Adorn Barber & Beauty LLC v. Twin City Fire Ins. Co.

• Decision Date: 18 October 2021
• Docket Number: Civil Action 3:20CV418
• Court: U.S. District Court — Eastern District of Virginia
• Parties: ADORN BARBER & BEAUTY LLC, Plaintiff, v. TWIN CITY FIRE INSURANCE COMPANY, Defendant.

ADORN BARBER & BEAUTY LLC, Plaintiff, v. TWIN CITY FIRE INSURANCE COMPANY, Defendant.

Civil Action No. 3:20CV418

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

October 18, 2021

MEMORANDUM OPINION

Robert E. Payne, Senior United States District Judge

This matter is before the Court on the DEFENDANT TWIN CITY FIRE INSURANCE COMPANY'S RENEWED RULE 12(b)(6) MOTION TO DISMISS (ECF No. 52) ("RENEWED MOTION TO DISMISS"). Twin City Fire Insurance Company ("Twin City") pursuant to Federal Rule of Civil Procedure 12(b)(6) requests the Court to dismiss the AMENDED COMPLAINT FOR INJUNCTIVE AND OTHER RELIEF ("FAC") (ECF No. 34) filed by Adorn Barber & Beauty LLC's ("Adorn"). For the reasons set forth below, the RENEWED MOTION TO DISMISS will be granted.

BACKGROUND

A. Statement of Facts

As required, the facts in the FAC are taken as true. All inferences are accorded in Adorn's favor.

At all relevant times, Adorn, a Virginia limited liability company, maintained an insurance contract with Twin City, an insurance carrier that is a wholly owned subsidiary of The Hartford Financial Services Group, Inc. (usually known as "The Hartford"), whose principal place of business is in Hartford, Connecticut, where its headquarters are located. Twin City conducts insurance business within Virginia. See FAC, ¶¶ 10-11, ECF No. 34. Twin City issued an insurance policy numbered 65 SBA AA3524 to Adorn for the period of March 1, 2020 to March 1, 2021. See id. at ¶ 12; EX. 1 Policy and Declaration ("Policy"), ECF No. 1-1. The Policy was based on language "that is essentially standardized language adopted from and/or developed by the ISO ('Insurance Service Office')." FAC ¶ 26, ECF No. 34. ISO "provides advisory services and information to many insurance companies" and "develops and publishes policy language that many insurance companies use as the basis for their products." Id.

On March 12, 2021, the Commonwealth of Virginia declared a State of Emergency due to the COVID-19 pandemic. Id. at ¶ 61. On March 23, Governor Ralph Northam issued Order 53, which required all nonessential businesses in Virginia to stop operations and physically close. Id. at ¶ 62. The pandemic and subsequent state and local orders mandating the closure of all non-essential business caused Adorn, like other businesses around the globe, to close its business on March 24, 2020. Id. at ¶ 3. The closure resulted in over $150, 000 in losses and forced Adorn to dismiss part-time employees, and it expects to reduce the salaries of its full-time employees. Id. at ¶¶ 5, 72.

Adorn alleges that its damages were caused both by the contamination of its facilities by the COVID-19 virus and the Virginia COVID-19 related orders. Adorn argues that the Policy covers business income losses and extra expenses attributable to the virus and the virus-related orders by the Virginia government. Id. at ¶¶ 79-81; ECF No. 54 at 7. Because Twin City takes the opposite view, Adorn seeks a declaratory judgment that the Policy covers those business losses. FAC ¶¶ 88-91, ECF No. 34. Specifically, Adorn seeks to recover losses under the Business Income, Extra Expense, and Civil Authority provisions in the Policy. Id. at ¶¶ 37, 43; ECF No. 54 at 6.

Twin City's position is that, under the unambiguous text of the Policy, Adorn's claims are not covered, because the Policy does not cover virus-related losses for the reason that those losses are excluded from coverage under the "`Fungi', Wet Rot, Dry Rot, Bacteria And Virus" Exclusion ("Virus Exclusion") and that the Civil Authority provision does not afford coverage. Thus, Twin City seeks dismissal of the FAC under Fed.R.Civ.P. 12(b)(6). See generally MEMORANDUM OF LAW IN SUPPORT OF DEFENDANT TWIN CITY FIRE INSURANCE COMPANY'S RENEWED RULE 12(b)(6) MOTION TO DISMISS PLAINTIFF'S FIRST AMENDED COMPLAINT (ECF No. 53).

B. Contractual Provisions

The dispute revolves around the Policy provisions pertaining to Business Income, Extra Expense, Civil Authority, Specified Cause of Loss, and Limited Fungi, Bacteria, and Virus Exclusion coverage. Those provisions are set forth below.

. Business Income Coverage

The Business Income provision states that Twin City:

(1) [W]ill pay for the actual loss of Business Income due to the necessary suspension of your 'operations' during the `period of restoration'. The suspension must be caused by direct physical loss of or physical damage to property at the 'scheduled premises' . . . caused by or resulting from a Covered Cause of Loss.

(4) Business Income means the: (a) Net Income . . . that would have been earned or incurred if no direct physical loss or physical damage had occurred; and (b) Continuing normal operating expenses incurred, including payroll. . . .

EX. 1 ("Policy") at 47, ECF No. 1-1 (emphasis added). Notably, the "Covered Cause of Loss" provision includes "RISKS OF DIRECT PHYSICAL LOSS" unless the loss is part of an exclusion or limitation delineated in the Policy. Id. at 39.

. Extra Expense

The Extra Expense provision states that Twin City:

(1) [W]ill pay reasonable and 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 physical damage to property at the 'scheduled premises' . . . caused by or resulting from Covered Cause of Loss.

(3) Extra Expense means expense incurred: (a) To avoid or minimize the suspension of business and to continue 'operations': (i) At the 'scheduled premises'; . . . (b) To minimize the suspension of business if you cannot continue 'operations'. (c) (i) To repair or replace any property . . .

(4) With respect to the coverage provided in this Additional Coverage, suspension means: (a) The partial slowdown or complete cessation of your business activities; or (b) That part or all of the 'scheduled premises' is rendered untenantable as a result of a Covered Cause of Loss if coverage for Extra Expense applies to the policy.

Id. at 47-48 (emphasis added).

. Civil Authority

The Civil Authority provision states that:

(1) This insurance is extended to apply to the actual loss of Business Income you sustain when access to your 'scheduled premises' is specifically prohibited by order of a civil authority as the direct result of a Covered Cause of Loss to property in the immediate area of your 'scheduled premises'.

Id. at 48 (emphasis added).

. Limited Fungi, Bacteria or Virus Coverage

The Policy contains a "LIMITED FUNGI, BACTERIA OR VIRUS COVERAGE" ("Virus Exclusion") provision that delineates exclusions to the Standard Property Coverage Form and the Special Property Coverage Form. Id. at 135. The Virus Exclusion states that Twin City:

will not pay for loss or damage caused directly or indirectly by" the “[p]resence, growth, proliferation, spread or any activity of 'fungi', wet rot, dry rot, bacteria or virus and that

[s]uch loss or damage is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss[;] however, if `fungi', wet rot, dry rot, bacteria or virus results in a 'specified cause of loss' to Covered Property, we will pay for the loss or damage caused by that 'specified cause of loss.' The exclusion applies whether or not the loss event results in widespread damage or affects a substantial area.

Id. at 136.^[1]

. Specified Cause of Loss

If the "virus results in a 'specified cause of loss' to Covered Property[, ]" Twin City will "pay for the loss or damage caused by that specified cause of loss." Id. The Policy defines "specified cause of loss" as:

Fire; lightning; explosion, windstorm or hail; smoke; aircraft or vehicles; riot or civil commotion; vandalism; leakage from fire extinguishing equipment; sinkhole collapse; volcanic action; falling objects; weight of snow, ice or sleet; water damage.

Id. at 62.

DISCUSSION

A. Legal Standards

1. Motions Under Fed.R.Civ.P. 12(b)(6)

Federal Rule of Civil Procedure 12(b)(6) permits the dismissal of actions that do not state a claim upon which relief can be granted. Thus, a motion to dismiss "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 (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 (2009)).

When contemplating a motion to dismiss under Rule 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, 891 F.3d at 145. 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 quotations 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.

Although assessment of a Rule 12(b)(6) motion must be generally limited to the allegations in the complaint, where a copy of a written instrument is attached as an exhibit to the complaint or incorporated in it by reference, the instrument is part of the complaint, and a court may consider it in deciding the motion seeking dismissal under Rule 12(b)(6). Goines v....