Deer Mountain Inn LLC v. Union Ins. Co.

• Citation: 541 F.Supp.3d 235
• Decision Date: 24 May 2021
• Docket Number: 1:20-cv-0984 (BKS/DJS)
• Parties: DEER MOUNTAIN INN LLC, Individually and on Behalf of All Others Similarly Situated, Plaintiff, v. UNION INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Northern District of New York

541 F.Supp.3d 235

DEER MOUNTAIN INN LLC, Individually and on Behalf of All Others Similarly Situated, Plaintiff,

v.UNION INSURANCE COMPANY, Defendant.

1:20-cv-0984 (BKS/DJS)

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

Signed May 24, 2021

For Plaintiff: James E. Cecchi, Lindsey H. Taylor, Carella, Byrne, Cecchi, Olstein, Brody & Agnello, P.C., 5 Becker Farm Road, 2^nd Floor, Roseland, New Jersey 07068, Christopher A. Seeger, Stephen A. Weiss, Seeger Weiss LLP, 55 Challenger Road, 6^th Floor, Ridgefield Park, New Jersey 07660, Samuel H. Rudman, Mark S. Reich, Robbins Geller Rudman & Dowd LLP, 58 South Service Road, Suite 200, Melville, New York 11747, Paul J. Geller, Stuart A. Davidson, Robbins Geller Rudman & Dowd LLP, 120 East Palmetto Park Road, Suite 500, Boca Raton, Florida 33432.

For Defendant: Antonia B. Ianniello, Lisa M. Southerland, Steptoe & Johnson LLP, 1330 Connecticut Avenue, NW, Washington, DC 20036, Jonathan M. Bernstein, Goldberg Segalla LLP, 8 Southwoods Boulevard, Suite 300, Albany, New York 12211.

MEMORANDUM-DECISION AND ORDER

Brenda K. Sannes, United States District Judge:

I. INTRODUCTION

Plaintiff Deer Mountain Inn LLC, on behalf of itself and a putative multi-state class and New York sub-class of similarly situated businesses, brings this action¹ against Defendant Union Insurance Company seeking damages and declaratory relief in connection with Defendant's denial of insurance coverage for certain of Plaintiff's business losses associated with the COVID-19 pandemic. (Dkt. No. 1). Presently before the Court is Defendant's motion to dismiss Plaintiff's complaint pursuant to Fed. R. Civ. P. 12(b)(6). (Dkt. No. 20). Plaintiff has opposed Defendant's motion, (Dkt. No. 33), and Defendant has replied, (Dkt. No. 37). Both parties have also filed multiple notices of supplemental authority in support of their respective positions. (Dkt. Nos. 38, 41, 44, 47, 51, 52, 55, 57). The Court heard oral argument on the motion on May 24, 2021. For the reasons that follow, Defendant's motion is granted.

II. FACTS²

Plaintiff operates the Deer Mountain Inn, a country inn and restaurant located in Tannersville, New York. (Dkt. No. 1, ¶ 14). Like many businesses in New York and across the country, Plaintiff has been impacted by the global pandemic caused by COVID-19, a highly contagious coronavirus that was discovered in China in December 2019 and has since spread across the world, infecting millions of people in the U.S. and globally. (Id. ¶¶ 18-21). COVID-19 causes no symptoms at all in some patients, while in others it causes symptoms with a range of severity, including pneumonia

, fever, cough, dyspnea, bilateral infiltrates on chest imaging, severe respiratory failure requiring ventilation and support in an intensive care unit, and death. (Id. ¶ 22). COVID-19 can be transmitted from human-to-human "through symptomatic transmission, presymptomatic transmission, or asymptomatic transmission" of infectious droplets, and can also be transmitted to humans who touch contaminated surfaces or objects. (Id. ¶¶ 23-29). COVID-19 has an incubation period of up to 14 days, during which infected people can transmit the virus regardless of whether they have any symptoms. (Id. ¶¶ 24-25).

In order to curb the spread of COVID-19 through human-to-human and surface-to-human transmission, civil authorities around the country have issued orders temporarily closing or restricting the operations of a broad range of businesses (the "Closure Orders"). (Id. ¶¶ 30-31). Plaintiff's complaint does not describe or attach the specific closure orders that impacted its own business in New York. However, in connection with its motion, Defendant submitted copies of Executive Order No. 202.8 issued by New York Governor Andrew Cuomo on March 20, 2020 (the "New York Closure Order"), with accompanying guidance published on the New York State government's website. (Dkt. Nos. 20-9, 20-10). Plaintiff has not contested the accuracy of these documents, nor has it pointed to any other specific Closure Orders that allegedly caused its losses.³ As relevant to Plaintiff, the New York Closure Order requires "[a]ll businesses and not-for-profit entities in the state" to "reduce the in-person workforce at any work locations by 100%," but specifically exempts "[a]ny essential business or entity providing essential services or functions" from this requirement. (Dkt. No. 20-9, at 3). The guidance on the state website specifically defines "essential business" to include "restaurants [and] bars (but only for take-out/delivery)," as well as "hotels, and places of accommodation." (Dkt. No. 20-10, at 4). Thus, on its face, the New York Closure Order allowed Plaintiff's hotel business to remain open and permitted Plaintiff's restaurant business to operate take-out and delivery services at its premises, but forbade it from offering in-person dining.⁴

At the time of the New York Closure Order, Plaintiff was insured by Policy Number CPA 5100237-16 issued by Defendant for the policy period of June 6, 2019 through June 6, 2020 (the "Policy"). (Dkt. No. 1, ¶ 17).⁵ The Policy, which is a "standard form[ ] that [is] used by [Defendant] for all insureds having applicable coverage," is an " ‘all-risk’ commercial property polic[y] which cover[s] loss or damage to the covered premises resulting from all risks other than those expressly excluded." (Id. ¶¶ 32-33). Plaintiff alleges that the Policy (as well as similar policies Defendant has issued to other businesses in New York and around the country) provides coverage for business losses incurred as a result of the Closure Orders, including those issued in New York.

Plaintiff claims coverage under the Policy's business income insurance provision (the "Business Income Provision"), which provides, in relevant part:

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". [sic] The "suspension" must be caused by direct physical loss of or damage to property at premises which are described in the Declarations and for which Business Income Limit of Insurance is shown in the Declarations. The loss or damage must be caused by or result from of a Covered Cause of Loss.

(Id. ¶ 35; Dkt. No. 20-2, at 136). "Business Income" is defined as the "Net Income (Net Profit or Loss before income taxes), that would have been earned or incurred" and any "[c]ontinuing normal operating expenses incurred, including payroll." (Dkt. No. 1, ¶ 36; Dkt. No. 20-2, at 136). Plaintiff also claims coverage under the Policy's extra expense insurance provision (the "Extra Expense Provision"), which provides, in relevant part:

Extra Expense means necessary expenses you incur during the "period of restoration" that you would not have incurred if there had been no direct physical loss or damage to property caused by or resulting from a Covered Cause of Loss.

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 location or temporary location.

(2) Minimize the "suspension" of business if you cannot continue "operations". [sic]

We will also pay Extra Expense to repair or replace any property, but only to the extent it reduces the amount of loss that otherwise would have been payable under this Coverage Form.

(Dkt. No. 1, ¶ 37; Dkt. No. 20-2, at 136-37). Finally, Plaintiff claims coverage under the Policy's civil authority coverage provision (the "Civil Authority Provision"), which provides, in relevant part:

When a Covered Cause of Loss causes damage to property other than property at the described premises, we will pay for the actual loss of Business Income you sustain and necessary Extra Expense caused by action of civil authority that prohibits access to the described premises, provided that both of the following apply:

(1) Access to the area immediately surrounding the damaged property is prohibited by civil authority as a result of the damage, and the described premises are within that area but are not more than one mile from the damaged property; and

(2) The action of civil authority is taken in response to dangerous physical conditions resulting from the damage or continuation of the Covered Cause of Loss that caused the damage, or the action is taken to enable a civil authority to have unimpeded access to the damaged property.

(Dkt. No. 1, ¶ 38; Dkt. No. 20-2, at 137).

For purposes of the foregoing provisions, "Covered Cause of Loss" is defined as "direct physical loss unless the loss is excluded or limited in this policy." (Dkt. No. 20-2, at 156). The "period of restoration" begins "72 hours after the time of direct physical loss or damage" for purposes of the Business Income Provision and "[i]mmediately after the time of direct physical loss or damage" for purposes of the Extra Expense Provision, and ends at the earlier of the "date when the property at the described premises should be repaired, rebuilt or replaced with reasonable speed and similar quality" or the "date when business is resumed at a new permanent location." (Dkt. No. 20-2, at 144).

The Policy also contains an endorsement entitled "Exclusion of Loss Due to Virus or Bacteria," (the "Virus Exclusion"). The Virus Exclusion provides, in relevant part:

The exclusion ... applies to all coverage under all forms and endorsements that comprise this Coverage Part, including but not limited to forms or endorsements that cover property damage to buildings or personal property and forms or endorsements that cover business income, extra expense or action of civil authority.

We will not pay for loss or damage caused by or resulting from any virus, bacterium or other microorganism that induces or is capable of inducing physical distress, illness or disease ...

The terms of the

...