BJZJ, LLC v. Mt. Hawley Ins. Co.
| Decision Date | 24 March 2022 |
| Docket Number | CASE NO. 6:21-CV-00998 |
| Citation | 593 F.Supp.3d 461 |
| Parties | BJZJ, LLC v. MT. HAWLEY INSURANCE CO. |
| Court | U.S. District Court — Western District of Louisiana |
Douglas Anthony Lee, II, Joseph Frazier Gaar, Jr., Lucas Scott Colligan, Gaar Law Firm, Lafayette, LA, Jacob Houston Hargett, Jason M. Welborn, Welborn & Hargett, Lafayette, LA, for BJZJ, LLC.
Lorin Rebekah Scott, Nicole M. Babb, Seth A. Schmeeckle, Lugenbuhl Wheaton et al., New Orleans, LA, William Maxwell Daley, Pro Hac Vice, Robinson & Cole, Providence, RI, Wystan M. Ackerman, Pro Hac Vice, Robinson & Cole, Hartford, CT, for Mt. Hawley Insurance Co.
RULING
Before the Court is a Motion to Dismiss for Failure to State a Claim brought by Defendant, Mt. Hawley Insurance Company.1 Pursuant to its motion, Defendant seeks dismissal of all claims asserted in this matter. Plaintiff BJZJ LLC d/b/a Snap Fitness opposes the motion.2 For the reasons that follow, the motion is GRANTED.
Plaintiff owns and operates a fitness and recreational facility located in Maurice, Louisiana.3 Plaintiff purchased a Commercial Lines Policy ("the Policy") from Defendant, which was in effect at all times relevant to this suit. The Policy includes Business Income and Extra Expense coverage. Beginning in March of 2020, in response to the onset of the COVID-19 pandemic, the Governor of Louisiana issued a series of orders requiring nonessential businesses to either suspend or reduce their operations. Due to these orders, Plaintiff alleges it was "forced to greatly reduce operations," which in turn caused "immense financial losses."4 To recover its lost revenue, Plaintiff filed a claim with Defendant for coverage under the Policy. On or about December 28, 2020, Defendant denied coverage. Plaintiff then filed this suit, contending coverage is triggered by the "Business Income and Extra Expense" portion of the Policy, including under the "Civil Authority" provision.5 Plaintiff seeks declaratory and injunctive relief, compensatory damages for breach of contract, costs and attorney's fees.
"Motions to dismiss for failure to state a claim are appropriate when a defendant attacks the complaint because it fails to state a legally cognizable clam."6 Such a motion "admits the facts alleged in the complaint, but challenges plaintiff's rights to relief based upon those facts."7 To overcome a Rule 12(b)(6) motion, a complaint must contain sufficient factual matter to state a claim to relief that is plausible on its face.8 The plausibility standard is met "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged."9 Although a complaint does not need detailed factual allegations, "it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation."10 A pleading that merely offers "labels and conclusions" or "a formulaic recitation of the elements" will not suffice.11 Likewise, a complaint that tenders "naked assertions devoid of further factual enhancement" will not survive a Rule 12(b)(6) motion.12
When deciding a Rule 12(b)(6) motion, "[t]he court accepts all well-pleaded facts as true, viewing them in the light most favorable to the plaintiff."13 However, this tenet does not apply to conclusory allegations, unwarranted deductions, or legal conclusions couched as factual allegations, as such assertions do not constitute "well-pleaded facts."14 In considering a Rule 12(b)(6) motion, the district court generally "must limit itself to the contents of the pleadings, including attachments thereto."15 One exception to this rule is that the court may consider "documents attached to either a motion to dismiss or an opposition to that motion when the documents are referred to in the pleadings and are central to a plaintiff's claims."16 In light of this exception, the Court will consider the insurance policy at issue in this case, as it is attached to Defendant's motion and quoted from at length in the Complaint.
This suit was removed to this Court on the basis of diversity jurisdiction.17 Accordingly, the Court applies Louisiana's Conflict of Laws codal articles to determine what body of law applies when interpreting the contract of insurance.18 Under those articles, the law of the state where the insurance contract was issued and executed generally governs the interpretation of the contract.19 However, a choice-of-law analysis is unnecessary "if the laws of the states with an interest in the dispute do not conflict."20 Here, Defendant states the Policy was issued in Minnesota, but that "for the purposes of the instant motion, there is no conflict between Minnesota and Louisiana law...."21 Both parties have applied Louisiana law in their briefing when interpreting the insurance contract. Accordingly, the Court presumes there is no material conflict between the laws of Louisiana and Minnesota and will therefore interpret the contract in accordance with Louisiana law. To determine Louisiana law, district courts are "bound to apply the law as interpreted by the state's highest court."22 Where such decisions are absent, the court must make an "Erie- guess" and "determine, in its best judgment, how the highest court of the state would resolve the issue if presented with the same case."23 However, if a panel of the Fifth Circuit has ruled on a state law issue and that ruling has not been superseded by either Louisiana jurisprudence or a change in statutory authority, district courts are bound by that interpretation of Louisiana law.24
"An insurance policy is a contract between the parties and should be construed by using the general rules of interpretation of contracts set forth in the Louisiana Civil Code."25 "The judiciary's role in interpreting insurance contracts is to ascertain the common intent of the parties to the contract."26 "The parties' intent, as reflected by the words of the policy, determine[s] the extent of coverage."27 The words of an insurance contract are not to be read in isolation, as "[e]very insurance contract shall be construed according to the entirety of its terms and conditions as set forth in the policy, and as amplified, extended, or modified by any rider, endorsement, or application attached to or made a part of the policy."28 "When the words of a contract are clear and explicit and lead to no absurd consequences, no further interpretation may be made in search of the parties' intent."29
A provision of a contract that is susceptible to different meanings "must be interpreted with a meaning that renders it effective and not with one that renders it ineffective."30 "Ambiguous policy provisions are generally construed against the insurer and in favor of coverage."31 Under this rule, an equivocal provision seeking to narrow an insurer's obligation is strictly construed against the insurer.32 This principle however applies "only if the ambiguous policy provision is susceptible to two or more reasonable interpretations."33 As explained by the Louisiana Supreme Court:
The insured bears the burden of proving an incident falls within the policy's terms; the insurer bears the burden of proving the applicability of an exclusionary clause within the policy.35
Plaintiff asserts it is entitled to coverage under the Policy's "Business Income and Extra Expense" and "Civil Authority" provisions. Defendant contends that the forgoing provisions do not provide coverage for losses associated with the COVID-19 pandemic and further asserts that coverage is barred by several exclusions in the Policy. The basic grant of coverage set forth in the Policy provides coverage "for direct physical loss of or damage to Covered Property ... caused by or resulting from any Covered Cause of Loss."36 "Covered Cause of Loss" is defined as "Risks of Direct Physical Loss" unless excluded or limited by the Policy.37 The "Business Income and Extra Expense" portion of the Policy states:
We will pay for the actual loss of "earnings" 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 location(s) scheduled in this policy, ... caused by or resulting from a Covered Cause of Loss.38
In addition to "earnings," this portion of the policy provides coverage for any "Extra Expense" incurred,39 as well as for any earnings lost when access to the facility is prohibited by "action of civil authority,"40 provided the extra expenses or loss of earnings was caused by a "direct physical loss of or damage to property."41
Defendant asserts Plaintiff's claim for Business Income and Extra Expense coverage fails as a matter of law, because Plaintiff has not alleged "direct physical loss or damage to property" as required by the Policy.42 Plaintiff responds that it is not required to allege "physical damage," because allegations of "physical loss" are sufficient to state a claim under the Policy.43 According to Plaintiff, an insured can suffer a "physical loss," without necessarily suffering "physical damage," thereby triggering coverage under the policy.44 Stated differently, Plaintiff contends...
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