Cosmetic Laser, Inc. v. Twin City Fire Ins. Co.

• Decision Date: 11 August 2021
• Docket Number: 3:20-cv-00638 (SRU)
• Citation: 554 F.Supp.3d 389
• Parties: COSMETIC LASER, INC., individually and on behalf of all others similarly situated, Plaintiff, v. TWIN CITY FIRE INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — District of Connecticut

554 F.Supp.3d 389

COSMETIC LASER, INC., individually and on behalf of all others similarly situated, Plaintiff,

v.TWIN CITY FIRE INSURANCE COMPANY, Defendant.

No. 3:20-cv-00638 (SRU)

United States District Court, D. Connecticut.

Signed August 11, 2021

Adam J. Levitt, DiCello Levitt Gutzler LLC, Chicago, IL, Jesse Bair, Nathan Mark Kuenzi, Timothy Burns, Burns Bowen Bair LLP, Madison, WI, Kathleen L. Nastri, Koskoff, Koskoff & Bieder, P.C., Bridgeport, CT, Kenneth P. Abbarno, DiCello Levitt Gutzler LLC, Mentor, OH, for Plaintiff.

Anthony Anscombe, Steptoe & Johnson LLP, Chicago, IL, Gerald P. Dwyer, Jr., Peter Meggers, Stephani Roman, Robinson & Cole LLP, Hartford, CT, Sarah Gordon, Steptoe & Johnson LLP, Washington, DC, for Defendant.

RULING ON MOTION TO DISMISS

Stefan R. Underhill, United States District Judge

Cosmetic Laser, Inc. ("Cosmetic Laser") owns multiple spas in Ohio that were shut down during the COVID-19 pandemic. Individually, and on behalf of other class members, Cosmetic Laser sued its property insurer, Twin City Fire Insurance Company ("Twin City"), for breach of contract. Cosmetic Laser asserts various theories for why its losses are covered. Because those theories are not convincing, I grant Twin City's motion to dismiss.

I. Standard of Review

A motion to dismiss for failure to state a claim pursuant to Rule 12(b)(6) is designed "merely to assess the legal feasibility of the complaint, not to assay the weight of the evidence which might be offered in support thereof." Ryder Energy Distrib. Corp. v. Merrill Lynch Commodities, Inc. , 748 F.2d 774, 779 (2d Cir. 1984) (quoting Geisler v. Petrocelli , 616 F.2d 636, 639 (2d Cir. 1980) ). When deciding a motion to dismiss pursuant to Rule 12(b)(6), the court must accept the material facts alleged in the complaint as true, draw all reasonable inferences in favor of the plaintiffs, and decide whether it is plausible that plaintiffs have a valid claim for relief. See Ashcroft v. Iqbal , 556 U.S. 662, 678–79, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) ; Bell Atl. Corp. v. Twombly , 550 U.S. 544, 555–56, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ; Leeds v. Meltz , 85 F.3d 51, 53 (2d Cir. 1996).

Under Twombly , "[f]actual allegations must be enough to raise a right to relief above the speculative level" and assert a cause of action with enough heft to show entitlement to relief and "enough facts to state a claim to relief that is plausible on its face." 550 U.S. at 555, 570, 127 S.Ct. 1955 ; see also Iqbal , 556 U.S. at 679, 129 S.Ct. 1937 ("While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations."). The plausibility standard set forth in Twombly and Iqbal obligates the plaintiff to "provide the grounds of his entitlement to relief" through more than "labels and conclusions, and a formulaic recitation of the elements of a cause of action." Twombly , 550 U.S. at 555, 127 S.Ct. 1955 (cleaned up). Plausibility at the pleading stage is nonetheless distinct from probability, and "a well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof of [the claims] is improbable, and ... recovery is very remote and unlikely." Id. at 556, 127 S.Ct. 1955 (cleaned up).

II. Background

A. Factual Background

1. The Parties and The Policy

The plaintiff, Cosmetic Laser, is a Medi Spa¹ with locations in Mentor and Chardon, Lake County, Ohio. See Am. Compl., Doc. No. 34, at ¶ 1. Cosmetic Laser offers "personalized skincare treatments, Botox treatments, wellness massages, laser hair removal, and many other services, including private spa parties for groups of 4-6 people." Id.

Cosmetic Laser purchased insurance, including property coverage, from Twin City. See id. at ¶ 8. I will refer to that insurance contract as "the Policy." See Policy, Ex. A to Mot. for J. on the Pleadings, Doc. No. 31-3.² The Policy covered the period from February 8, 2020 to February 8, 2021. See Am. Compl., Doc. No. 34, at ¶ 23; Policy, Doc. No. 31-3, at 15. The Policy provided for property coverage in a "Special Property Coverage Form." See Policy, Doc. No. 31-3, at 34–58.

The Policy was an "all risk" policy, meaning that it "cover[ed] all risks of loss except for risks that are expressly and specifically excluded." Am. Compl., Doc. No. 34, at ¶ 24. Put differently, according to the Policy, Twin City agreed to "pay for direct physical loss of or physical damage to Covered Property ... caused by or resulting from a Covered Cause of Loss." Policy, Doc. No. 31-3, at 34. The Policy also defined "Covered Causes of Loss" as, in relevant part, all "risks of direct physical loss" except those "[e]xcluded in Section B., EXCLUSIONS." Id. at 35. The parties dispute whether several sections in the Policy cover Cosmetic Laser's claim. Those sections are: (1) the Virus Endorsement,³ (2) the Business Income provision, (3) the Extra Expense provision, and (4) the Civil Authority provision.

The contractual provisions that the parties most heatedly contest are contained in the Virus Endorsement. In relevant part, the Virus Endorsement adds the following exclusion to Section B of the Policy:

i. "Fungi", Wet Rot, Dry Rot, Bacteria And Virus

We will not pay for loss or damage caused directly or indirectly by any of the following. Such loss or damage is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss:

(1) Presence, growth, proliferation, spread or any activity of "fungi", wet rot, dry rot, bacteria or virus.

(2) But if "fungi", wet rot, dry rot, bacteria or virus results in a "specified cause of loss" to Covered Property, we will pay for the loss or damage caused by that "specified cause of loss."

Policy, Doc. No. 31-3, at 130. I will refer to that exclusionary provision of the Virus Endorsement as the "Virus Exclusion." "Specified cause of loss" is defined as: "[f]ire; lightning; explosion, windstorm or hail; smoke; aircraft or vehicles; riot or civil commotion; vandalism; leakage from fire extinguishing equipment; sinkhole collapse; volcanic action; falling objects; weight of snow, ice or sleet; water damage." Id. at 58. The Virus Endorsement limits the scope of the Virus Exclusion. The Virus Endorsement continues:

This exclusion does not apply:

(1) When "fungi", wet or dry rot, bacteria or virus results from fire or lightning; or

(2) To the extent that coverage is provided in the Additional Coverage – Limited Coverage for "Fungi", Wet Rot, Dry Rot, Bacteria and Virus with respect to loss or damage by a cause of loss other than fire or lightning.

This exclusion applies whether or not the loss event results in widespread damage or affects a substantial area.

Id. at 130. In Section B.1, the Virus Endorsement clarifies the Policy's "[l]imited coverage for ‘fungi’, wet rot, dry rot, bacteria and virus." Id. at 131. Section B.1 reads as follows:

1. Limited Coverage For "Fungi", Wet Rot, Dry Rot, Bacteria and Virus

a. The coverage described in 1.b below only applies when the "fungi", wet or dry rot, bacteria or virus is the result of one or more of the following causes that occurs during the policy period and only if all reasonable means were used to save and preserve the property from further damage at the time of and after that occurrence.

(1) A "specified cause of loss" other than fire or lightning;

(2) Equipment Breakdown Accident occurs to Equipment Breakdown Property, if Equipment Breakdown applies to the affected premises.

b. We will pay for loss or damage by "fungi", wet rot, dry rot, bacteria and virus. As used in this Limited Coverage, the term loss or damage means:

(1) Direct physical loss or direct physical damage to Covered Property caused by "fungi", wet rot, dry rot, bacteria or virus, including the cost of removal of the "fungi", wet rot, dry rot, bacteria or virus;

(2) The cost to tear out and replace any part of the building or other property as needed to gain access to the "fungi", wet rot, dry rot, bacteria or virus; and

(3) The cost of testing performed after removal, repair, replacement or restoration of the damaged property is completed, provided there is a reason to believe that "fungi", wet rot, dry rot, bacteria or virus are present.

Id. I will refer to that limited grant of coverage as "Subsection B.1.b." Coverage under Subsection B.1.b requires that the fungi, wet rot, dry rot, bacteria or virus results from the particular causes provided in Subsection B.1.a.

Subsection B.1.f—the final subsection of the "Limited Coverage for ‘Fungi’, Wet Rot, Dry Rot, Bacteria and Virus" section—concerns the availability of limited Time Element Coverage, which is "a term of art in the insurance industry referring to coverages measured in time, including," as relevant here, Business Income, Extra Expense, and Civil Authority coverage. See Q Clothier New Orleans LLC v. Twin City Fire Ins. Co. , 535 F.Supp.3d 574, 585 (E.D. La. Apr. 23, 2021) (cleaned up). The parties disagree regarding whether Subsection B.1.f covers Cosmetic Laser's loss here. Subsection B.1.f reads as follows:

f. The following applies only if a Time Element Coverage applies to the "scheduled premises" and only if the suspension of "operations" satisfies all the terms and conditions of the applicable Time Element Coverage.

(1) If the loss which resulted in "fungi", wet or dry rot, bacteria or virus does not in itself necessitate a suspension of "operations", but such suspension is necessary due to loss or damage to property caused by "fungi", wet or dry rot, bacteria or virus, then our payment under the Time Element Coverage is limited to the amount of loss and expense sustained in a period of not more than 30 days unless another number of days is indicated in the Declarations. The days need not be consecutive. If a covered suspension of "operations" was caused by loss or damage other than "fungi", wet or dry rot, bacteria or virus, but remediation of "fungi", wet or dry rot, bacteria or virus prolongs the "period of restoration", we will pay for

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