L&L Logistics & Warehousing Inc. v. Evanston Ins. Co.

• Decision Date: 13 April 2021
• Docket Number: Civil Action No. 3:20-cv-324
• Citation: 533 F.Supp.3d 299
• Parties: L&L LOGISTICS AND WAREHOUSING INC. dba L&L Trucking, Plaintiff, v. EVANSTON INSURANCE CO., Defendant.
• Court: U.S. District Court — Eastern District of Virginia

533 F.Supp.3d 299

L&L LOGISTICS AND WAREHOUSING INC. dba L&L Trucking, Plaintiff,

v.EVANSTON INSURANCE CO., Defendant.

Civil Action No. 3:20-cv-324

United States District Court, E.D. Virginia, Richmond Division.

Signed April 13, 2021

Daniel Levin, Pro Hac Vice, Levin Sedran & Berman LLP, Philadelphia, PA, Jeffrey Arnold Breit, Kevin Biniazan, Breit Cantor Grana Buckner, PLLC, Virginia Beach, VA, Justin Matthew Sheldon, Breit Cantor Grana Buckner, PLLC, Richmond, VA, for Plaintiff.

John Becker Mumford, Jr., Lindsay Lankford Rollins, Hancock Daniel & Johnson, Glen Allen, VA, for Defendant.

MEMORANDUM OPINION

Robert E. Payne, Senior United States District Judge This matter is before the Court on DEFENDANTS’ RENEWED MOTION TO DISMISS AMENDED COMPLAINT ("Renewed Motion to Dismiss") (ECF No. 48 ). Defendant Evanston Insurance Company¹ ("Evanston") requests that Plaintiff L&L Logistics and Warehousing Inc. d/b/a L&L Trucking's ("L&L's") FIRST AMENDED COMPLAINT (ECF No. 13 ) be dismissed with prejudice pursuant to Federal Rule of Civil Procedure 12 (b) (6). For the reasons set forth below, the Renewed Motion to Dismiss will be granted.

I. BACKGROUND

A. Statement of Facts

At all relevant times, L&L, a California corporation, had an insurance policy (the "Policy") with Evanston Insurance, an insurance carrier headquartered in Glen Allen, Virginia. FAC ¶¶ 3, 9, ECF No. 13. The Policy was based on "language that is essentially standardized language adopted from and/or developed by the ISO,"² and it covered certain business losses. FAC ¶¶ 11, 21, ECF No. 13.

Between March 4, 2020 - March 17, 2020, in response to the COVID-19 pandemic, the state of California enacted a series of restrictions on public gatherings, concluding with a stay-at-home order limiting the ability of non-essential businesses to function normally. FAC ¶¶ 42-45, ECF No. 13.

Like many businesses around the world, "[i]n light of the Coronavirus global pandemic and state and local orders mandating that all non-essential in store businesses must shut down on March 16, 2020, Plaintiff's trucking company has suffered business loss." FAC ¶ 2, ECF No. 13. L&L takes the position that its damages were caused both by the contamination of COVID-19 on the covered premises and the California COVID-19 orders. See FAC ¶¶ 54-60, ECF No. 13 ; see also March 24 Hearing Tr. 23:8-12, ECF No. 58. L&L submitted a claim for business loss and business interruption insurance in an amount greater than $150,000, but Evanston denied the claim. FAC ¶¶ 4, 13, ECF No. 13.

L&L is now seeking a declaratory judgment that would essentially find that L&L is entitled to Business Income, Extra Expense, and Civil Authority coverage under the Policy. See FAC at 13, ECF No. 13. Evanston, in turn, filed a counterclaim which essentially seeks declaratory judgment of the exact opposite. Countercl. at 11, ECF No. 11. Evanston now seeks to have L&L's First Amended Complaint dismissed for the same reasons outlined in the Counterclaim (i.e., L&L's claim is not covered under the Policy).³

B. Contractual Provisions

The current dispute centers around the interaction between the first two pages of the "BUSINESS INCOME (AND EXTRA EXPENSE) COVERAGE FORM" (CP 00 30 10 12), the single-paged "EXCLUSION OF LOSS DUE TO VIRUS OR BACTERIA" (CP 01 40 07 06), the two-paged "EXCLUSION - POLLUTION, ORGANIC PATHOGENS AND ASBESTOS" (MECP 1310 09 14), and the ten-paged "CAUSES OF LOSS - SPECIAL FORM" (CP 10 30 10 12). The full text of the relevant provisions is provided in the Appendix.

Business Income Coverage

The "BUSINESS INCOME (AND EXTRA EXPENSE) COVERAGE FORM" states that Evanston

[W] ill pay for the actual loss of Business Income you [i.e., the policyholder] 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 premises which are described in the Declarations .... The loss or damage must be caused by or result from a Covered Cause of Loss.

EX. 1 ("Policy") at 77, ECF No. 13-1. But importantly, the loss or damage must be caused by a "Covered Cause of Loss" which is defined in the "CAUSES OF LOSS - SPECIAL FORM."

Extra Expense Income Coverage

The "BUSINESS INCOME (AND EXTRA EXPENSE) COVERAGE FORM" also states that Extra Expense Income coverage applies to "necessary expenses you [i.e., the policyholder] incur during the ‘period of restoration’ that you 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." EX. 1 ("Policy") at 77, ECF No. 13-1 (emphasis added).

Civil Authority Coverage

And, finally, the "BUSINESS INCOME (AND EXTRA EXPENSE) COVERAGE FORM" states that Civil Authority coverage applies when (1) "a Covered Cause of Loss causes damage to property other than the property at the described premises"; (2) "[a]ccess to the area immediately surrounding the damaged property is prohibited by civil authority as a result of the damage"; (3) "the described premises are within that area but are not more than one mile from the damaged property"; and (4) "[t]he action of the 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." EX. 1 ("Policy") at 78, ECF No. 13-1 (emphasis added).

Covered Causes of Loss

All relevant portions of the "BUSINESS EXPENSE (AND EXTRA EXPENSE) COVERAGE FORM," – i.e., the Business Income coverage, Extra Expense Income coverage, and Civil Authority coverage provisions – state that coverage can only be triggered by a "Covered Cause of Loss." See EX. 1 ("Policy") at 77-78, ECF No. 13-1. The "CAUSES OF LOSS - SPECIAL FORM," states that "[w]hen Special is shown in the Declarations, Covered Causes of Loss means direct physical loss unless the loss is excluded or limited in this policy." EX. 1 ("Policy") at 89, ECF No. 13-1 (emphasis); see also EX. 1 ("Policy") at 59, ECF No. 13-1 (showing table on "Commercial Property Coverage Part Declarations" form [MDCP 1000 02 13] with "Special" listed under the "Covered Causes of Loss" column for the "Business Income with Extra Expense" row).

Virus Exclusions

For the purposes of this case, there are two relevant loss exclusions: the Virus Exclusion and the Organic Pathogen Exclusion. Both exclusions apply to the "BUSINESS EXPENSE (AND EXTRA EXPENSE) COVERAGE FORM" which outlines the Business Income Loss, Extra Expense, and Civil Authority coverage provided by the Policy. See EX. 1 ("Policy") at 88-89, 99, ECF No. 13-1. However, the scope and applicability of each exclusion varies.

Under the Virus Exclusion, Evanston "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." EX. 1 ("Policy") at 88, ECF No. 13-1. The Virus Exclusion explicitly states that it applies to "all coverage" under the policy. EX. 1 ("Policy") at 88, ECF No. 13-1.

Under the Organic Pathogen Exclusion, Evanston "will not pay for loss or damage caused directly or indirectly by[,]" among other things, the "[p]resence, growth, proliferation, spread or any activity of ‘organic pathogens[,]’ " including viruses. EX. 1 ("Policy") at 99, ECF No. 13-1 (emphasis added). Moreover, "[s]uch loss or damage is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss." EX. 1 ("Policy") at 99, ECF No. 13-1 (emphasis added). The Organic Pathogen Exclusion amends the "CAUSES OF LOSS - SPECIAL FORM" – which is the loss form that applies to the relevant provisions of the Policy – by excluding losses caused by organic pathogens, including viruses. EX. 1 ("Policy") at 9, 11-12, 77-78, 89, ECF No. 13-1. Thus, the Organic Pathogen Exclusion operates to remove "organic pathogens" from the definition of a "covered cause of loss."

II. DISCUSSION

A. Legal Standard

1. 12(b)(6) Motions

A motion to dismiss pursuant to Fed. R. Civ. Pro. 12(b) (6) "tests the sufficiency of a complaint." Columbia v. Haley, 738 F.3d 107, 116 (4th Cir. 2013). To survive a motion to dismiss, the factual allegations set forth in the complaint must be sufficient to " ‘to raise a right to relief above the speculative level’ and ‘state a claim to relief that is plausible on its face.’ " Id. (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). "A claim is ‘plausible on its face,’ if a plaintiff can demonstrate more than ‘a sheer possibility that a defendant has acted unlawfully.’ " Rockville Cars, LLC v. City of Rockville, 891 F.3d 141, 145 (4th Cir. 2018) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) ). Nevertheless, "[a] complaint should not be dismissed pursuant to Rule 12(b) (6) ... unless it appears to a certainty that the nonmoving party cannot prove any set of facts in support of its claim that would entitle it to relief." Chapman v. Clarendon Nat'l Ins., 299 F. Supp. 2d 559, 562 (E.D. Va. 2004).

When considering a motion to dismiss under Fed. R. Civ. P. 12(b) (6), a court "must accept the factual allegations of the complaint as true and construe them in the light most favorable to the nonmoving party." Rockville Cars, LLC v. City of Rockville, 891 F.3d 141, 145 (4th Cir. 2018). However, courts need not "accept as true a legal conclusion couched as a factual allegation." SD3, LLC v. Black & Decker (U.S.) Inc., 801 F.3d 412, 422 (4th Cir. 2015) (quoting United States v. Triple Canopy, Inc., 775 F.3d 628, 632 n.1 (4th Cir. 2015) ) (internal quotation marks omitted). And, "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Iqbal, 556 U.S. at 678, 129 S.Ct. 1937.

Although a court's review is generally limited to the...