Palmer Holdings & Invs., Inc. v. Integrity Ins. Co.

• Citation: 505 F.Supp.3d 842
• Decision Date: 07 December 2020
• Docket Number: No. 4:20-cv-154-JAJ,4:20-cv-154-JAJ
• Parties: PALMER HOLDINGS AND INVESTMENTS, INC., et al., Plaintiffs, v. INTEGRITY INSURANCE CO., et al., Defendants.
• Court: U.S. District Court — Southern District of Iowa

505 F.Supp.3d 842

PALMER HOLDINGS AND INVESTMENTS, INC., et al., Plaintiffs,

v.INTEGRITY INSURANCE CO., et al., Defendants.

No. 4:20-cv-154-JAJ

United States District Court, S.D. Iowa, Central Division.

Signed December 7, 2020

James W. Carney, Nicholas J. Mauro, Carney & Appleby PLC, Des Moines, IA, for Plaintiffs.

Sean M. O'Brien, Bradshaw Fowler Proctor & Fairgrave, P.C., Des Moines, IA, James Gallagher, Pro Hac Vice, Gallagher, Gams, Tallan, Barnes & Littrell LLP, Columbus, OH, William Owen Krekstein, Pro Hac Vice, Timoney Knox LLP, Fort Washington, PA, for Defendants.

ORDER

JOHN A. JARVEY, Chief Judge This matter comes before the Court pursuant to Defendants’ Motion to Dismiss for Failure to State a Claim Upon Which Relief Can Be Granted filed on October 2, 2020. [Dkt. No. 20]. Plaintiffs filed a Resistance on October 26, 2020. [Dkt. No. 29]. Defendants replied to Plaintiffs’ Resistance on November 17, 2020. [Dkt. No. 35]. Plaintiffs included two affidavits in its resistance to Defendants’ Motion to Dismiss, and Defendant filed a Motion to Strike these affidavits from Plaintiffs’ resistance on November 16, 2020. [Dkt. No. 34]. Plaintiffs filed a Resistance to the motion to strike on November 30, 2020 [Dkt. No. 36], and Defendants replied on December 7, 2020. [Dkt. No. 37]. For the reasons stated below, Defendants’ Motion to Dismiss is GRANTED and Defendants’ Motion to Strike is DENIED .

I. Introduction

A. Background

Plaintiffs are businesses operating and managing various restaurants in Polk County, Iowa. Pls.’ Am. Compl. [Dkt. No. 17], ¶ 3. Plaintiffs’ Amended Complaint alleges they purchased Business Income and Civil Authority insurance from Defendants. Id. ¶ 10. Plaintiffs did not attach the insurance policy to the original Complaint or Amended Complaint, but Defendants attached the policy to their Answer to Plaintiffs’ original Complaint. [Dkt. No. 5-1]. The policy is identified in the Amended Complaint and is integral to and embraced by Plaintiffs’ claims. See Zean v. Fairview Health Servs. , 858 F.3d 520, 526 (8th Cir. 2017) (citations omitted). Reynolds's proclamation is also integral to and embraced by Plaintiffs’ claims. As such, the Court may consider the policy and the proclamation without converting Defendants’ Motion to Dismiss into a motion for summary judgment. See id. (citations omitted).

On March 17, 2020, Iowa Governor Kim Reynolds issued a proclamation related to the COVID-19 pandemic. In relevant part, the proclamation stated:

All Restaurants and Bars are hereby closed to the general public except that to the extent permitted by applicable law, and in accordance with any recommendations of the Iowa Department of Public Health, food and beverages may be sold if such food or beverages are promptly taken from the premises, such as on a carry-out or drive-through basis, or if the food or beverage is delivered to customers off the premises.

Office of the Governor of Iowa Kim Reynolds, Gov. Reynolds Issues a State of Public Health Disaster Emergency , iowa.gov, https://governor.iowa.gov/press-release/gov-reynolds-issues-a-state-of-public-health-disaster-emergency (Mar. 17, 2020).

Plaintiffs’ claim they are entitled to coverage under their insurance policy with Defendants. Pls.’ Am. Compl. [Dkt. No. 17], ¶ 65. Specifically, they allege they are entitled to coverage under the Business Income, Extra Expense, and Civil Authority provisions of their policy. Id. Additionally, Plaintiffs contend Defendants should be estopped from invoking the Virus Exclusion provision of the policy. Id. ¶ 80.

In relevant part, the Business Income provision states:

We will 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.

Defs.’ Ans., Affirm. Defs., & Jury Demand, Ex. 1 [Dkt. No. Dkt. No. 5-1 at 38].

The Extra Expense provision states, in relevant part:

We will pay necessary Extra Expense you incur during the "period of restoration" that you would not have incurred if there had been no direct physical loss or damage to the property at the described premises. The loss or damage must be caused by or result from a Covered Cause of Loss.

Id. at 40.

The Civil Authority provision states:

When a Covered Cause of Loss causes damage to property other than property at the described premises, we will pay for the actual loss of Business Income you sustain and necessary Extra Expense caused by action of civil authority that prohibits access to the described premises, provided that both of the following apply:

(1) Access to the area immediately surrounding the damaged property is prohibited by civil authority as a result of the damage, and the described premises are within that area but are not more than one mile from the damaged property; and

(2) The action of civil authority is taken in response to dangerous physical conditions resulting from the damage or continuation of the Covered Cause of Loss that caused the damage, or the action is taken to enable a civil authority to have unimpeded access to the damaged property.

Id. at 40–41.

The Virus Exclusion states:

1. We will not pay for loss or damage caused directly or indirectly by any of the following. Such loss is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss. These exclusions apply whether or not the loss event results in widespread damage or affects a substantial area.

...

j. Virus or Bacteria

(1) Any virus, bacterium or other microorganism that induces or is capable of inducing physical distress, illness or disease.

(2) However, the exclusion in Paragraph (1) does not apply to loss or damage caused by or resulting from "fungi", wet rot or dry rot. Such loss or damage is addressed in Exclusion i.

(3) With respect to any loss or damage subject to the exclusion in Paragraph (1), such exclusion supersedes any exclusion relating to "pollutants".

Id. at 48, 50.

The policy defines "Period of Restoration" as follows:

9. "Period of Restoration":

a. means the period of time that:

(1) Begins:

(a) 72 hours after the time of direct physical loss or damage for Business Income Coverage; or

(b) Immediately after the time of direct physical loss or damage for Extra Expense Coverage; Caused by or resulting from any Covered Cause of Loss at the described premises; and

(2) Ends the earlier of:

(a) The date when the property at the described premises should be repaired, rebuilt or replaced with reasonable speed and similar quality; or

(b) The date when business is resumed at a new permanent location...

Id. at 63. "Property damage" is defined in Section II – Liability as including "loss of use of tangible property that is not physically injured ...." Id. at 78.

The Ordinance or Law Exclusion provides:

1. We will not pay for loss or damage caused directly or indirectly by any of the following. Such loss or damage is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss. These exclusions apply whether or not the loss event results in widespread damage or affects a substantial area.

a. Ordinance Or Law

(1) The enforcement of any ordinance or law:

(a) Regulating the construction, use or repair of any property;

...

(2) This exclusion, Ordinance or Law, applies whether the loss results from:

(a) An ordinance or law that is enforced even if the property has not been damaged ....

Id. at 48.

1. Plaintiffs’ Claims

Plaintiffs’ Amended Complaint contains several allegations that are incorporated into the final Counts. In relevant part, Plaintiffs allege:

10. To protect its businesses in the event they suddenly had to suspend operations for reasons outside of their control, Plaintiffs purchased Businessesowners’ Coverage that included both Business Income and Civil authority insurance coverage from Illinois Casualty Company.

...

13. The policy in question was a blanket business personal property coverage form providing for coverage that would pay for "direct physical loss of or damage to Covered Property at the premises described in the Declarations caused by or resulting from any Covered Cause of Loss.

...

20. The policies do not define the phrase "direct physical loss of or damage to....", nor do they define "direct", "physical", "loss", or "damage" individually.

21. The use of the disjunctive "or" in the phrase "direct physical loss of or damage to" means that coverage is triggered if either a physical loss of property or damage to property occurs.

22. The Policies’ use of the disjunctive "or" between the terms "physical loss" and "damage" necessarily means that either a "loss" or "damage" is required, and that "loss" is distinct from "damage."

23. The Policies do not state or otherwise define "loss" to require an actual alteration of property.

24. At the time Plaintiffs purchased the Policies, courts had held on numerous occasions that any condition making it impossible to use property for its intended use constituted "physical loss or damage to property."

...

38. On March 17, 2020, Iowa Governor Kim Reynolds issued a proclamation closing all bars and restaurants from dine-in or in-person service.

...

40. The action of this Civil Authority resulted in the necessary suspension of Plaintiffs’ operations as they economically could not operate their businesses solely on a take-out or delivery basis.

41. The proclamation caused "direct physical loss of or damage to" Plaintiffs’ covered property under the Policy by precluding Plaintiffs from conducting their operations, precluding customers from patronizing the business, and otherwise frustrating the intended purpose of Plaintiffs’ businesses, all thereby causing the necessary suspension of operations during a period of restoration.

42. Governor Reynolds’ March 17, 2020 Order prohibited access to Plaintiff's Covered Property, and

...