Golden Corral Corp. v. Ill. Union Ins. Co.

• Decision Date: 08 September 2021
• Docket Number: 5:20-CV-349-D
• Parties: GOLDEN CORRAL CORP., and Golden Corral Franchising Systems, Inc., Plaintiffs, v. ILLINOIS UNION INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Eastern District of North Carolina

559 F.Supp.3d 476

GOLDEN CORRAL CORP., and Golden Corral Franchising Systems, Inc., Plaintiffs,

v.ILLINOIS UNION INSURANCE COMPANY, Defendant.

No. 5:20-CV-349-D

United States District Court, E.D. North Carolina, Western Division.

Signed September 8, 2021

Gregg E. McDougal, Lawrence Russell Duke, William R. Hartzell, The McDougal Law Firm, PLLC, Raleigh, NC, for Plaintiffs.

James M. Bauer, Robert W. Fisher, Clyde & Co. US LLP, Atlanta, GA, Jennifer A. Welch, Theodore B. Smyth, Cranfill Sumner & Hartzog LLP, Raleigh, NC, for Defendant.

ORDER

JAMES C. DEVER III, United States District Judge

On May 14, 2020, Golden Corral Corporation and Golden Corral Franchising Systems (collectively, "Golden Corral" or "plaintiffs") filed a complaint against Illinois Union Insurance Company ("Illinois Union" or "defendant") in Wake County Superior Court seeking to recover for financial losses arising from the COVID-19 pandemic's effect on plaintiffs’ business operations [D.E. 1-1]. On July 2, 2020, Illinois Union removed the case to this court based on diversity jurisdiction [D.E. 1]. On August 28, 2020, Golden Corral filed an amended complaint [D.E. 15]. On February 1, 2021, Illinois Union moved for judgment on the pleadings [D.E. 24] and filed a memorandum in support and exhibits [D.E. 25]. On February 22, 2021, Golden Corral responded in opposition [D.E. 31]. On March 8, 2021, Illinois Union replied [D.E. 32]. As explained below, the court grants Illinois Union's motion for judgment on the pleadings.

I.

Golden Corral Corporation is a North Carolina corporation with a principal place of business in Raleigh, North Carolina. See Am. Compl. [D.E. 15] ¶ 2. Golden Corral Franchising Systems is a Delaware corporation that does business in North Carolina and has its principal place of business in Raleigh, North Carolina. See id. ¶ 3. The two entities together own or franchise approximately 483 restaurants across the United States. See id. ¶¶ 11–15. The franchisee restaurants pay royalties to Golden Corral, some have leases with Golden Corral, and some have financed equipment through Golden Corral. See id. ¶¶ 12, 14–15. Illinois Union is an insurance company organized under Illinois law, with a principal place of business in Philadelphia, Pennsylvania. See id. ¶4; [D.E. 17] ¶ 4. It is authorized to do business in North Carolina. See Am. Compl. ¶ 5; [D.E. 17] ¶ 5.

In March 2019, Illinois Union issued to Golden Corral a commercial property insurance policy that Golden Corral applied for, executed, and received in North Carolina. See Am. Compl. ¶ 16; [D.E. 17-1]. The policy covered the period from March 31, 2019, to March 31, 2020. See [D.E. 17-1] 27. The policy contains an "Insuring Agreement." See id. at 42. The policy insures Golden Corral against " ‘all risks’ of direct physical loss, damage or destruction, occurring during the Policy period," except as otherwise excluded. Id. Whenever the policy uses the term "peril insured," it is referring to the Insuring Agreement plus any exclusions in the policy. See id. The policy includes numerous endorsements, including a General Amendatory Endorsement containing provisions at issue here, that affect the terms and scope of the policy. See, e.g., id. at 113–15. The policy's choice-of-law provision specifies that "[a]ny dispute concerning or related to this insurance shall be determined in accordance with the laws of the United States of America in the Jurisdiction of North Carolina, without regard to its conflict of laws principles." Id. at 40.

The COVID-19 pandemic began in early 2020 in the United States. See Am. Compl. ¶¶ 28–31. In order to address the COVID-19 pandemic, many state and local governments issued orders restricting access to restaurants, including restaurants owned or franchised by Golden Corral. See id. ¶¶ 32–35, 37–38.

In March 2020, Golden Corral and its franchisees suspended the operations of their restaurants in response to the government-issued orders. See id. ¶¶ 42–43. These closures disrupted Golden Corral's normal business operations, resulting in "substantial losses to revenues from its corporate-owned locations, losses of royalties from its franchise locations, and losses of rental income from leases and losses of payments from equipment financing from certain of its franchise locations." Id. ¶ 44.¹

Golden Corral believes these financial losses are insured under its policy with Illinois Union. See id. ¶ 44. On May 12, 2020, Golden Corral filed insurance claims with Illinois Union. See id. ¶ 45. On May 13, 2020, Illinois Union acknowledged it received the claims and notified Golden Corral that it assigned the claims to the company's catastrophic claims specialist for the Pacific Region. See id. ¶ 46; [D.E. 17] ¶ 46.

On May 14, 2020, Golden Corral instituted this lawsuit in Wake County Superior Court. See [D.E. 1-1]. After suing Illinois Union, Golden Corral repeatedly attempted to contact the claims specialist about its insurance claims. See Am. Compl. ¶¶ 47–56. On August 10, 2020, Illinois Union denied Golden Corral's claims. See id. ¶ 57. On August 28, 2020, Golden Corral filed an amended complaint reflecting the denial. See [D.E. 15]. On September 11, 2020, Illinois Union answered Golden Corral's amended complaint. See [D.E. 17].

Golden Corral bases its claims on three parts of the insurance policy. First, the policy includes an endorsement for "Interruption by Civil or Military Authority." [D.E. 17-1] 113 (emphasis omitted). That endorsement states:

This Policy insures the "Time Element" loss sustained during the period of time when, as a result of direct physical loss, damage or destruction or imminent loss by a peril insured by this Policy within five (5) miles of an insured "location," normal business operations are interrupted or reduced because access to that "location" is prevented or impaired by order of civil or military authority.

Id.; see Am. Compl. ¶¶ 62, 76. Second, the policy includes an endorsement for "Loss of Ingress or Egress." [D.E. 17] 113 (emphasis omitted). That endorsement states:

This Policy insures the "Time Element" loss sustained during the period when, as a result of direct physical loss, damage or destruction by a peril insured by this Policy within five (5) miles of an insured "location," normal business operations are interrupted or reduced because ingress to or egress from that "location" is prevented or impaired.

Id. at 113–14; see Am. Compl. ¶¶ 63, 77. Finally, the policy covers losses from "Business Interruption." The coverage provision states:

This Policy insures loss resulting from the necessary interruption or reduction of business operations conducted by the Insured and caused by physical loss, damage or destruction, by a peril insured by this Policy, of property insured.

[D.E. 17-1] 52; see Am. Compl. ¶¶ 64, 78. In its amended complaint, Golden Corral seeks a declaratory judgment that these provisions cover the financial losses it incurred from suspending its business operations and seeks damages for breach of a contract. See Am. Compl. ¶¶ 58–79. Golden Corral also seeks damages because Illinois Union allegedly breached the implied contractual covenant of good faith and fair dealing. See id. ¶¶ 80–94.

Illinois Union denies that these policy provisions cover Golden Corral's losses and denies it has breached any contractual obligations. See [D.E. 17] ¶¶ 70, 79, 90–94. Alternatively, Illinois Union argues that the "Pollution, Contamination" exclusion in the policy excludes any covered losses. See id. at 24–25. In relevant part, the exclusion states:

Loss or damages caused by, resulting from, contributed to or made worse by actual, alleged or threatened release, discharge, escape or dispersal of ‘contaminants or pollutants,’ all whether direct or indirect, proximate or remote or in whole or in part arising from any cause whatsoever.

[D.E. 17-1] 60. The exclusion then defines the phrase "contaminants or pollutants" to mean:

[A]ny material that after its release can cause or threaten damage to human health or human welfare or causes or threatens damage, deterioration, loss of value, marketability or loss of use of property insured by this Policy, including, but not limited to, bacteria, virus, or hazardous substances ....

Id. at 61.

On February 1, 2021, Illinois Union moved for judgment on the pleadings. See [D.E. 24]. Golden Corral opposes the motion. See [D.E. 31].

II.

A party may move for judgment on the pleadings at any time "[a]fter the pleadings are closed—but early enough not to delay trial." Fed. R. Civ. P. 12(c). A court should grant the motion if "the moving party has clearly established that no material issue of fact remains to be resolved and the party is entitled to judgment as a matter of law." Park Univ. Enters., Inc. v. Am. Cas. Co. of Reading, 442 F.3d 1239, 1244 (10th Cir. 2006) (quotation omitted), abrogated on other grounds by Magnus, Inc. v. Diamond State Ins. Co., 545 F. App'x 750 (10th Cir. 2013) (unpublished); see Mayfield v. Nat'l Ass'n for Stock Car Auto Racing, Inc., 674 F.3d 369, 375 (4th Cir. 2012) ; Burbach Broad. Co. of Del. v. Elkins Radio Corp., 278 F.3d 401, 405–06 (4th Cir. 2002). A court may consider the pleadings and any materials referenced in or attached to the pleadings, which are incorporated by reference. See Fed. R. Civ. P. 10(c) ; Fayetteville Invs. v. Com. Builders, Inc., 936 F.2d 1462, 1465 (4th Cir. 1991). A court also may consider "matters of which a court may take judicial notice." Tellabs, Inc. v. Makor Issues & Rts., Ltd., 551 U.S. 308, 322, 127 S.Ct. 2499, 168 L.Ed.2d 179 (2007).

The same standard applies under Rule 12(c) and Rule 12(b)(6). See Mayfield, 674 F.3d at 375 ; Burbach Broad. Co., 278 F.3d at 405–06. Thus, a motion under Rule 12(c) tests the legal and factual sufficiency of the claim. See, e.g., Ashcroft v. Iqbal, 556 U.S. 662, 677–80, 684, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) ; Bell Atl. Corp. v. Twombly, 550 U.S. 544, 554–63, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ; Coleman v. Md....