Cherokee Nation v. Lexington Ins. Co.
| Decision Date | 13 September 2022 |
| Docket Number | 119,359 ,Comp. w/ 119,413 & 119,701 |
| Citation | 521 P.3d 1261 |
| Parties | CHEROKEE NATION ; Cherokee Nation Businesses, LLC ; Cherokee Nation Entertainment, LLC, Plaintiffs/Appellees, v. (1) LEXINGTON INSURANCE COMPANY; (2) Certain Underwriters at Lloyd's, London Subscribing to Policy No. PJ193647: (ASC 1414, KLN 510, ATL 1861, CIN 318, TAL 1183, AGR 3268 and XL Catlin Insurance Company UK Ltd.); (3) Certain Underwriters at Lloyd's, London Subscribing to Policy No. PJ1900131: (CNP4444); (4) Underwriters at Lloyd's — Aspen Specialty Insurance Company; (5) Certain Underwriters at Lloyd's, London Subscribing to Policy No. PJ1933021: (ASC 1414, KLN 510, CIN 318, ATL 1861, CHN 2015, APL 1969, QBE 1886 and XL Catlin Insurance Company UK Ltd.); (6) Certain Underwriters at Lloyd's, London Subscribing to Policy No. PD-10363 (BRT 2987) for Cherokee Nation Entertainment, LLC; PD-10367-05 (BRT2987) for Cherokee Nation Businesses, and PD-11091-00 (BRT2987) for Cherokee Nation; (7) Certain Underwriters at Lloyd's London Subscribing to Policy No. PJ19000067: (KLN 510, TMK 1880, CNP 4444, ATL 1861, BRT 2987 and 2988, AUW 0609, TAL 1183, AUL 1274, Neon Worldwide Property Consortium 9761); (8) Homeland Insurance Company of NY (One Beacon); (9) Hallmark Specialty Insurance Company; (10) Endurance Worldwide Insurance Ltd. T/AS SOMPO International (Policy Numbers PJ1900134-A and PJ1900134-B); (11) Arch Specialty Insurance Company; (12) Evanston Insurance Company; (13) Allied World National Assurance Company; (14) Liberty Mutual Fire Insurance Company; (15) XL Insurance America, Inc.; (16) AXA/XL America, Inc.; (17) RSUI-Landmark American Insurance Company; (18) Chubb Bermuda Ltd.; (19) Underwriters at Lloyd's London ; (20) ABC Insurance Companies (to be determined); Defendants/Appellants. |
| Court | Oklahoma Supreme Court |
Michael Burrage, Reggie Whitten, Patricia Sawyer, Austin Vance, J. Renley Dennis, and Tiffani J. Shipman, Whitten Burrage, Oklahoma City, Oklahoma, for Plaintiffs/Appellees.
Bradley Beckworth and Chad E. Ihrig, Nix Patterson, LLP, Austin, Texas, for Plaintiffs/Appellees.
Sara Hill, General Counsel for Cherokee Nation, Tahlequah, Oklahoma, for Plaintiffs/Appellees.
Phil R. Richards and Joy Tate, Richards & Connor, Tulsa, Oklahoma, for Lexington Insurance Company, Defendant/Appellant.
Richard J. Doren and Matthew A. Hoffman, Gibson Dunn & Crutcher LLP, Los Angeles, California, for Lexington Insurance Company, Defendant/Appellant.
Harvey D. Ellis and Timila S. Rother, Crowe & Dunlevy, P.C., Oklahoma City, Oklahoma, for Certain Underwriters at Lloyd's, London et al. and Endurance Worldwide Insurance Ltd., Defendants/Appellants.
Amy Sherry Fischer and Larry D. Ottoway, Foliart, Huff, Ottaway & Bottom, Oklahoma City, Oklahoma, for Certain Underwriters at Lloyd's, London et al. and Endurance Worldwide Insurance Ltd., Defendants/Appellants.
Matthew P. Cardosi, Robins Kaplan LLP, Boston, Massachusetts, for Certain Underwriters at Lloyd's, London et al. and Endurance Worldwide Insurance Ltd., Defendants/Appellants.
Amy M. Churan, Robins Kaplan LLP, Los Angeles, California, for Certain Underwriters at Lloyd's, London et al. and Endurance Worldwide Insurance Ltd., Defendants/Appellants.
Jon E. Brightmire and Michael S. Linscott, Doerner, Saunders, Daniel & Anderson, L.L.P., Tulsa, Oklahoma, for Aspen Specialty Insurance Company and Aspen Insurance UK, Ltd., Defendants/Appellants.
Sara E. Potts, Doerner, Saunders, Daniel & Anderson, L.L.P., Oklahoma City, Oklahoma, for Aspen Specialty Insurance Company and Aspen Insurance UK, Ltd., Defendants/Appellants.
James C. Milton, William O'Connor, Bryan J. Nowlin, and Margo E. Shipley, Hall, Estill, Hardwick, Gable, Golden & Nelson, P.C., Tulsa, Oklahoma, for Homeland Insurance Company of NY (One Beacon), Arch Specialty Insurance Company, Allied World National Assurance Company, Liberty Mutual Fire Insurance Company, and Landmark American Insurance Company, Defendants/Appellants.
Shannon O'Malley, Kristin Cummings, and Bennett Moss, Zelle LLP, Dallas, Texas, for Homeland Insurance Company of NY (One Beacon), Arch Specialty Insurance Company, Liberty Mutual Fire Insurance Company, and Landmark American Insurance Company, Defendants/Appellants.
Jack Cadenhead, The Cadenhead Law Firm, P.C., Seminole, Oklahoma, for Allied World National Assurance Company, Defendant/Appellant.
Dustin DuBose, Mound Cotton Wollan Greengrass, LLP, Houston, Texas, for Allied World National Assurance Company, Defendant/Appellant.
Kerry R. Lewis and Dan S. Folluo, Rhodes, Hieronymus, Jones, Tucker & Gable, PLLC, Tulsa, Oklahoma, for Hallmark Specialty Insurance Company, Aspen Specialty Insurance Company, and Aspen Insurance UK, Ltd., Defendants/Appellants.
Joe M. Hampton and Johnny R. Blassingame, Hampton Barghols Pierce, PLLC, Oklahoma City, Oklahoma, for Chubb Bermuda International,3 Defendant/Appellant.
Susan Sullivan, Clyde & Co. US, LLP, Los Angeles, California, for Chubb Bermuda International, Defendant/Appellant.
Robert W. Fischer and Taylor L. Davis, Clyde & Co. US, LLP, Atlanta, Georgia, for Chubb Bermuda International, Defendant/Appellant.
Roger N. Butler, Jr. and Nathaniel T. Smith, Secrest, Hill, Butler, Secrest, Tulsa, Oklahoma, for Evanston Insurance Company, Defendant/Appellant.
C. William Threlkeld and Sterling E. Pratt, Fenton, Fenton, Smith, Reneau & Moon, Oklahoma City, Oklahoma, for XL Insurance America, Inc., Defendant/Appellant.
Winchester, J. ¶1 The COVID-19 pandemic has impacted businesses in an unprecedented way. Naturally, businesses have turned to their insurers for the economic losses they have experienced. Appellees Cherokee Nation, Cherokee Nation Businesses, LLC, and Cherokee Nation Entertainment, LLC4 (collectively, Nation) likewise turned to Appellant Insurers5 to recover economic losses they incurred when they temporarily closed their properties in March 2020 to prevent COVID-19 related harm to their patrons, employees, and properties.
¶2 Nation brought a declaratory judgment action in district court seeking a ruling that the Tribal First Policy Wording, Tribal Property Insurance Program USA Form No. 15 (Policy) provides coverage under the business interruption provision for the losses it incurred due to its temporary closure. The question before this Court is whether the district court correctly determined that business interruption coverage for losses "caused by direct physical loss or damage ... to real and/or personal property " includes losses incurred by some intangible harm that rendered Nation's property unusable for its intended purpose. The district court's expansion of business interruption coverage ignores the plain, unambiguous language of the Policy and the decisions from nearly all circuit courts of appeals, many federal district courts, and state courts that have ruled that business interruption coverage requires actual, tangible loss or damage to property, not just loss of use. We agree with the clear majority of jurisdictions and hold that "direct physical loss or damage ... to real and/or personal property" requires immediate, actual or tangible deprivation or destruction of property.
FACTS AND PROCEDURE
¶3 In July 2019, Nation purchased an all-risk property insurance Policy from Insurers that included business interruption coverage. In March 2020, Nation decided to temporarily close its properties due to the threat of COVID-19. The properties remained closed until June 2020. Nation then brought this action seeking business interruption coverage under the property insurance Policy for its economic losses during the closure.
¶4 Nation filed a motion for partial summary judgment on business interruption coverage. Nation contended that the closure of its properties was a fortuitous event causing the loss of use of its properties, amounting to a "direct physical loss" as covered by the Policy.
¶5 Insurers opposed this motion, arguing that the Policy did not provide coverage for Nation's alleged losses because it did not sustain "direct physical loss or damage" to its properties and the district court did not have to consider the Policy's exclusions. Insurers contended that business interruption coverage occurs only during the restoration period that consists of the rebuilding, repairing, or replacing of an insured's damaged or lost property. Insurers urged that Nation did not suffer a "direct physical loss or damage ... to real and/or personal property" that required any rebuilding, repairing, or replacing, but instead Nation merely did not use its properties for a temporary period of time.
¶6 The district court granted Nation's motion for partial summary judgment, finding coverage for Nation's alleged losses under the Policy's business interruption provision. The district court considered that Insurers did not define the phrase "direct physical loss or damage" in their policies and held that coverage for "direct physical loss" included losses sustained from property rendered unusable for its intended purpose. The district court also found that none of the exclusions raised by Insurers contemplated "pandemics, or suspected, imminent, threatened, or fear of viruses"—common language utilized by carriers to clearly exclude such losses. The district court concluded the exclusions did not apply to Nation's loss. Insurers appealed, and we retained the appeal.
¶7 The issue before this Court is whether the district court in finding coverage for Nation's alleged loss, correctly determined that the phrase "direct physical loss or damage" included coverage for losses sustained by property that was unusable for its intended purpose. We hold the phrase "direct physical loss or damage" does not include coverage for merely loss of use of property. Instead, the phrase "direct physical loss or damage ... to real and/or personal property" requires immediate and actual, material, or tangible deprivation or destruction of property . Govinda, LLC v. Columbia Mut. Ins. Co. ,...
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