suit against MCCH. When MCCH filed its Answer, it also filed a counterclaim alleging that Wehr had performed work in a negligent manner and in a way that breached its contract with MCCH. Ultimately, the claim between MCCH and Wehr was settled. As part of the settlement agreement, MCCH assigned to Wehr any claims MCCH had against Assurance under a Builder's Risk and Installation Policy obtained by MCCH through Assurance. MCCH obtained this Builder's Risk Insurance Policy to insure against property damage risks associated with the expansion. (Docket No. 29-5.) The Builder's Risk Policy was in effect from December 1, 2007, to October 1, 2009. (Docket No. 40, Page 6.)
The exact date MCCH "discovered" the "loss or damage" is significant in determining whether Wehr's claims against Assurance are barred by a provision in the policy containing a statute of limitations for asserting legal claims. That provision requires that legal action against Assurance under the insurance contract must be brought "within 2 years after you first have knowledge of the direct loss or damage." (Docket No. 29-5, Page 13.) The Complaint by Plaintiff Wehr against Defendant Assurance was filed on November 23, 2011. (Docket No. 1.) The parties disagree when exactly MCCH discovered the damage or loss.
Plaintiff asserts that the "damage, and MCCH's discovery of the damage, occurred on different dates depending on where the floors were located." (Docket No. 35, Page 1.) Plaintiff concedes MCCH discovered the manifestation of damage to the floors in patient rooms and hallways-mostly on Floors 2 and 3-in October and November of 2009. Id. at 1-2. However, Plaintiff contends damage to the floors in the operating rooms-located on Floor 4-manifested itself many months later in approximately July 2010. Id. at 2. Accordingly, Plaintiff argues that damage is separate and not barred by the statute of limitations provision.
Defendant disagrees with Plaintiff's assertions and argues that the date of "damage or loss" to the operating room floors should be set at an earlier date than the manifestation of damage because Plaintiff had knowledge that the concrete mix was likely expanding and had previously caused problems on other floors. Alternatively, if the Court would accept Plaintiff's initial contention that the date of the damage or loss be when the actual manifestation of damage occurred (July 2010), then Defendant argues that the damage is not recoverable because it is outside the policy coverage.
Summary judgment is appropriate where "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). In determining whether summary judgment is appropriate, a court must resolve all ambiguities and draw all reasonable inferences against the moving party. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).
"[N]ot every issue of fact or conflicting inference presents a genuine issue of material fact." Street v. J. C. Bradford & Co., 886 F.2d 1472, 1477 (6th Cir. 1989). The test is whether the party bearing the burden of proof has presented a jury question as to each element in the case. Hartsel v. Keys, 87 F.3d 795, 799 (6th Cir. 1996). The plaintiff must present more than a mere scintilla of evidence in support of his position; the plaintiff must present evidence on which the trier of fact could reasonably find for the plaintiff. See id. (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986)). The plaintiff may accomplish this by "citing to particular parts of materials in the record" or by "showing that the materials cited do not establish the absence... of a genuine dispute...." Fed.R.Civ.P. 56(c)(1). Mere speculation will not suffice to defeat a motion for summary judgment; "the mere existence of a colorable factual dispute will not defeat a properly supported motion for summary judgment. A genuine dispute between the parties on an issue of material fact must exist to render summary judgment inappropriate." Moinette v. Elec. Data Sys. Corp., 90 F.3d 1173, 1177 (6th Cir. 1996).
Kentucky Courts have consistently applied the rule that an insurance policy may contractually set a shorter limitations period than is provided by statute, see Webb v. Kentucky Farm Bureau Ins. Co., 577 S.W.2d 17 (Ky. Ct. App. 1978), absent a statue or regulatory scheme that such a shorter limitations period would conflict with or a finding it would be unreasonable. See Elkins v. Kentucky Farm Bureau Mut. Ins. Co., 844 S.W.2d 423, 424 (Ky. Ct. App. 1992) (finding one-year time limit was impermissible because it conflicted with two-year limitation allowed by Motor Vehicle Reparations Act); Pike v. Gov't Employees Ins. Co., 174 F.App'x 311, 315 (6th Cir. 2006). Webb found that a homeowner's insurance policy provision requiring commencement of suit within 12 months after inception of loss was not in conflict with any statutes-including a statute designating a 15-year statute of limitations for action on a contract-and implicitly found such a limitation was reasonable. Webb, 577 S.W.2d at 19 (finding appellant's action to recover for fire loss under homeowner's policy was barred because action was not brought within 12 months of the inception of the loss). Notably, Webb found the public policy of Kentucky favors such limitations. Id. at 18.
In Smith, the Sixth Circuit held that a one year limitations period "after the inception of loss or damage" in an insurance contract did not conflict with Kentucky law and was reasonable. Smith v. Allstate Ins. Co., 403 F.3d 401, 402-04 (6th Cir. 2005). The Smith Court still gave effect to the one-year limitations period, even though the contract prohibited suit during a portion of that year. Smith, 403 F.3d at 405; see also Edmonson v. Pennsylvania Nat. Mut. Cas. Ins. Co., 781 S.W.2d 753, 756 (Ky. 1989). Smith held provisions "limiting the time within which an insured may sue are generally valid under Kentucky law." Id. at 404 (citations omitted).
Plaintiff demonstrates that there is precedent establishing these suit limitation provisions are strictly construed against the insurer. Plaintiff also demonstrates that the doctrine of "reasonable expectations" requires the insured be entitled to all coverage he may reasonably expect to be provided under the policy is applicable in Kentucky. See Bidwell v. Shelter Mutual Insurance Company, 367 S.W.3d 585, 589 (Ky. 2012). The "suit limitation" provision in the policy between Assurance and MCCH is as follows:
C. Legal Action Against Us
No one may bring a legal action against us under the Coverage Part unless:
1. There has been full compliance with all the terms of this ...