Borah, Goldstein, Altschuler, Nahins & Goidel, P.C. v. Cont'l Cas. Co.

• Decision Date: 16 February 2023
• Docket Number: 22-cv-01788 (LJL)
• Court: U.S. District Court — Southern District of New York
• Parties: BORAH, GOLDSTEIN, ALTSCHULER, NAHINS & GOIDEL, P.C., Plaintiff, v. CONTINENTAL CASUALTY COMPANY, Defendant.

BORAH, GOLDSTEIN, ALTSCHULER, NAHINS & GOIDEL, P.C., Plaintiff,
v.
CONTINENTAL CASUALTY COMPANY, Defendant.

No. 22-cv-01788 (LJL)

United States District Court, S.D. New York

February 16, 2023

OPINION AND ORDER

LEWIS J. LIMAN, UNITED STATES DISTRICT JUDGE:

Defendant Continental Casualty Company (“Defendant” or “Continental”) moves, pursuant to Federal Rule of Civil Procedure 12(b)(6), to dismiss the complaint (the “Complaint”) of Borah, Goldstein, Altschuler, Nahins & Goidel, P.C. (“Plaintiff”). Dkt. No. 20. For the reasons that follow, the motion is granted.

BACKGROUND

In this case, Plaintiff seeks insurance coverage for business interruption and related loss caused by Plaintiff closing its offices and suspending its operations in light of the COVID-19 pandemic. Dkt. No. 14. A score of similar cases have been filed in courts across the country. See Pac. Indem. Co. v. Kiton Corp., 2022 WL 2292769, at *1 (S.D.N.Y. June 24, 2022).

For the purposes of this motion, the Court takes as true the well-pleaded allegations of the Complaint. “The Court at this stage may also consider statements or documents incorporated into the Complaint by reference, such as coverage provisions in the insurance contract at issue.” Michael Cetta, Inc. v. Admiral Indem. Co., 506 F.Supp.3d 168, 170 (S.D.N.Y. 2020).

I. Insurance Policy

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Plaintiff is a law firm engaged in the provision of legal services to clients in the New York City area primarily related to real estate and landlord-tenant law. Dkt. No. 14 ¶ 13. Plaintiff's principal office is located in Manhattan, although it has satellite offices in Queens, Melville, and the Bronx. Id. ¶ 14. During the relevant period prior to the COVID-19 pandemic, Plaintiff employed 57 attorneys and approximately 80 non-attorneys, all of whom operated from Plaintiff's offices. Id. ¶¶ 15-16. A significant portion of Plaintiff's business involves in-person appearances by its employees in court and accordingly Plaintiff depends on the courts and governmental administrative bodies functioning. Id. ¶¶ 17-18.

Plaintiff purchased an Insurance Policy (Policy #5094248640) underwritten by Continental for the renewal period covering July 15, 2019 to July 15, 2020 (the “Policy”). Id. ¶¶ 1, 22. Plaintiff was not offered the opportunity and did not participate in the negotiation or drafting of the Policy. Id. ¶ 25. The premises covered by the Policy are Plaintiff's office locations at: (i) 377 Broadway, Floors 4-7, New York, NY 10013; (ii) 108-18 Queens Boulevard, Forest Hills, NY 11375; (iii) 290 Broad Hollow Road, Melville, NY 11747; and (iv) 800 Grand Concourse, Bronx, NY 10451. Id. ¶ 33.

The Policy includes a Business Income and Extra Expense endorsement (“BI & EE Endorsement”). Id. ¶ 27. The BI & EE Endorsement provides:

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

Id. ¶ 44 (quoting Dkt. No. 14-1 at ECF p. 40). The Policy defines “suspension” (in relevant part) as “[t]he partial or complete cessation of your business activities ....” Id. ¶ 45 (quoting Dkt. No. 14-1 at ECF p. 37). “Operations” is defined, in relevant part, as “the type of your business

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activities occurring at the described premises ....” Id. ¶ 46 (quoting Dkt. No. 14-1 at ECF p. 35). “Period of restoration” is defined, in relevant part, as the period of time that:

a. Begins with the date of direct physical loss or damage caused by or resulting from any Covered Cause of Loss at the described premises; and

b. Ends on the earlier of: (1) The date when the property at the described premises should be repaired, rebuilt or replaced with reasonable speed and similar quality

..

Id. ¶ 47 (quoting Dkt. No. 14-1 at ECF p. 35). The terms “direct physical loss,” “direct,” “physical loss,” and “damage” are not defined in the Policy. Id. ¶¶ 29-32, 34. The words “virus” and “pandemic” do not appear in the Policy. Id. ¶¶ 36-37.

The BI & EE Endorsement also provides for payment to the insured for extra expense incurred:

We will pay Extra Expense (other than the expense to repair or replace property) to: (1) Avoid or minimize the “suspension” of business and to continue “operations” at the described premises or at replacement premises or temporary locations, including relocation expenses and costs to equip and operate the replacement premises or temporary locations ....

Id. ¶ 48 (quoting Dkt. No. 14-1 at ECF p. 41). “Extra Expense” is defined as the “reasonable and necessary expenses you incur during the ‘period of restoration' that you would not have incurred if there had been no direct physical loss of or damage to property caused by or resulting from a Covered Cause of Loss.” Id. ¶ 49 (quoting Dkt. No. 14-1 at ECF p. 41).

The Policy also includes a Business Income and Extra Expense-Dependent Property endorsement (“Dependent Property Endorsement”). Id. ¶ 50; see Dkt. No. 14-1 at ECF p. 152. That endorsement provides for additional coverage for business income loss due to suspension of operations at certain dependent properties within the coverage territory operated by another on whom the insured depends on to, among other things, deliver materials or services or accept the

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insured's products or services. Dkt. No. 14 ¶ 51. The Dependent Property Endorsement provides that coverage shall extend:

to the actual loss of Business Income you sustain and reasonable and necessary Extra Expense you incur due to the “suspension” of your “operations” during the “period of restoration.” The “suspension” must be caused by direct physical loss or damage at the premises of a Dependent Property, caused by or resulting from a Covered Cause of Loss.

Id. ¶ 52 (quoting Dkt. No. 14-1 at ECF p. 152). “Dependent Property” is defined as: “property operated by other [on] whom you depend [] to:

a. Deliver materials or services . . . to you, or to others for your account (Contributing Locations);

b. Accept your products or services (Recipient Locations);

c. Manufacture products for delivery to your customers under contract of sale (Manufacturing Locations); or d. Attract customers to your business (Leader Locations).”

Id. ¶ 53 (quoting Dkt. No. 14-1 at ECF p. 152).

Plaintiff also added coverage under the Civil Authority rider endorsement (“Civil Authority Endorsement”). Id. ¶ 55; see Dkt. No. 14-1 at ECF p. 62. The Civil Authority Endorsement extends the Policy's coverage to:

the actual loss of Business Income you sustain and reasonable and necessary Extra Expense you incur caused by action of civil authority that prohibits access to the described premises. The civil authority action must be due to direct physical loss of or damage to property at locations, other than the described premises, caused by or resulting from a Covered Cause of Loss.

Dkt. No. 14 ¶ 57 (quoting Dkt. No. 14-1 at ECF p. 62).

II. The COVID-19 Pandemic and Instant Dispute

COVID-19 is a contagious disease caused by severe acute respiratory syndrome coronavirus 2 (SARs-COV-2). Id. ¶ 58. As of April 2, 2022, it resulted in more than 488 million cases and 6.14 million deaths. Id. ¶ 59.

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The COVID-19 virus may be transmitted in various manners, including transmission via surfaces.^[1] Id. ¶ 60. The U.S. Centers for Disease Control and Prevention (“CDC”) warn: “The virus that causes COVID-19 can land on surfaces. It's possible for people to become infected if they touch those surfaces and then touch their nose, mouth, or eyes.” Id. ¶ 61. The Mayo Clinic similarly warns: “The COVID-19 virus can also spread if someone touches his or her eyes, nose or mouth after touching a surface or object with the virus on it. Without cleaning and disinfection, the COVID-19 virus may stay on surfaces from hours to days.” Id. ¶ 62. In addition, even cleaning property once does not assure that the property will not again be impacted by the coronavirus. Id. ¶ 65. Instead, to ensure that COVID-19 does not spread, businesses must be constantly engaged in cleaning efforts at significant cost to comply with the CDC recommendations. Id.

At the onset of the COVID-19 pandemic in New York State, the New York Governor declared a state-wide disaster emergency (“Executive Order 202”) on March 7, 2020 and issued three subsequent executive orders requiring businesses to utilize, to the maximum extent possible, telecommuting or work from home procedures and employers to reduce in-person workforces by various percentages, including 50% by March 20, 2020 at 8:00 p.m., 75% by March 21, 2020 at 8:00 p.m., and 100% by March 22, 2020 at 8:00 p.m. Id. ¶ 69. New York City's Mayor also issued a series of Emergency Executive Orders (“EEOs”), in which the Mayor

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declared a state of emergency, adopted the restrictions of the Governor's orders, extended provisions of prior orders, and provided mechanisms for enforcing the orders. Id. ¶ 70. Two of the EEOs state that “the virus physically is causing property loss and damage.” Id. ¶ 71. Other EEOs state as a reason for their issuance: “the propensity of the virus to spread person-to-person and also because the actions taken to prevent such spread have led to property loss and damage.” Id. ¶ 72. In addition, the Chief Judge and Chief Administrative Judge of New York State issued a series of administrative orders requiring courthouse closures and limited civil court filings. Id. ¶ 73.

In response to the COVID-19 pandemic, Plaintiff closed its offices as of Saturday, March 21, 2020. Id. ¶ 77. At the time Plaintiff closed its offices, New York City had become the epicenter of the pandemic in the United States. Id. ¶ 78. Plaintiff states that business...