Ballas Nails & Spa, LLC v. Travelers Cas. Ins. Co. of Am.

• Decision Date: 05 January 2021
• Docket Number: No. 4:20 CV 1155 CDP,4:20 CV 1155 CDP
• Citation: 511 F.Supp.3d 978
• Court: U.S. District Court — Eastern District of Missouri
• Parties: BALLAS NAILS & SPA, LLC, Plaintiff, v. TRAVELERS CASUALTY INSURANCE COMPANY OF AMERICA, Defendant.

511 F.Supp.3d 978

BALLAS NAILS & SPA, LLC, Plaintiff,

v.TRAVELERS CASUALTY INSURANCE COMPANY OF AMERICA, Defendant.

No. 4:20 CV 1155 CDP

United States District Court, E.D. Missouri, Eastern Division.

Signed January 5, 2021

Mark D. Molner, Molner Law Firm LLC, Kansas City, MO, Taylor Kosla, Agruss Law Firm LLC, Chicago, IL, for Plaintiff.

Gregory Paul Varga, Stephen O. Clancy, Robinson and Cole LLP, Hartford, CT, Patrick J. Kenny, Nicholas Anthony Cammarata, Armstrong Teasdale LLP, St. Louis, MO, for Defendant.

MEMORANDUM AND ORDER

CATHERINE D. PERRY, UNITED STATES DISTRICT JUDGE

Plaintiff Ballas Nails & Spa, LLC, owns and operates a nail salon in St. Louis County, Missouri. It was forced to suspend its business following government closure orders issued in response to the outbreak of the novel coronavirus, known to cause the disease Covid-19. Ballas brings this declaratory judgment action against its insurer, defendant Travelers Casualty Insurance Company of America, seeking declarations that it is entitled to coverage on its insurance claim for lost business income following the issuance of these closure orders. Because the insurance policy at issue does not provide coverage for Ballas's claims, I will grant Travelers’ motion to dismiss.

Background

In March 2020, both St. Louis County and the City of St. Louis declared a public health emergency given the rapidly evolving state of the Covid-19 crisis. On March 21, the St. Louis City Director of Health & Hospitals/Health Commissioner issued an executive order that required individuals living within the City to remain at home, except to perform tasks essential to the health and safety of individuals. And businesses were ordered to cease all activities with limited exceptions. St. Louis County, which is a separate county from and abuts St. Louis City, issued similar orders. Plaintiff Ballas Nails & Spa, a business located in St. Louis County, was not considered an "essential" business and was therefore subject to the restrictions imposed by the orders. On April 3, Missouri's Director of the Department of Health and Senior Services issued a stay-at-home order that directed individuals residing in Missouri to avoid leaving their homes. On May 18, St. Louis County and City businesses were permitted to reopen with limitations and restrictions in place.

Ballas asserts that it was forced to suspend or reduce its business because of Covid-19 and the resultant closure orders issued by civil authorities in Missouri. It made a claim under its Travelers insurance policy for lost business income, which Travelers denied on August 11, 2020. Ballas then filed this three-count declaratory judgment action on August 27, seeking a declaration that 1) its business losses are covered under the Business Income and Extra Expense provision of the policy; 2) its business losses are covered under the Civil Authority provision of the policy; and 3) the "Sue and Labor" provision of the policy entitles it to recover the expenses it reasonably incurred to protect its property from further damage by Covid-19.

Travelers moves to dismiss Ballas's complaint under Rule 12(b)(6), Federal Rules of Civil Procedure, arguing that the policy provides coverage for income losses caused only by physical loss of or damage to property, not for economic loss caused by governmental or other efforts to protect the public from disease. Travelers also argues that, regardless, several policy exclusions bar coverage in the circumstances of this case. For the following reasons, Travelers’ arguments are well taken.

Legal Standards

The purpose of a motion to dismiss under Rule 12(b)(6) is to test the legal sufficiency of the complaint. Fed. R. Civ. P. 12(b)(6). When reviewing a Rule 12(b)(6) motion, I assume the factual allegations of the complaint as true and construe them in plaintiff's favor. Bell Atlantic Corp. v. Twombly , 550 U.S. 544, 555-56, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). To survive a motion to dismiss, the complaint must contain sufficient factual matter, accepted as true, to state a claim to relief "that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). The factual allegations must be sufficient to " ‘raise a right to relief above the speculative level.’ " Parkhurst v. Tabor , 569 F.3d 861, 865 (8th Cir. 2009) (quoting Twombly , 550 U.S. at 555, 127 S.Ct. 1955 ). More than labels and conclusions are required. Twombly , 550 U.S. at 555, 127 S.Ct. 1955. "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal , 556 U.S. at 678, 129 S.Ct. 1937.

"Because federal jurisdiction in this case is based on diversity of citizenship, state law controls the interpretation of the Policy." DeAtley v. Mutual of Omaha Ins. Co., 701 F.3d 836, 838 (8th Cir. 2012). Under Missouri law,¹ the interpretation of an insurance policy is a question of law. Schmitz v. Great Am. Assurance Co., 337 S.W.3d 700, 705 (Mo. banc 2011). The insured bears the burden of proving coverage under an insurance policy, and the insurer bears the burden of proving the applicability of any exclusion from coverage. Fischer v. First Am. Title Ins. Co., 388 S.W.3d 181, 187 (Mo. Ct. App. 2012). When construing an insurance policy, I must apply "the meaning which would be attached by an ordinary person of average understanding if purchasing insurance." Allen v. Continental W. Ins. Co., 436 S.W.3d 548, 553-54 (Mo. banc 2014) (internal quotation marks and citation omitted).

If an insurance policy is unambiguous, I must enforce the policy as written. Allen, 436 S.W.3d at 554. If the policy is ambiguous, however, any ambiguity must be resolved against the insurer-drafter. Id. "An ambiguity exists when there is duplicity, indistinctness, or uncertainty in the meaning of the language in the policy," or if the policy "is reasonably open to different constructions." Seeck v. Geico Gen. Ins. Co., 212 S.W.3d 129, 132 (Mo. banc 2007) (internal quotation marks and citation omitted). The mere "fact that parties disagree over the policy's interpretation does not render a term ambiguous." O'Rourke v. Esurance Ins. Co. , 325 S.W.3d 395, 398 (Mo. Ct. App. 2010).

The Policy

The Travelers policy at issue here is for commercial liability and business property insurance. It covered the period of October 22, 2019, to October 22, 2020.

The Business Income and Extra Expense provision of the policy requires Travelers to

pay for the actual loss of Business Income you sustain due to the necessary "suspension" of your "operations" during the "period of restoration". The "suspension" must be caused by direct physical loss of or damage to property at the described premises. The loss or damage must be caused by or result from a Covered Cause of Loss.

(ECF 1-5 at header pp. 4-5.) "Covered Causes of Loss" are defined as "risks of direct physical loss," subject to certain limitations and exclusions. (Id. at header pp. 5-6.) The Extra Expense provision applies to "reasonable and necessary expenses" Ballas incurred "during the ‘period of restoration’ " that it would not have incurred "if there had been no direct physical loss or damage to property caused by or resulting from a Covered Cause of Loss." (Id. at header p. 5.)

Coverage under the Civil Authority provision applies to

the actual loss of Business Income you sustain and reasonable and necessary Extra Expense you incur caused by action of civil authority that prohibits access to the described premises. The civil authority action must be due to direct physical loss of or damage to property at locations, other than described premises, that are within 100 miles of the described premises, caused by or resulting from a Covered Cause of Loss.

(ECF 1-5 at header p. 17.)

The Duties in the Event of Loss or Damage clause, which Ballas refers to as "Sue and Labor" coverage, requires the insured to "take all reasonable steps to protect the Covered Property from further damage, and keep a record of your expenses necessary to protect the Covered Property, for consideration in the settlement of the claim." (ECF 1-5 at header p. 30.)

Finally, the Virus Exclusion states that Travelers "will not pay for loss or damage caused by or resulting from any virus, bacterium or other microorganism that induces or is capable of inducing physical distress, illness or disease." (ECF 14-7 at header p. 198.) This exclusion applies to "forms or endorsements that cover business income, extra expense, ... or action of civil authority." (Id. )

Discussion

The complaint does not allege any facts demonstrating that Ballas sustained a "direct physical loss of or damage to property" resulting from a "covered cause of loss," which is required for coverage under the Business Income and Extra Expense provision. The complaint also fails to allege facts showing any "direct physical loss of or damage to property" resulting from a "covered cause of loss" at other locations, which is required for Civil Authority coverage. And because expenses are reimbursable under the Sue and Labor clause only in the settlement of an already-covered claim, the clause does not apply here since Ballas does not have a covered claim. Finally, even if coverage were found to exist under one or more of these provisions, the policy's Virus Exclusion bars Ballas's claims.

Business Income and Extra Expense

The parties dispute whether Ballas's allegations establish a "direct physical loss of or damage to property" as required for coverage under the Business Income and Extra Expense provision of the policy.

The policy does not define "direct physical loss" or "direct physical damage," so I must rely on the plain and ordinary meaning of the terms. See Vogt v. State Farm Life Ins. Co. , 963 F.3d 753, 763 (8th Cir. 2020) (applying Missouri law). Ballas contends that the Eighth Circuit decided in Hampton Foods, Inc. v. Aetna Cas. & Sur....