Cent. Laundry, LLC v. Ill. Union Ins. Co.

• Decision Date: 05 January 2022
• Docket Number: Civil Action No. 1:20-cv-1273 (RDA/TCB)
• Citation: 578 F.Supp.3d 781
• Parties: CENTRAL LAUNDRY, LLC, et al., Plaintiffs, v. ILLINOIS UNION INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Eastern District of Virginia

578 F.Supp.3d 781

CENTRAL LAUNDRY, LLC, et al., Plaintiffs,

v.ILLINOIS UNION INSURANCE COMPANY, Defendant.

Civil Action No. 1:20-cv-1273 (RDA/TCB)

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

Signed January 5, 2022

C. Thomas Brown, Glenn Hugh Silver, Silver & Brown, Fairfax, VA, for Plaintiffs.

Marianne May, Clyde & Co. US LLP, Florham, NJ, Vincent James Palmiotto, Clyde & Co. US LLP, Washington, DC, for Defendant.

MEMORANDUM OPINION AND ORDER

Rossie D. Alston, Jr., United States District Judge

This matter comes before the Court on the Motion for Partial Summary Judgment brought by Plaintiffs, Professional Hospitality Resources, Inc., Central Laundry, LLC, Heritage Investments, LLC, 34th Street Garage, LLC, Oceanfront Investments, LLC, Cavalier Associates, LLC, Norfolk Hotel Associates, LLC, and Atlantic Coast Development, LLC (collectively "Plaintiffs" or "Insureds"), and on the Motion for Summary Judgment brought by Defendant Illinois Union Insurance Company ("Defendant" or "Insurer") in this insurance coverage case. Dkt. Nos. 46; 48. The Court has dispensed with oral argument as it would not aid in the decisional process. Fed. R. Civ. P. 78(b) ; Local Civil Rule 7(J). This matter has been fully briefed and is now ripe for disposition.

Considering Plaintiffs’ Motion for Partial Summary Judgment (Dkt. 46), Plaintiffs’ Memorandum in Support (Dkt. 47), Defendant's Brief in Opposition (Dkt. 57), Plaintiffs’ Reply (Dkt. 59), as well as Defendant's Motion for Summary Judgment (Dkt. 48), Defendant's Memorandum in Support (Dkt. 49), Plaintiffs’ Brief in Opposition (Dkt. 54), and Defendant's Reply (Dkt. 60), it is hereby ORDERED that Defendant's Motion for Summary Judgment is GRANTED and it is further ORDERED that Plaintiffs’ Motion for Partial Summary Judgment is DENIED. For the reasons that follow, judgment must be entered against Plaintiffs’ claims because Plaintiffs have failed to establish a triable issue of material fact.

I. BACKGROUND

A. Factual Background

Although the parties dispute certain facts, the following facts are uncontested except where noted. See Dkt. 47 at 3-9; Dkt. 49 at 2-14.

Plaintiffs are the owners and operators of several hospitality, hotel, and restaurant businesses located in Norfolk and Virginia Beach, each of which is owned by Gold Key/PHR. Dkt. 1-2 at 2-4 ¶¶ 1-8, 14. Plaintiffs allege the novel coronavirus, SARS-CoV-2, known to cause the COVID-19 infectious disease ("COVID-19"), has and continues to suspend and threaten Plaintiffs’ operations. Id. at 5 ¶15. COVID-19 is a severe acute respiratory syndrome that may cause respiratory illness and inflammation. Dkt. 47 at 4. The virus spreads using people as vectors and is thought to be primarily transmitted via respiratory droplets but also via contaminated hands, including those of asymptomatic carriers of the disease, and contaminated surfaces. Id. at 5. The Governor of Virginia labeled COVID-19 as a "communicable disease of public health threat" as defined in § 44-146.16 of the Code of Virginia and a "disaster" as defined in § 44-146.16 of the Code of Virginia. Id. at 210-11. Furthermore, the Governor determined that a "substantial number" of individuals with the disease are asymptomatic. Id. at 254.

Plaintiffs sought insurance coverage from Defendant for income losses and extra costs related to the partial suspension of their operations as well as the costs expended to remediate the presence and future threat of COVID-19. They sought coverage under Premises Pollution Liability Portfolio Insurance Policy number PPI G27840620 001 ("Policy"), which Defendant issued to Plaintiffs covering the period from April 18, 2016 to April 18, 2021. Id. at 29. Plaintiffs had over 100 employees test positive for COVID-19 while working across seven locations in Virginia—each of which is considered a "covered location" under the Policy. Dkt. 47 at 7; Dkt. 57 at 5. All parties agree that Plaintiffs’ claim falls within the Policy period.

In a letter to Defendant from Plaintiffs, dated March 20, 2020, Plaintiffs notified Defendant of a claim for "business interruption." Dkt. 1-2 at 322-23. In that letter, Plaintiffs attributed the "business interruption" to a March 17, 2020 notice from the Governor of Virginia declaring the spread of COVID-19 virus a public health emergency, which required Plaintiffs to "partially suspend business operations." Id. at 323. On April 9, 2020, Defendant provided a response letter to Plaintiffs denying coverage under the Policy because the claim "d[id] not involve a ‘pollution condition or ‘an indoor environmental condition,’ " and as a result, "coverage for ‘business interruption’ is not triggered." Dkt. 47-9 at 4. A letter to Defendant from Plaintiffs, dated April 17, 2020, included additional "covered locations" for which Plaintiffs sought compensation for "loss" under the Policy. Id. at 332.

The definitions in the Policy are extensive and interrelated. For this reason, this Court summarizes the relevant definitions undergirding the arguments presented in the cross-motions for summary judgment.

Plaintiffs generally allege that COVID-19 was a "pollution condition" under the Policy and that they are entitled to compensation under the Policy for losses sustained therefrom at each of their "covered locations" (those locations covered under the terms of the Policy). "Pollution condition" is defined in relevant part as:

The discharge, dispersal, release, escape, migration, or seepage of any solid, liquid, gaseous or thermal irritant, contaminant, or pollutant, including soil, silt, sedimentation, smoke, soot, vapors, fumes, acids, alkalis, chemicals, electromagnetic fields (EMFs), hazardous substances, hazardous materials, waste materials, "low-level radioactive waste", "mixed waste" and medical, red bag, infectious or pathological wastes, on, in, into, or upon land and structures thereupon, the atmosphere, surface water, or groundwater.

Dkt. 1-2 at 39.

The Policy generally indemnifies Plaintiffs for up to $5,000,000 per "pollution condition" with a $10,000,000 aggregate cap for "all pollution conditions" in excess of a $50,000 self-insured retention payment per "pollution condition." Id. ; Dkt. 49 at 2-3. A three-day deductible period also applies to each "pollution condition," whereby Defendant is not required to cover liability costs associated with the "pollution condition" for three days following the occurrence of said "pollution condition." Dkt. 1-2 at 29.

There exist three relevant insuring agreements under which Plaintiffs seek compensation from Defendant due to their assertion that COVID-19 qualifies as a "pollution condition": First-Party Remediation Costs Coverage ("Coverage A"); First-Party Emergency Response Coverage ("Coverage B"); and Supplemental Coverage – Loss of Rental Income ("Supplemental Coverage"). Each of the three coverages applies to "Loss" emanating in one way or another from the negative impact of a "pollution condition."

Coverage A requires that the "pollution condition" exist "on, at[,] under or migrating from a ‘covered location.’ " Id. at 32. "Loss" under Coverage A includes "first-party remediation costs" which are defined as "reasonable necessary ‘remediation costs’ incurred by an ‘insured’ resulting from the discovery of a ‘pollution condition’ ...." "Remediation costs" are those "expenses incurred to investigate, quantify, monitor, remove, dispose, treat, neutralize, or immobilize ‘pollution conditions’ ... to the extent required by ‘environmental law’ in the jurisdiction of such ‘pollution conditions’ ...." "Environmental law" is defined as:

any Federal, state, commonwealth, municipal or other local law, statute, ordinance, rule, guidance document, regulation, and all amendments thereto (collectively Laws), including voluntary cleanup or risk-based corrective action guidance, or the direction of an "environmental professional" acting pursuant to the authority provided by any such Laws, along with any governmental, judicial or administrative order or directive governing the liability or responsibilities of the "insured" with respect to a "pollution condition" or "indoor environmental condition".

Id. at 36.

Coverage A "Loss" also includes "business interruption loss" which means, as relevant here, "Business income" which the Policy defines as "Net profit or loss ... that would have been realized had there been no ‘business interruption’ " id. at 35, or "extra expense" which the Policy defines as:

costs incurred by the "insured" due to a "pollution condition" or "indoor environmental condition" that are necessary to avoid or mitigate any "business interruption". Such costs must be incurred to actually minimize the amount of foregone "business income" that would otherwise be covered pursuant to this Policy.

Id. at 37.

"Business interruption" in turn is defined as:

the necessary partial or complete suspension of the "insured's" operations at a "covered location" for a period of time, which is directly attributable to a "pollution condition" or "indoor environmental condition" to which Coverage A of this Policy applies. Such period of time shall extend from the date that the operations are necessarily suspended and end when such "pollution condition" or "indoor environmental condition" has been remediated to the point at which the "insured's" normal operations could reasonably be restored.

Id. at 35.

Coverage B requires that the "pollution condition" exist "on, at[,] under or migrating from a ‘covered location.’ " Id. at 32. "Loss" under Coverage B includes "emergency response costs," which are defined to include:

first-party remediation costs’ incurred within seven (7) days following the discovery of a "pollution condition" ... in order to abate or respond to an imminent and substantial threat to human health or the environment arising out of ... [a] "pollution condition" ... on, at, under or migrating from a "covered location" ... provided such "emergency response costs" are reported to the Insurer

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