Buffalo Xerographix, Inc. v. Hartford Ins. Grp.

• Decision Date: 18 May 2021
• Docket Number: Case No. 1:20-cv-520
• Citation: 540 F.Supp.3d 382
• Parties: BUFFALO XEROGRAPHIX, INC., Shatkin F.I.R.S.T. LLC, and Todd E. Shatkin DDS PLLC, for themselves and on behalf of a class of similarly situated policyholders, Plaintiffs, v. The HARTFORD INSURANCE GROUP d/b/a The Hartford Financial Services Group, Inc., Sentinel Insurance Company, Ltd., Hartford Casualty Insurance Company, and Hartford Insurance Company of the Midwest, Defendants.
• Court: U.S. District Court — Western District of New York

540 F.Supp.3d 382

BUFFALO XEROGRAPHIX, INC., Shatkin F.I.R.S.T. LLC, and Todd E. Shatkin DDS PLLC, for themselves and on behalf of a class of similarly situated policyholders, Plaintiffs,

v.The HARTFORD INSURANCE GROUP d/b/a The Hartford Financial Services Group, Inc., Sentinel Insurance Company, Ltd., Hartford Casualty Insurance Company, and Hartford Insurance Company of the Midwest, Defendants.

Case No. 1:20-cv-520

United States District Court, W.D. New York.

Signed May 18, 2021

Filed May 19, 2021

Charles C. Ritter, Jr., Christopher M. Berloth, Steven William Klutkowski, Thomas D. Lyons, Duke, Holzman, Photiadis & Gresens, LLP, Buffalo, NY, for Plaintiff Buffalo Xerographix Inc.

Steven William Klutkowski, Duke Holzman Photiadis & Gresens LLP, Buffalo, NY, for Plaintiffs Shatkin F.I.R.S.T. LLC, Todd E. Shatkin DDS PLLC.

Charles A. Michael, Pro Hac Vice, Christopher M. Paparella, Meghan Newcomer, Pro Hac Vice, Steptoe & Johnson LLP, New York, NY, Eugene Welch, Tully Rinckey, PLLC, Rochester, NY, Matthew Elder Mitchell, Tully Rinckey PLLC, Buffalo, NY, Sarah D. Gordon, Pro Hac Vice, Steptoe & Johnson LLP, Washington, DC, for Defendants Sentinel Insurance Company, Limited, Hartford Casualty Insurance Company, Hartford Insurance Company of the Midwest.

ORDER ON THE HARTFORD INSURANCE GROUP'S MOTION TO DISMISS

Geoffrey W. Crawford, Judge

Plaintiffs Buffalo Xerographix, Inc. ("BXI"), Shatkin F.I.R.S.T. LLC ("First LLC"), and Todd E. Shatkin DDS PLLC ("TES") have filed a putative class action against defendant insurance companies, Sentinel Insurance Company, Ltd. ("Sentinel"), Hartford Casualty Insurance Co. ("Hartford Casualty"), and Hartford Insurance Company of the Midwest ("Midwest") (collectively, "Insuring Defendants" or "Subsidiary Defendants"), and defendant The Hartford Insurance Group ("HIG") for breach of contract and violations of New York General Business Law § 349 relating to contracts for insurance between Plaintiffs and Defendants. (Doc. 60.) Defendant HIG has filed a motion to dismiss, arguing that Plaintiffs do not plausibly allege HIG's liability under the contracts; that Plaintiffs lack standing for their claims against HIG; and that the court lacks personal jurisdiction over HIG. (Doc. 61.)

Facts

The Amended Complaint alleges the following facts. Plaintiff BXI entered into a contract for insurance with Sentinel, Plaintiff First LLC with Hartford Casualty, and Plaintiff TES with Midwest. (Doc. 60 ¶ 1.) Plaintiffs seek to represent a class of similarly situated individuals who purchased contracts from Subsidiary Defendants and HIG. (Id. ¶ 165.) The Amended Complaint alleges that HIG was also a party to each of these contracts (id. ¶ 1), and that HIG "owns, directs and controls the activities" of the Subsidiary Defendants (id. ¶ 2).

The insurance contracts at the heart of this litigation are commercial property insurance contracts. (Id. ¶ 3.) The contracts include "(a) policies identified by Defendants as ‘Spectrum Business Owner's Policy’; and/or (b) Special Property Coverage Form SS 00 07 07 05 (the ‘Policy’)." (Id. ) The Policy is "all risk" and provides coverage for physical loss or damage to property unless the loss is "excluded" or "limited." (Id. ¶¶ 4–5.) Defendants have stated that the Policy does not provide benefits for losses due or relating to the novel coronavirus, the disease it causes (COVID-19), or the actions taken by civil authorities in response to the virus and COVID-19. (Id. ¶ 13.) Defendants denied coverage to Plaintiffs for damages arising from the virus, COVID-19, and orders issued by civil authorities (id. ¶ 15).

A. Relationship Between Defendant HIG and Subsidiary Defendants

Defendant HIG is a Delaware corporation registered and authorized to transact insurance business in New York. (Id. ¶ 20.) Sentinel, Hartford Casualty, and Midwest are each stock insurance companies "owned, controlled and directed by HIG." (Id. ¶ 21.) HIG

(a) develops policy forms, endorsements, and exclusions which it issues directly and in conjunction with its Affiliates, (b) controls, directs and/or performs the underwriting activities for all insurance policies issued under the tradename "The Hartford," including the policies issued to plaintiffs BXI, [First LLC], and TES, (c) controls, directs, and/[or] performs the underwriting activities for all insurance policies of which any of the Affiliates are referenced as a "writing company;" (d) controls, directs, and/or performs claims investigation through common claims representatives for the policies issued by it and/or any Affiliate, including the policies issued to plaintiffs BXI, [First LLC], and TES, and (e) controls, directs, and performs coverage determinations for policies issued under the tradename The Hartford and/or by any of the Affiliates, including the policies issued to plaintiffs BXI, [First LLC] and TES.

(Id. ¶ 22.) HIG "controls and directs" the claims processing for policies sold by HIG and Subsidiary Defendants. (Id. ¶ 26.)

Plaintiffs allege that HIG and Subsidiary Defendants "share and use the same logo(s)" (id. ¶ 119), slogans (id. ¶ 120) and "marketing, including common use of the ‘Stag’ logo and ‘The Hartford’ as registered trademarks" (id. ¶ 127); "share and use the same forms, including the [Department of Financial Services] Response, [Insurance Service Office] forms, policy forms, reservation of rights letters, and denial letters" (id. ¶ 121); "share the same underwriting department, such that the underwriting department underwrites claims for each Affiliate indiscriminately and indistinguishably" (id. ¶ 122), and "the same adjusters and examiners, such that the same individuals investigate, adjust, examine, and make coverage determinations on claims for each Affiliate" (id. ¶ 123); and share the same office space, including One Hartford Plaza, Hartford, CT and 501 Pennsylvania Parkway, Indianapolis, IN (id. ¶¶ 124–25), telephone numbers (id. ¶ 126), websites (id. ¶ 128), and IT systems (id. ¶ 129). Furthermore, Plaintiffs allege that the business model and operations of Subsidiary Defendants "is designed to assist, support, and follow the directions of defendant HIG." (Id. ¶ 130.)

Corporate disclosure statements filed by Subsidiary Defendants indicate that Sentinel is a wholly owned subsidiary of HIG (Doc. 35 at 1); Hartford Casualty is a wholly owned subsidiary of Hartford Accident & Indemnity Company, which is in turn a wholly owned subsidiary of Hartford Fire Insurance Company, which is itself a wholly owned subsidiary of HIG (Doc. 30); and Midwest is a wholly owned subsidiary of HIG (Doc. 31).

B. Plaintiffs’ Insurance Contracts

Plaintiffs’ insurance contracts were attached as exhibits to the Amended Complaint. The policies include numerous references to "The Hartford." (See Doc. 68 at 17 (citing examples).) An "Important Notice to Policyholders" page near the beginning of each policy states: "You are receiving this Notice because you purchased a business owner's policy from The Hartford, (your Policy was issued by The Hartford writing company identified on your policy Declarations page) ...." (Doc. 60-1 at 7; Doc 60-2 at 5; Doc. 60-3 at 5.) The phone number for claims reporting, which is displayed on the same page, is the same across all three policies. Similarly, an adjacent page titled "Insurance Policy Billing information" explains: "You are receiving this Notice so you know what to expect as a valued customer of The Hartford. Should you have any questions after reviewing this information, please contact us at 866-467-8730." (Doc. 60-1 at 6; Doc 60-2 at 6; Doc. 60-3 at 6.) The phone number is the same in all three policies.

Form SS 00 01 03 14 of the policies indicates that it is a "Spectrum Business Owner's Policy." (Id. ¶ 48.) Plaintiffs seek to a represent a class of policyholders whose policies included the "Spectrum Business Owner's Policy" or "Special Property Coverage Form" SS 00 07 07 05. (Doc. 60 ¶ 165.) The declarations page of the Spectrum Business Owner's Policy states:

This Spectrum Policy consists of Declaration, Coverage Forms, Common Policy Conditions and any other Forms and Endorsements issued to be a part of the Policy. This insurance is provided by the stock insurance company of The Hartford Insurance Group shown below.

INSURER : [Sentinel, Hartford Casualty, or Hartford Midwest]

One Hartford Plaza, Hartford, CT 06155

(Doc. 60-1 at 15; Doc. 60-2 at 12; Doc. 60-3 at 12.) A logo featuring a stag above the words "The Hartford" appears on the opposite side of the declaration page. (Doc. 60-1 at 15; Doc. 60-2 at 12; Doc. 60-3 at 12.) The bottom of each declaration page displays a signature, accompanied by the note "Countersigned by [Signature]" and "Authorized Representative." (Doc. 60-1 at 15; Doc. 60-2 at 12; Doc. 60-3 at 12.) The signature is the same across the three policies. Some pages later, each policy contains the statement, "Our President and Secretary have signed this policy. Where required by law, the Declarations page has also been countersigned by our duly authorized representative." (Doc. 60-1 at 33; Doc. 60-2 at 28; Doc. 60-3 at 28.) The electronic signatures of Lisa Levin and Douglass Elliott, who are the Secretary and President, respectively, of Defendant HIG, accompany this statement. (Doc. 60-1 at 33; Doc. 60-2 at 28; Doc. 60-3 at 28; Doc. 60 ¶ 36.)

The Amended Complaint includes numerous allegations regarding the effects of COVID-19 on Plaintiffs’ businesses, which are not directly relevant to the resolution of the pending motion. (See Doc. 60 ¶¶ 81–107.) In brief, Plaintiffs allege that they have suffered "direct physical loss of or physical damage to Covered Property" as a result of COVID-19 and actions taken by civil authorities, and contend that their policies (as provided for in Special Property Coverage Form SS 00 07 07 05) entitle them to recover for these losses. (Id. ¶¶ 105–107.) Of note, Plaintiffs’ policies do not contain the "Virus Exclusion" developed by the Insurance Service Office ("IS...