Dharamsi v. Nationwide Mut. Ins. Co.

• Decision Date: 18 May 2021
• Docket Number: Case No. 2:20-cv-2980
• Citation: 540 F.Supp.3d 749
• Parties: Ekramullah DHARAMSI d/b/a Pyramid Cleaners, et al., Plaintiffs, v. NATIONWIDE MUTUAL INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Southern District of Ohio

540 F.Supp.3d 749

Ekramullah DHARAMSI d/b/a Pyramid Cleaners, et al., Plaintiffs,

v.NATIONWIDE MUTUAL INSURANCE COMPANY, Defendant.

Case No. 2:20-cv-2980

United States District Court, S.D. Ohio, Eastern Division.

Filed May 18, 2021

Andrew S. Baker, Columbus, OH, Arnold Levin, Pro Hac Vice, Laurence S. Berman, Pro Hac Vice, Daniel C. Levin, Pro Hac Vice, Levin Sedran Berman LLP, Philadelphia, PA, D. Aaron Rihn, Pro Hac Vice, Robert Peirce & Associates, P.C., Pittsburgh, PA, Paul W. Evans, Pro Hac Vice, Rachel N. Minder, Pro Hac Vice, W. Daniel Miles, III, Pro Hac Vice, Beasley, Allen, Crow, Methvin, Portis & Miles, P.C., Montgomery, AL, for Plaintiff Ekramullah Dharamsi.

Gregory E. O'Brien, Cavitch Familo & Durkin LPA, Cleveland, OH, Marium Umeki Moore, Pro Hac Vice, Selman Breitman LLP, Los Angeles, CA, for Defendant.

OPINION AND ORDER

SARAH D. MORRISON, UNITED STATES DISTRICT JUDGE

After his dry-cleaning business suffered losses due to the COVID-19 pandemic, Plaintiff Ekramullah Dharamsi d/b/a Pyramid Cleaners sought coverage under an insurance policy issued by Defendant Nationwide Mutual Insurance Company. When Nationwide denied his claim, Mr. Dharamsi filed the instant action. It is now before the Court for consideration of Nationwide's Motion to Dismiss the Amended Complaint. (Mot. to Dismiss, ECF No. 35.) Mr. Dharamsi has responded (Resp., ECF No. 36), and Nationwide filed its reply (Reply, ECF No. 37). Both parties filed notices of supplemental authority, which the Court agreed to consider. (See ECF No. 46.) While there is no doubt that COVID-19 has had a devastating impact on Mr. Dharamsi's business, for the reasons set forth below, Nationwide's Motion is GRANTED .

I. BACKGROUND

All well-pled factual allegations in the Amended Complaint (Am. Compl., ECF No. 26) are considered as true for purposes of the Motion to Dismiss. See Gavitt v. Born , 835 F.3d 623, 639–40 (6th Cir. 2016). The following summary draws from the allegations in the Amended Complaint, the documents integral to and incorporated therein, and certain other documents which are subject to judicial notice.

A. The Policy

Mr. Dharamsi owns and operates a dry-cleaning business in Mesquite, Texas. (Am. Compl., ¶ 8.) He purchased a business interruption insurance policy from Nationwide (the "Policy," ECF No. 23-1),¹ which was in place from November 12, 2019, through November 12, 2020. (Id. , ¶ 10.) The Policy also covered a dry-cleaning business in Dallas, Texas, owned by Aminmohamed Dharamsi, and another in Garland, Texas, owned by Nortez Inv. Inc. (Id. , ¶¶ 11, 12.) These three businesses constitute the "Covered Properties."

The Policy is an "all-risk policy," meaning it provides "coverage for all losses ... unless a loss is specifically excluded or limited in the Policy." (Id. , ¶ 17.) It contains the following relevant provisions:

• Coverage . Nationwide will pay for "direct physical loss of or damage to" Covered Property "caused by or resulting from any Covered Cause of Loss." (Policy, PAGEID # 155.)

• Covered Cause of Loss . "This Coverage Form insures against direct physical loss" unless the loss is otherwise excluded or limited. (Id. , PAGEID # 156.)

The Policy also includes, inter alia , the following "Additional Coverages":

• Business Income Coverage . Covers "actual loss of ‘business income’ " sustained due to the suspension of operations; the "suspension must be caused by direct physical loss of or damage to property at the described premises." (Id. , PAGEID # 159–60.)

• Extra Expense Coverage . Covers "extra expense" that "you would not have incurred if there had been no direct physical loss of or damage to property at the described premises." (Id. , PAGEID # 160–61.)

• Civil Authority Coverage . When a "Covered Cause of Loss causes damages to property other than property at the described premises ... we will pay for the actual loss of Business Income you sustain ... caused by action of civil authority that prohibits access to the described premises ...." (Id. , PAGEID # 161.)

All coverage under the Policy is subject to certain exclusions, including "damage or loss caused directly or indirectly by" "any virus, bacterium or other microorganism that induces or is capable of inducing physical distress, illness or disease" (the "Virus Exclusion Clause"). (Id. , PAGEID # 174, 176.)

B. Impact of COVID-19 on the Covered Properties

On March 13, 2020, Texas Governor Greg Abbott issued a State of Emergency as a result of the COVID-19 pandemic. (Am. Compl., ¶ 37. See also ECF No. 23-2.) Shortly thereafter, Governor Abbott issued orders recommending that Texans avoid crowds of more than ten people, and closing all "non-essential businesses." (Id. , ¶¶ 38, 40. See also ECF Nos. 23-3, 23-4.) Dry-cleaning businesses were deemed essential and permitted to remain open. (Id. , ¶ 40.) Dallas County, where the three Covered Properties are located, also issued a shelter-in-place order requiring all residents to stay home except to perform essential activities or services. (Id. , ¶ 39. See also ECF No. 23-5.)

On March 25, 2020, Mr. Dharamsi learned that employees of the Mesquite location had been in contact with an individual who contracted the coronavirus. (Id. , ¶ 53.) He closed that location for almost six weeks while the affected employees were in quarantine. (Id. , ¶¶ 43, 53.) Because the Mesquite location performed dry-cleaning services for the Dallas and Garland locations, the latter two were also unable to serve customers during that time. (Id. , ¶¶ 42, 54.) Even after re-opening, demand for Mr. Dharamsi's services "suffered a sharp decline ... because [his] customers were impacted by the stay at home orders." (Id. , ¶ 52.) Mr. Dharamsi further alleges that the customer-facing nature of his business required constant cleaning and sanitation to mitigate risk of contamination. (Id. , ¶¶ 56–57, 64–65.)

Mr. Dharamsi alleges that he suffered losses in excess of $150,000. (Id. , ¶ 4.) Nationwide denied his claim to recover for those losses under the Policy. (Id. , ¶ 14.)

II. PROCEDURAL BACKGROUND

Mr. Dharamsi, along with Aminmohamed Dharamsi and Nortez Inv. Inc., filed this action on June 10, 2020. (ECF No. 1.) After Nationwide moved to dismiss the original complaint, Mr. Dharamsi filed the operative Amended Complaint.² (ECF No. 26.) The Amended Complaint asserts one claim for declaratory judgment, asking that the Court declare that Mr. Dharamsi is entitled to coverage under the Policy. Nationwide now moves to dismiss the Amended Complaint for failure to state a claim upon which relief may be granted. (ECF No. 35.)

III. STANDARD OF REVIEW

Federal Rule of Civil Procedure 8(a) requires a plaintiff to plead each claim with sufficient specificity to "give the defendant fair notice of what the claim is and the grounds upon which it rests." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (internal alteration and quotations omitted). A complaint which falls short of the Rule 8(a) standard may be dismissed if it fails to state a claim upon which relief can be granted. Fed. R. Civ. P. 12(b)(6). The Supreme Court has explained:

To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face. A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. The plausibility standard is not akin to a probability requirement, but it asks for more than a sheer possibility that a defendant has acted unlawfully. Where a complaint pleads facts that are merely consistent with a defendant's liability, it stops short of the line between possibility and plausibility of entitlement to relief.

Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (internal citations and quotations omitted). The complaint need not contain detailed factual allegations, but it must include more than labels, conclusions, and formulaic recitations of the elements of a cause of action. Directv, Inc. v. Treesh , 487 F.3d 471, 476 (6th Cir. 2007). "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Iqbal , 556 U.S. at 678, 129 S.Ct. 1937 (citing Twombly , 550 U.S. at 555, 127 S.Ct. 1955 ).

IV. ANALYSIS

A. Under Ohio's choice-of-law rules, Ohio law applies.

As a threshold matter, the Court must determine the applicable law. "In a diversity action involving an insurance contract, a federal court applies the substantive law of the forum state"—in this instance, Ohio. Talley v. State Farm Fire and Cas. Co. , 223 F.3d 323, 326 (6th Cir. 2000) (citing Erie R. Co. v. Tompkins , 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938) ). That principle extends to the forum state's choice-of-law rules. Klaxon Co. v. Stentor Elec. Mfg. Co. , 313 U.S. 487, 498, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). Nationwide argues that that the Court should apply Texas law, because "Texas law is clear, and Ohio law is unknown" with regard to the issues before the Court. (Reply, 3.) Mr. Dharamsi instead argues that there is no conflict between Ohio and Texas law, and so Ohio law should apply. (Resp., 7.) The Court agrees with Mr. Dharamsi.

It is well-established that, under Ohio's choice-of-law rules, "an actual conflict between Ohio law and the law of another jurisdiction must exist for a choice-of-law analysis to be undertaken." Hayslip v. Genuine Parts Co. , 420 F. Supp. 3d 666, 677 (S.D. Ohio 2019) (Smith, J.) (quoting Glidden Co. v. Lumbermens Mut. Cas. Co. , 474, 112 Ohio St.3d 470, 861 N.E.2d 109, 115 (Ohio 2006) ). The parties have not identified "an actual conflict." Ohio and Texas apply the same rules of contract interpretation to insurance contracts. Compare Wohl v. Swinney , 118 Ohio St.3d 277, 888 N.E.2d 1062, 1066 (Ohio 2008) with State Farm Life Ins. Co. v. Beaston , 907 S.W.2d 430, 433 (Tex. 1995)...