Hampshire House Corp. v. Fireman's Fund Ins. Co.
| Decision Date | 26 August 2021 |
| Docket Number | Civil Action No. 20-11409-FDS |
| Citation | 557 F.Supp.3d 284 |
| Parties | HAMPSHIRE HOUSE CORPORATION, Plaintiff, v. FIREMAN'S FUND INSURANCE COMPANY, Associated Indemnity Corporation, and Allianz Global Risks United States Insurance Company, Defendants. |
| Court | U.S. District Court — District of Massachusetts |
Allan Kanner, Pro Hac Vice, Allan Kanner & Associates, Cynthia G. St. Amant, Pro Hac Vice, Kanner & Whiteley, LLC, New Orleans, LA, Jonathan Tucker Merrigan, Evan K. Buchberger, Sweeney Merrigan Law, LLP, Boston, MA, Thomas T. Merrigan, Sweeney Merrigan Law, Greenfield, MA, for Plaintiffs.
Daniel E. Rosenfeld, Sullivan & Worcester LLP, Jamie Kurtz, Bruce E. Falby, DLA Piper US LLP, Boston, MA, Robert Hoffman, Pro Hac Vice, DLA Piper LLP, Dallas, TX, for Defendants.
MEMORANDUM AND ORDER ON DEFENDANTS’ MOTION TO DISMISS
This is a dispute concerning insurance coverage. Jurisdiction is based on diversity of citizenship.
Plaintiff Hampshire House Corporation ("Hampshire") operates four restaurants with bars in Boston, two of which also have retail services. Beginning in March 2020, as the COVID-19 pandemic began to spread across the country, the Commonwealth of Massachusetts issued orders that required restaurants to suspend on-premises consumption of food and drink, as well as on-premises retail operations. Hampshire's insurer, Associated Indemnity Corporation ("AIC"), denied coverage of Hampshire's insurance claims following those orders. The amended complaint seeks damages on that basis, among others, from AIC, and Fireman's Fund Insurance Company ("FFIC") and Allianz Global Risks United States Insurance Company ("Allianz"), which allegedly control coverage decisions, for breach of contract, breach of the covenant of good faith and fair dealing, and unfair trade practices.
Defendants have moved to dismiss the complaint for failure to state a claim upon which relief can be granted, contending that the policy on its face does not provide coverage. In the alternative, they contend that FFIC and Allianz are improper defendants, and have moved to dismiss all claims against them. Plaintiff opposes the motion to dismiss and, in the alternative, requests leave to amend the complaint.
For the following reasons, the motion to dismiss will be granted.
The following facts are presented as alleged in the complaint unless otherwise noted.
Hampshire is a Massachusetts corporation. (Am. Compl. ¶ 1). It operates the following businesses: Cheers, located at 84 Beacon Street, a restaurant with a bar and event and retail services; 75 Chestnut Street, a restaurant with a bar; Cheers, located at Faneuil Hall, a restaurant with a bar and retail services; and 75 on Liberty Wharf Bar & Grill, a restaurant with a bar. (Id. )
AIC and FFIC are California corporations with principal places of business in Illinois. (Id. ¶¶ 2, 4). AIC is identified as the issuer on the policy. (Id. ¶ 4). Allianz is an Illinois corporation with a principal place of business in Illinois. (Id. ¶ 5). According to the complaint, AIC does not make coverage decisions; FFIC operationally and financially controls AIC, and Allianz operationally and financially controls FFIC. (Id. ¶ 7).
In January 2020, the first case of the infectious disease COVID-19 was confirmed in the United States. (Id. ¶ 34). Over the course of the following year and eight months, Massachusetts has reported more than 650,000 confirmed cases of COVID-19 and more than 17,500 deaths from the disease. See Mass.gov, COVID-19 Interactive Data Dashboard, https://www.mass.gov/info-details/covid-19-response-reporting (last visited June 14, 2021). In Suffolk County, where Boston is located, more than 23,300 cases had been confirmed as of the filing date of the amended complaint, which was September 28, 2020. (Am. Compl. ¶ 34).
According to the complaint, COVID-19 can be spread through aerosol transport, respiratory droplets, or surface contact. (Id. ¶¶ 35-38). It alleges that the virus can remain stable and transmissible for at least three hours in aerosols, up to four hours on copper
, up to 24 hours on cardboard, and up to two to three days on plastic and stainless steel. (Id. ¶ 36). Having customers and employees in confined indoor spaces can add to the transfer of COVID-19, particularly because asymptomatic viral carriers can infect others. (Id. ¶¶ 42, 43).
To prevent and limit the spread of COVID-19, state and local authorities issued a series of emergency orders. (Id. ¶ 21). In Massachusetts, Governor Baker issued an order on March 15, 2020, that suspended "on premises consumption of food or drink" at restaurants. (Id. ¶ 23). On March 23, 2020, Governor Baker issued an order requiring non-essential businesses to "close their physical workplaces and facilities (‘brick-and-mortar premises’) to workers, customers, and the public" until April 7, 2020, and limiting on-premises gatherings to no more than ten people. (Id. ¶ 25).1 Subsequent orders similarly limited business operations until at least June 8, 2020, when, during Phase 2, "limited capacity on-premises dining and on-premises shopping services" was allowed. (Id. ¶¶ 25, 72).
Hampshire's four locations, like other Boston businesses, have been subject to the orders issued by Governor Baker. (Id. ¶ 70). The complaint alleges that the orders and the spread of COVID-19 have caused "Hampshire's core business functions to be nearly eliminated or destroyed." (Id. ¶ 75). Between March 15 and June 8, 2020, Hampshire was permitted to provide takeout dining services, which at least one of its restaurants did, but not on-premises dining. (Id. ¶¶ 62, 72). Prior to reopening for limited capacity on-premises dining and shopping in June 2020, it created outdoor eating spaces, added plexiglass, and reconfigured the interiors of its premises. (Id. ¶¶ 72, 76). In August 2020, its Cheers Faneuil Hall business permanently closed. (Id. ¶ 73).
Hampshire purchased an insurance policy from AIC on August 1, 2019. ). Among other items, the policy provides "Business Income and Extra Expense" and "Civil Authority" coverage. (Hampshire Policy at 55-56).
The "Business Income Coverage Form (and Extra Expense)" defines the scope of the business income coverage in the following terms:
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 damage to property at the premises described in the Declarations, including personal property in the open (or in a vehicle) within 100 feet, caused by or resulting from any Covered Cause of Loss.
(Hampshire Policy at 55). It also provides for "Extra Expense" coverage:
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.
(Id. ). It further provides the following "Civil Authority" coverage:
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 due to direct physical loss of or damage to property, other than at the described premises, caused by or resulting from any Covered Cause of Loss. This coverage will apply for a period of up to two consecutive weeks from the date of that action.
(Id. at 56).
On March 17, 2020, Hampshire provided AIC with its first notice of loss for incurred business income losses. (Id. ¶ 93). On June 16, 2020, AIC denied the claim. . The denial letter stated that "[b]ecause there has been no direct physical loss of or damage to property, there has been no Covered Cause of Loss under the Policy's Business Income, Extra Expense or Civil Authority coverages of the Policy." (June 16, 2020 Denial Letter at 8).
Hampshire alleges that Allianz violated its contractual, statutory, and lawful obligations to pay its losses because Hampshire had coverage for "physical loss of or damage to the insured property from all risks unless expressly limited or excluded by language in the body of the Policy or through a separate exclusion endorsement," and "[t]here [were] no exclusions in Hampshire's policy for the loss of business income caused by emergency [o]rders, or the COVID-19 virus." (Am. Compl. ¶¶ 105, 108-09). The amended complaint further alleges that FFIC and AIC "were complicit in Allianz's position." (Id. ¶ 102).
According to the complaint, defendants relied on "pre-determined conclusions of no coverage," and made their decision "without [a] reasonable investigation" and with "no basis for their factual conclusions." (Am. Compl. ¶¶ 92, 94-97). The complaint alleges that, at some point, Allianz posted the following message on its website:
In general, any standard property and business interruption coverage must be triggered by physical loss or damage to property at an insured location and infectious disease is usually not a covered peril.
(Id. ¶ 101 (quoting Allianz's website)). It therefore alleges that Allianz issued decisions across states with a "one-size-fits-all approach" and "without regard for applicable state statutory and decisional case law affecting coverage." (Id. ¶¶ 100, 102).
On July 27, 2020, Hampshire filed suit against FFIC, AIC, and Allianz. The amended complaint asserts claims for breach of contract (Count 1), breach of the covenant of good faith and fair dealing (Count 2), violations of Mass. Gen. Laws ch. 176D (Count 3), and violations of Mass. Gen. Laws ch. 93A (Count 4).
FFIC, AIC, and Allianz have moved to dismiss the complaint pursuant to Fed. R. Civ. P. 12(b)(6) for failure to state a claim upon which relief can be granted, or, in the...
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