Hais, Hais, & Goldberger, P.C. v. Sentinel Ins. Co., 4: 20 CV 919 DDN

CourtUnited States District Courts. 8th Circuit. United States District Court (Eastern District of Missouri)
Writing for the CourtDavid D. Noce, UNITED STATES MAGISTRATE JUDGE
Citation544 F.Supp.3d 869
Docket NumberNo. 4: 20 CV 919 DDN,4: 20 CV 919 DDN
Decision Date21 June 2021

Alan S. Mandel, Mandel and Mandel LLP, St. Louis, MO, for Plaintiff.

James L. Brochin, Khristoph Becker, Charles Michael, Steptoe and Johnson LLP, New York, NY, Patrick J. Kenny, Armstrong Teasdale LLP, St. Louis, MO, Sarah Gordon, Steptoe and Johnson LLP, Washington, DC, for Defendant.



This action is before the Court on the motion of defendant Sentinel Insurance Company, Ltd., to dismiss the complaint of plaintiff Hais, Hais, and Goldberger, P.C., under Federal Rule of Civil Procedure 12(b)(6). A hearing was held, post-hearing materials have been received, and the matter is ripe for decision.1


Plaintiff commenced this action in the Circuit Court of St. Louis County, Missouri. Defendant removed the action to this Court under 28 U.S.C. § 1441(a), invoking the Court's original subject matter jurisdiction granted by 28 U.S.C. § 1332, based upon the diversity of the parties’ citizenship and the amount in controversy.

Plaintiff alleges the following facts in its complaint. Plaintiff is and has been a law firm practicing family law in the St. Louis, Missouri, metropolitan area for over 30 years. Plaintiff purchased a commercial property insurance policy ("Policy") from defendant to protect itself from property loss and business interruption. "COVID-19, its effects, and the response by state and local government has caused physical damage and loss to Plaintiff's property and has caused an interruption in Plaintiff's business." (Doc. 4 at 1-2.) Plaintiff specifically alleges that its revenues are down due to the coronavirus pandemic and related governmental actions such as stay-at-home orders.

Plaintiff alleges it prepared for such events as the coronavirus pandemic by purchasing the Policy from defendant; it alleges it attached a copy of the policy to its state court petition as Attachment A. (Id. at ¶ 9.) The complaint describes the policy as an "all-risk" policy that "insures against all risks of physical loss or damage to the property except by the expressly listed exclusions. The Policy does not exclude or limit coverage for losses from COVID-19 or pandemics." (Id. at ¶¶ 38, 39.)

Plaintiff alleges the Policy's provisions include coverage on page 10 for actual loss of business income sustained due to direct physical loss or damage; on page 10 for the "extra expense" of minimizing the suspension of business and of continuing business operations; and on page 11 for interruption of business caused by an order from a "Civil Authority." (Id. at 9-10.) More specifically, plaintiff alleges the Policy covers:

a. Loss of Business Income sustained due to the necessary suspension of "operations" during the "period of restoration."
b. Expenses incurred to avoid or minimize the suspension of business and to continue "operations", at replacement premises or at temporary locations, including relocation expenses.
c. The actual loss of Business Income sustained when access to the "scheduled premises" is specifically prohibited by order of a civil authority as the direct result of a Covered Cause of Loss to property in the immediate area of the "scheduled premises".
d. All amounts due from customers that it is unable to collect, interest charges on any loan required to offset amounts it is unable to collect pending Defendant's payment of these amounts; and other reasonable expenses that it incurs to reestablish its records of accounts receivable.

(Id. at 3.) All of these alleged coverages arise from the Policy's "SPECIAL PROPERTY COVERAGE FORM."

Plaintiff alleges that on April 14, 2020, defendant denied plaintiff's notice of claim and refused to cover plaintiff's losses due to the pandemic.

Plaintiff seeks declaratory and monetary relief for defendant's breach of the policy contract in six counts under Missouri law: Counts 1 and 2 for business interruption; Counts 3 and 4 for damages caused by actions of civil authority; and Counts 5 and 6 for the recovery of its extra business expenses.


Defendant admits it issued the Policy to plaintiff and that it covers the period August 20, 2020 through August 20, 2021. However, defendant moves to dismiss the complaint because the Policy unambiguously excludes coverage for plaintiff's claims caused by the novel coronavirus pandemic that causes COVID-19.

Applicable legal standards

Under Rule 12(b)(6) a party may move to dismiss all or part of a complaint for its failure to state a claim upon which relief can be granted. See Fed. R. Civ. Pro. 12(b)(6). To overcome a Rule 12(b)(6) motion a complaint "must include enough facts to state a claim to relief that is plausible on its face," Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), containing "more than labels and conclusions." Id. at 555, 127 S.Ct. 1955. Such a complaint will "allow[ ] the court to draw the reasonable inference that the defendant is liable for the misconduct alleged," Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009), and will state a claim for relief that rises above mere speculation. Twombly , 550 U.S. at 555, 127 S.Ct. 1955.

In reviewing the pleadings under this standard, the Court must accept all of the plaintiff's factual allegations as true and draw all inferences in plaintiff's favor, but the Court is not required to accept the legal conclusions plaintiff draws from the facts alleged. Retro Television Network, Inc. v. Luken Commc'ns, LLC, 696 F.3d 766, 768-69 (8th Cir. 2012). The Court additionally "is not required to divine the litigant's intent and create claims that are not clearly raised [and] it need not conjure up unpled allegations to save a complaint." Gregory v. Dillard's, Inc. , 565 F.3d 464, 473 (8th Cir. 2009) (en banc).

In a diversity case, the forum state's choice of law rules govern. See Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941) ; see also 28 U.S.C. § 1652. Under Missouri law, when construing contracts without a choice of law provision, the most significant relationship test is used. E.g., Sturgeon v. Allied Professionals Ins. Co. , 344 S.W.3d 205, 211 (Mo. Ct. App. 2011). In actions involving insurance policies, the principal location of the insured risk is given paramount weight in the significant relationship test. Id. Defendant's policy was issued to cover plaintiff's business premises that are located in Missouri. The Court concludes that Missouri law provides the rules of decision in this matter and both parties apply Missouri substantive law in their arguments.

In this pleading dispute, it is plaintiff's burden to identify the policy provisions that cover the policy benefits it seeks. Am. Fam. Mut. Ins. v. Coke , 413 S.W.3d 362, 368 (Mo. Ct. App. 2013). Conversely, defendant must identify the policy provision that excludes the coverage plaintiff claims. Burns v. Smith , 303 S.W.3d 505, 510 (Mo. banc 2010) ; Am. Fam. Mut. Inc. Co. v. Coke , 413 S.W.3d at 368.

Once the relevant provisions of the policy are identified, the following principles of Missouri substantive law are to be applied:

The interpretation of an insurance policy is an issue of law .... In construing the terms of an insurance policy, the [Missouri Supreme] Court applies the meaning which would be attached by an ordinary person of average understanding if purchasing insurance. The general rule in interpreting insurance contracts is to give the language of the policy its plain meaning. If language in an insurance policy is ambiguous, [the ambiguity is resolved] against the insurer-drafter. An ambiguity exists only when a phrase is reasonably open to different constructions.

Allen v. Continental Western Ins. Co. , 436 S.W.3d 548, 553-54 (Mo. banc 2014) (citing Mendenhall v. Property and Casualty Ins. Co. of Hartford , 375 S.W.3d 90, 92 (Mo. banc 2012) ); Ritchie v. Allied Prop. & Cas. Ins. Co. , 307 S.W.3d 132, 135 (Mo. banc 2009) ; Gavan v. Bituminous Cas. Corp. , 242 S.W.3d 718, 720 (Mo. banc 2008) ; and Krombach v. Mayflower Ins. Co. , 827 S.W.2d 208, 211 (Mo. banc 1992) (internal quotation marks omitted) (cleaned up).

Policy provisions invoked by plaintiff

Plaintiff's complaint invokes the following Policy provisions:

Various provisions in this policy restrict coverage. Read the entire policy carefully to determine rights, duties, and what is and is not covered.
* * *
We will pay for direct physical loss of or physical damage to Covered Property at the premises described in the Declarations (also called "scheduled premises" in this policy) caused by or resulting from a Covered Cause of Loss.
1. Covered Property
Covered property as used in this policy, means the following types of property for which a Limit of Insurance is shown in the Declarations:
* * *
3. Covered Causes of Loss
a. Excluded in Section B., EXCLUSIONS; or
b. Limited in Paragraph A.4. Limitations; that follow.
4. Limitations
* * *
5. Additional Coverages
* * *
o. Business Income
(1) 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 of or physical damage to property at the "scheduled premises", ....
p. Extra Expense
(1) We will pay reasonable and necessary Extra Expense you incur during the "period of restoration" that you would not have incurred if there had been no direct physical loss or physical damage to property at the "scheduled premises"....
* * *
(3) Extra Expense means expense incurred:
(a) To avoid or minimize ....
(b) To minimize the suspension of business if you cannot continue "operations".
(c) (1) To repair or replace any property;

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