Benamax Ice, LLC v. Merch. Mut. Ins. Co.

• Decision Date: 29 March 2021
• Docket Number: Civil Action No. 20-8069
• Citation: 529 F.Supp.3d 350
• Parties: BENAMAX ICE, LLC, Plaintiff, v. MERCHANT MUTUAL INSURANCE CO., John Does (1-10), ABC Companies (1-10), Defendants.
• Court: U.S. District Court — District of New Jersey

529 F.Supp.3d 350

BENAMAX ICE, LLC, Plaintiff,

v.MERCHANT MUTUAL INSURANCE CO., John Does (1-10), ABC Companies (1-10), Defendants.

Civil Action No. 20-8069

United States District Court, D. New Jersey.

Signed March 29, 2021

Ashley Soble Nechemia, Robert Winfield Williams, Mattleman, Weinroth & Miller, P.C., Cherry Hill, NJ, for Plaintiff.

Nicole Michelle Crowley, Goldberg Segalla LLP, Newark, NJ, for Defendant Merchants Mutual Insurance Company.

JOSEPH H. RODRIGUEZ, United States District Judge

This matter comes before the Court on Motion to Dismiss of Defendant Merchant Marine Insurance Company ("Merchants") pursuant to Fed. R. Civ. P. 12 (b)(6). Plaintiff Benamax Ice, LLC ("Benamax"), which operates a restaurant¹ in Westmont, New Jersey, filed this breach of contract and declaratory judgment action alleging it is entitled to insurance coverage from Defendant Merchants for business income losses resulting from the impact of the COVID-19 global pandemic and the governmental response to contain the spread of the virus. Specifically, Benamax claims that both federal and state government orders mandating that in-person dining be suspended at restaurants ("Governmental Orders") has negatively impacted its business and, as a result, Benamax seeks coverage for losses sustained for the business interruption caused by the cumulative effect of the pandemic and the social constraints imposed by the government.

The parties agree that Merchants issued a Commercial Businessowners Policy (the "Policy") to Benamax covering, inter alia, losses caused by direct physical loss of or damage to property. Merchants moves to dismiss on the basis that Benamax's economic losses are not covered under the Policy and because Benamax has not sufficiently alleged qualifying physical damage and because the Policy's "Virus or Bacteria" exclusion applies and precludes coverage.

The unfortunate circumstances many businesses face has resulted in an uptick in insurance litigation over policy coverage for economic losses endured because of the public's trepidation and the government's social gathering management policies. The litigation, although recent, has quickly accrued caselaw considering policy coverage, such as and including Policy one at issue here. Defendant argues that several courts, including some in this district, have interpreted the Merchant Policy and found that the plaintiffs’ economic losses in those cases, as related to the COVID-19 pandemic, are not covered for a variety of reasons, but most notably because of the Virus or Bacteria exclusion. See Delaware Valley Plumbing Supply, Inc. v. Merchants Mut. Ins. Co., No. 20-CV-08257 (NLH), 519 F.Supp.3d 178, 186 (D.N.J. Feb. 16, 2021) ("While the Court recognizes the significant harm suffered by individuals and businesses as a result of the COVID-19 pandemic, the Policy provided by Defendant explicitly barred coverage for the losses allegedly suffered by Plaintiff here."); Gavrilides Management Co. v. Michigan Insurance Co. , No. 20-258-CB-C30, 2020 WL 4719102 (Mich. Cir. Ct. July 1, 2020) (granting insurer motion to dismiss); Social Life Magazine, Inc. v. Sentinel Ins. Co. Ltd. , No. 20 CIV 3311 (VEC), 2020 WL 2904834 (S.D.N.Y. May 14, 2020) (denying policyholder's preliminary injunction motion based upon failure to demonstrate likely success on the merits).

Benamax's Complaint alleged that it suffered "direct physical loss of" or "damage to property" because its property was rendered unusable for its intended purpose because of New Jersey Executive Order 107, commonly referred to the ‘stay-at-home order.’ The closing of restaurants resulted in a direct physical loss of or damage to property because the Benamax property was rendered unusable for its intended purpose qualifying it for coverage. The reasonable expectations of the insured dictate that the definition of "property damage" in Section II of the Policy would apply to all sections of the policy. For this reason, Benamax claims that both Gavrilides Management Co. and Social Life Magazine Inc. are of no persuasive value and that authority exists for the Court to deny the motion. In addition, Benamax claims that it is entitled to "Civil Authority" coverage because it was denied access to its property resulting in property damage. Finally, Benamax argues that the Virus or Bacteria exclusion may not be considered on a Rule 12(b)(6) motion to dismiss, and even if it can be it is precluded by regulatory estoppel.

I. Standard of Review

Federal Rule of Civil Procedure 12(b)(6) allows a party to move for dismissal of a claim based on "failure to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). A complaint should be dismissed pursuant to Rule 12(b)(6) if the alleged facts, taken as true, fail to state a claim. Fed. R. Civ. P. 12(b)(6). When deciding a motion to dismiss pursuant to Rule 12(b)(6), ordinarily only the allegations in the complaint, matters of public record, orders, and exhibits attached to the complaint, are taken into consideration.² See Chester County Intermediate Unit v. Pa. Blue Shield , 896 F.2d 808, 812 (3d Cir. 1990). It is not necessary for the plaintiff to plead evidence. Bogosian v. Gulf Oil Corp. , 561 F.2d 434, 446 (3d Cir. 1977). The question before the Court is not whether the plaintiff will ultimately prevail. Watson v. Abington Twp. , 478 F.3d 144, 150 (2007). Instead, the Court simply asks whether the plaintiff has articulated "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007).

"A claim has facial plausibility³ when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (citing Twombly, 550 U.S. at 556, 127 S.Ct. 1955 ). "Where there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief." Iqbal , 556 U.S. at 679, 129 S.Ct. 1937.

The Court need not accept " ‘unsupported conclusions and unwarranted inferences,’ " Baraka v. McGreevey , 481 F.3d 187, 195 (3d Cir. 2007) (citation omitted), however, and "[l]egal conclusions made in the guise of factual allegations ... are given no presumption of truthfulness." Wyeth v. Ranbaxy Labs., Ltd. , 448 F. Supp. 2d 607, 609 (D.N.J. 2006) (citing Papasan v. Allain , 478 U.S. 265, 286, 106 S.Ct. 2932, 92 L.Ed.2d 209 (1986) ); see also Kanter v. Barella , 489 F.3d 170, 177 (3d Cir. 2007) (quoting Evancho v. Fisher , 423 F.3d 347, 351 (3d Cir. 2005) ("[A] court need not credit either ‘bald assertions’ or ‘legal conclusions’ in a complaint when deciding a motion to dismiss.")). Accord Iqbal , 556 U.S. at 678-80, 129 S.Ct. 1937 (finding that pleadings that are no more than conclusions are not entitled to the assumption of truth).

Further, although "detailed factual allegations" are not necessary, "a plaintiff's obligation to provide the ‘grounds’ of his ‘entitlement to relief’ requires more than labels and conclusions, and a formulaic recitation of a cause of action's elements will not do." Twombly , 550 U.S. at 555, 127 S.Ct. 1955 (internal citations omitted). See also Iqbal , 556 U.S. at 678, 129 S.Ct. 1937 ("Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.").

Thus, a motion to dismiss should be granted unless the plaintiff's factual allegations are "enough to raise a right to relief above the speculative level on the assumption that all allegations in the complaint are true (even if doubtful in fact)." Twombly , 550 U.S. at 556, 127 S.Ct. 1955 (internal citations omitted). "[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged-but it has not ‘shown’-‘that the pleader is entitled to relief.’ " Iqbal , 556 U.S. at 679, 129 S.Ct. 1937 (quoting Fed. R. Civ. P. 8(a)(2) ).

Under New Jersey law, insurance contracts are subject to special rules of interpretation because they are contracts of adhesion. Zacarias v. Allstate Ins. Co. , 168 N.J. 590, 775 A.2d 1262, 1264 (2001) (citations omitted). "If the policy language is clear, the policy should be interpreted as written, [but][i]f the policy is ambiguous, the policy will be construed in favor of the insured." Colliers Lanard & Axilbund v. Lloyds of London , 458 F.3d 231, 236 (3d Cir. 2006) (quoting Nav–Its, Inc. v. Selective Ins. Co. of Am. , 183 N.J. 110, 869 A.2d 929, 933 (2005) ). When there is ambiguity, the insurance policy should be interpreted to "comport with the reasonable expectations of the insured, even if a close reading of the written text reveals a contrary meaning." Zacarias , 775 A.2d at 1264.

New Jersey courts have held that insurance policy exclusions must be narrowly construed and that the burden is on the insurer to bring the case within the exclusion. Am. Motorists Ins. Co. v. L-C-A Sales Co. , 155 N.J. 29, 713 A.2d 1007, 1013 (1998) (citation omitted). "Nevertheless, [New Jersey courts] adhere to the principle that an insurance policy should generally be interpreted ‘according to its plain and ordinary meaning,’ so as not to disregard the ‘clear import and intent’ of a policy exclusion." Id. (citations omitted).

II. Discussion

Benamax purchased the Policy, a Merchants Advantage Plus Businessowners Policy from Defendant for its Westmont property for the Policy Period of February 15, 2020 through February 15, 2021. Compl. at ¶¶ 8-11. Benamax alleges that it suffered "direct physical loss of" or "damage to property" as contemplated by the Policy because its property was rendered unusable for its intended purpose because of New Jersey Executive Order 107, commonly referred to the ‘stay-at-home order.’⁴ Defendant claims that Benamax could have adapted to a "take-out...