Hair Studio 1208, LLC v. Hartford Underwriters Ins. Co.

• Decision Date: 14 May 2021
• Docket Number: CIVIL ACTION NO. 20-2171
• Citation: 539 F.Supp.3d 409
• Parties: HAIR STUDIO 1208, LLC, individually and on behalf of all others similarly situated, Plaintiff, v. HARTFORD UNDERWRITERS INSURANCE CO., Defendant.
• Court: U.S. District Court — Eastern District of Pennsylvania

539 F.Supp.3d 409

HAIR STUDIO 1208, LLC, individually and on behalf of all others similarly situated, Plaintiff,

v.HARTFORD UNDERWRITERS INSURANCE CO., Defendant.

CIVIL ACTION NO. 20-2171

United States District Court, E.D. Pennsylvania.

Filed May 14, 2021

Alison E. Chase, Keller Rohrback, Santa Barbara, CA, Amy C. Williams-Derry, Ian S. Birk, Nathan L. Nanfelt, Gabriel Verdugo, Gretchen Freeman Cappio, Keller Rohrback L.L.P, Karin B. Swope, Cotchett, Pitre & McCarthy, LLP, Seattle, WA, Joseph B. Kenney, Joseph G. Sauder, Sauder Schelkopf LLC, Berwyn, PA, for Plaintiff.

Alan E. Schoenfeld, Ryan M. Chabot, Wilmer Cutler Pickering Hale Dorr LLP, New York, NY, Anthony J. Anscombe, Steptoe & Johnson, Chicago, IL, Caitlin R. Tharp, Sarah D. Gordon, Steptoe & Johnson, Washington, DC, Richard D. Gable, Jr., Butler Weihmuller Katz Craig LLP, Philadelphia, PA, for Defendant.

MEMORANDUM OPINION

Goldberg, District Judge

Governmentally-imposed shutdown orders and limitations on customer capacity to alleviate the spread of the COVID-19 virus have surely taken a toll on businesses across the United States. Many of these businesses have turned to their insurance companies for help, seeking coverage for their losses. In most cases, they have unfortunately been met with denials.

Plaintiff Hair Studio 1208, LLC is an indoor hair salon and personal care business that sought and was denied such insurance coverage from its insurer, Defendant Hartford Underwriters Insurance Company. Plaintiff sues for breach of contract and for a declaratory judgment on its own behalf and on behalf of other similarly-situated businesses. Defendants move for judgment on the pleadings pursuant to Federal Rule of Civil Procedure 12(c). While I sympathize with the plight of this business owner, I will nonetheless grant the Motion and dismiss the Complaint.

I. FACTS IN THE AMENDED COMPLAINT

The following facts are set forth in the Amended Complaint:¹

A. The Insurance Policies

Plaintiff operates an indoor hair salon whose services include hair styling, washing, and coloring. Plaintiff's business property includes property owned and/or leased by Plaintiff and used for general business purposes for the specific purpose of hair styling and other personal care business-related activities. (Am. Compl. ¶¶ 9, 12.)

In the course of its business, Plaintiff obtained a Business Owner's Policy and related endorsements (the "Policy") from Defendant, insuring Plaintiff's property and business practice, with effective dates of January 1, 2020 to January 2, 2021. The Policy is an "all-risk" policy that provides broad property and business interruption coverage except where excluded. The Policy also includes Business Income Coverage, Extra Expense Coverage, Extended Business Income Coverage, and Civil Authority Coverage. The Amended Complaint avers that the business interruption coverage is materially identical to an insurance industry standardized form that is used in all fifty states. (Id. ¶¶ 11, 13–16.)

Pursuant to the "Special Property Coverage Form," the Policy covers "direct physical loss of or direct physical damage to Covered Property ... caused by or resulting from a Covered Cause of Loss." "Covered Cause of Loss" means "direct physical loss or direct physical damage unless the loss or damage is excluded or limited in this Coverage Part." (Id., Ex. A, p. 18–19.) The Policy also includes an endorsement for "Business Income and Extra Expense" (the "Business Income endorsement") and a Coverage Extension for "Civil Authority Actions" (the "Civil Authority endorsement").

The Business Income endorsement specifically provides, in pertinent 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". The suspension must be caused by direct physical loss or direct physical damage to property at the "scheduled premises", including personal property in the open (or in a vehicle) within 1,000 feet of the "scheduled premises", caused by or resulting from a Covered Cause of Loss.

(Id., Ex. A., p. 61.)

The Civil Authority endorsement states, in pertinent part:

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

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

(b) 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.

(Id., Ex. A, p. 72.)

The Policy also excludes losses from "virus, bacterium or other microorganism that induces or is capable of inducing physical distress, illness or disease." Specifically, this "Virus Exclusion" states:

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. These exclusions apply whether or not the loss event results in widespread damage or affects a substantial area:

...

Any virus, bacterium or other microorganism that induces or is capable of inducing physical distress, illness or disease.

(Id., Ex. A, pp. 21, 23.)

B. The Losses

In January 2020, the United States of America saw its first cases of persons infected by COVID-19, the spread of which has since been designated a worldwide pandemic. Given the stable and transmittable nature of the virus, the Centers for Disease Control ("CDC") recommended avoiding indoor activities. As such, on March 6, 2020, Pennsylvania Governor Tom Wolf, acting pursuant to 35 Pa.C.S. § 7301(c), proclaimed the existence of a disaster emergency throughout the Commonwealth. (Am. Compl. ¶¶ 18–20.)

On March 19, 2020, Governor Wolf ordered the closure of all non-life-sustaining businesses, stating in pertinent part:

No person or entity shall operate a place of business in the Commonwealth that is not a life sustaining business regardless of whether the business is open to members of the public. This prohibition does not apply to virtual or telework operations (e.g., work from home), so long as social distancing and other mitigation measures are followed in such operations.

(Id. ¶ 23.)

On March 23, 2020, Governor Wolf issued a "Stay at Home" order that provided:

All individuals residing in Allegheny County, Bucks County, Chester County Delaware County, Monroe County, Montgomery County, and Philadelphia County are ordered to stay at home except as needed to access, support, or provide life sustaining business, emergency, or government services. For employees of life sustaining businesses that remain open, the following child care services may remain open: group and family child care providers in a residence; child care facilities operating under a waiver granted by the Department of Human Services Office of Child Development and Early Learning; and part-day school age programs operating under an exemption from the March 19, 2020 business closure Orders.

(Id. ¶ 26.) By way of order on April 20, 2020, this proclamation and order were extended through May 8, 2020. (Id. ¶ 28.)

On March 16, 2020, Plaintiff closed its business and stopped providing hair and personal care services as a result of the above proclamations and orders. Because Plaintiff was unable to use its property for its intended purpose, it sought coverage under its Policy with Defendant claiming business interruption, extra expense, interruption by civil authority, and other expenses. In a letter dated April 3, 2020, Defendant denied coverage for Plaintiff's losses, citing in part to the "Virus Exclusion." (Id. ¶¶ 30–31, 33, 36.)

Plaintiff filed a Complaint on May 5, 2020, and an Amended Complaint on July 27, 2020, alleging breach of contract and seeking a declaratory judgment against Defendant. Plaintiff also brings its claims on behalf of other similarly-situated persons and entities.

II. STANDARD OF REVIEW

A motion for judgment on the pleadings, under Federal Rule of Civil Procedure 12(c), should be granted if the movant establishes that there are no material issues of fact, and he/she is entitled to judgment as a matter of law. Zimmerman v. Corbett, 873 F.3d 414, 417 (3d Cir. 2017) (quotations omitted). In deciding a Rule 12(c) motion, the court does not consider matters outside the pleadings. Mele v. Federal Reserve Bank of N.Y., 359 F.3d 251, 257 (3d Cir. 2004). A motion for judgment on the pleadings based on the defense that the plaintiff has failed to state a claim is analyzed under the same standards that apply to a Rule 12(b)(6) motion. Id. (quotations omitted).

Under Federal Rule of Civil Procedure 12(b)(6), a defendant bears the burden of demonstrating that the plaintiff has not stated a claim upon which relief can be granted. Fed. R. Civ. P. 12(b)(6) ; see also Hedges v. United States, 404 F.3d 744, 750 (3d Cir. 2005). The United States Supreme Court has recognized that "a plaintiff's obligation to provide the ‘grounds’ of his ‘entitle[ment] to relief’ requires more than labels and conclusions." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (quotations omitted). "[T]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice" and "only a complaint that states a plausible claim for relief survives a motion to dismiss." Ashcroft v. Iqbal, 556 U.S. 662, 678,...