Harvest Moon Distribs., LLC v. Southern-Owners Ins. Co.

• Decision Date: 01 March 2021
• Docket Number: Case No. 6:20-cv-1026-PGB-DCI
• Citation: Harvest Moon Distribs., LLC v. Southern-Owners Ins. Co., 522 F.Supp.3d 1127 (M.D. Fla. 2021)
• Parties: HARVEST MOON DISTRIBUTORS, LLC, Plaintiff, v. SOUTHERN-OWNERS INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Middle District of Florida

522 F.Supp.3d 1127

HARVEST MOON DISTRIBUTORS, LLC, Plaintiff,

v.SOUTHERN-OWNERS INSURANCE COMPANY, Defendant.

Case No. 6:20-cv-1026-PGB-DCI

United States District Court, M.D. Florida, Orlando Division.

Signed March 1, 2021

Alec Larkin Weber, Fisher Rushmer P.A., Orlando, FL, Imran Malik, Malik Law P.A., Maitland, FL, for Plaintiff.

Lori McAllister, Pro Hac Vice, Dykema Gossett, PLLC, Lansing, MI, Mark D. Tinker, Cole, Scott & Kissane, PA, Tampa, FL, for Defendant.

ORDER

PAUL G. BYRON, UNITED STATES DISTRICT JUDGE

This cause is before the Court on Defendant's Motion to Dismiss Pursuant to Rule 12(b)(6) (Doc. 41 (the "Motion ")) and Plaintiff's response thereto (Doc. 45 (the "Response ")). Upon consideration, the Motion is due to be granted.

I. BACKGROUND

Plaintiff Harvest Moon Distributors, LLC, is a wine and beer distributor with a commercial insurance policy (hereinafter, the "Policy ") issued by Defendant Southern-Owners Insurance Company. The parties dispute Plaintiff's entitlement to payments under the Policy for losses attributed to the coronavirus pandemic.

A. The Policy

To state a claim for breach of contract under the Policy's Business and Personal Property Coverage Form, Plaintiff must allege two threshold requirements: (1) "direct physical loss of or damage to Covered Property" (2) "caused by or resulting from any Covered Cause of Loss." (Doc. 40-1, p. 120).

The Policy's "Covered Causes of Loss" section refers to the Causes of Loss Form, which provides that "Covered Causes of Loss means RISKS OF DIRECT PHYSICAL LOSS" unless an exclusion or limitation applies. (Id. at p. 37). Because almost any event can pose a "risk" of loss, the Policy's exclusions and limitations are invaluable in determining what constitutes a Covered Cause of Loss.

The Policy includes three exclusions that are relevant here. First, the Policy does not cover losses or damages caused by "[d]elay, loss of use or loss of market." (Id. at p. 38). Second, the "[a]cts or decisions ... of any person, group, organization or governmental body" is not a Covered Cause of Loss. (Id. at p. 39). Finally, the Policy excludes the "enforcement of any ordinance or law" regulating the "use" of property. (Id. at p. 37).

If Plaintiff properly alleges these threshold requirements, then it may also be entitled to payments under the Business Income and Extra Expenses Endorsement. (Id. at p. 49). To sufficiently claim business income losses, Plaintiff must comply with the terms of the Endorsement:

a. Business Income

Subject to the Limit of Insurance provisions of this endorsement, 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."

Business income means the:

(1) Net Income (Net Profit or Loss before income taxes) that would have been earned or incurred; and

(2) Continuing normal operating expenses incurred, including payroll.

(Id. ). Additionally, the Endorsement covers "necessary Extra Expense[s] ... incur[red] during the ‘period of restoration.’ " (Id. ). An "Extra Expense" is an expense incurred:

(1) To avoid or minimize the suspension of business and to continue "operations":

(a) At the described premises or at a "newly acquired location"; or

(b) At a replacement premises or at temporary locations, including:

1) Relocation expenses; and

2) Costs to equip and operate the replacement or temporary locations.

(2) To minimize the suspension of business if you cannot continue "operations"; or

(3) (a) To repair or replace any property; or

(b) To research, replace or restore the lost information on damaged valuable papers and records ...

(Id. ). The Endorsement defines "operations" as "business activities occurring at the described premises or at a ‘newly acquired location’ " and "period of restoration" as beginning on the date of the direct physical loss or damage and ending on the date when the property "should be repaired, rebuilt or replaced with reasonable speed and similar quality." (Id. at p. 22).

B. The Court's Dismissal of the Original Complaint

On May 22, 2020, Plaintiff initiated this action in Florida state court, which Defendant later removed to this Court. (Doc. 1). The Complaint alleged that Plaintiff purchased beer in accordance with its contract with Walt Disney Parks and Resorts US Inc. ("Disney "). (Doc. 1-2). On March 15, 2020, before Plaintiff shipped the beer, Disney voluntarily closed to the public due to the pandemic. (Id. ¶¶ 33–34, 39). Thereafter, Disney refused to accept the beer or compensate Plaintiff. (See Doc. 3, p. 6). Four days after Disney's voluntary closure, Plaintiff submitted a claim to Defendant for loss of business income, extra expense, inventory, and accounts receivable caused by the pandemic. (Doc. 1-2, ¶ 41). On April 15, 2020, Plaintiff submitted a sworn proof of loss of its product to Defendant, claiming that its beer spoiled while Disney remained closed. (Id. ¶ 42). Defendant denied Plaintiff's claim. (Id. ¶ 43). The Complaint requested damages for breach of contract and declaratory judgment that it is entitled to coverage under the Policy. (Doc. 1-2).

Defendant filed a Motion to Dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), which the Court granted on October 9, 2020. (Docs. 3, 39). In dismissing the Complaint without prejudice, the Court examined the Policy in detail. As is relevant here, the Court determined that Plaintiff's alleged spoilation of its beer constituted a "physical loss or damage to Covered Property" pursuant to the Policy. (Doc. 39). However, the Court concluded that the Complaint failed to state a claim for coverage because it did not allege a "Covered Cause of Loss." The Court found that the pandemic is not a "direct" cause of the spoilation of the beer, stating that "COVID-19 itself did not damage Plaintiff's beer." (Id. at p. 12). It further held that the Policy bars from coverage the actual "direct" cause of the spoilation of the beer—Disney's voluntary closure and subsequent refusal of delivery—through the "loss of use" and "acts or decisions by persons, groups, organizations, or government bodies" exclusions. (Id. ).

The failure to demonstrate "direct physical loss or damage to Covered Property" by a "Covered Cause of Loss" necessarily precluded recovery under the Business Income and Extra Expenses Endorsement. (See id. at p. 5). But the Court emphasized another glaring flaw in the Complaint's request for coverage under the Endorsement: it did not allege that Plaintiff suspended its "operations" or underwent any "period of restoration." (Id. at pp. 7–9).

Plaintiff filed its Amended Complaint on October 23, 2020, again requesting damages for breach of contract and declaratory judgment that it is entitled to coverage under the Policy. (Doc. 40). Defendant filed the instant Motion, and the matter is now ripe for review.

II. STANDARD OF REVIEW

To survive a motion to dismiss made pursuant to Rule 12(b)(6), the complaint "must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ " Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). A claim is plausible on its face when the plaintiff "pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. Legal conclusions and recitation of a claim's elements are properly disregarded, and courts are "not bound to accept as true a legal conclusion couched as a factual allegation." Twombly , 550 U.S. at 555, 127 S.Ct. 1955 ; Papasan v. Allain , 478 U.S. 265, 286, 106 S.Ct. 2932, 92 L.Ed.2d 209 (1986). Courts must also view the complaint in the light most favorable to the plaintiff and must resolve any doubts as to the sufficiency of the complaint in the plaintiff's favor. Hunnings v. Texaco, Inc. , 29 F.3d 1480, 1483 (11th Cir. 1994) (per curiam). In sum, courts must (1) ignore conclusory allegations, bald legal assertions, and formulaic recitations of the elements of a claim; (2) accept well-pled factual allegations as true; and (3) view well-pled allegations in the light most favorable to the plaintiff. Iqbal , 556 U.S. at 679, 129 S.Ct. 1937.

III. DISCUSSION

The Court finds that the Motion is due to be dismissed because the Amended Complaint still fails to allege that a "Covered Cause of Loss" resulted in the "physical loss or damage." It ascribes its losses solely to the pandemic, ignoring the Court's prior Order dismissing the Complaint without prejudice:

Although the Policy does not explicitly exclude pandemic-related losses, Plaintiff's loss arose from Disney's act of refusing the beer, not from the pandemic. COVID-19 itself did not damage Plaintiff's beer. In other words, Plaintiff's beer would not have been damaged or destroyed but for Disney's decision , making Disney the cause of the alleged spoilation. For example, if Disney had accepted and refrigerated Plaintiff's beer or otherwise compensated Plaintiff, then Plaintiff would not have suffered any harm, regardless of the existence of the pandemic.

Rather, COVID-19 merely motivated Disney's decision to voluntarily close and to refuse acceptance of Plaintiff's beer.

But Disney's motivation for its decisions is irrelevant. The Policy explicitly excludes from coverage such business decisions by persons, groups, or organizations. The pandemic does not change the terms of the Policy, which the parties bargained for and agreed to. Moreover, the Complaint itself states that Plaintiff experienced "loss of use " of its product, which the Policy expressly excludes from coverage. Even construing the coverage terms as broadly as possible and the exclusionary terms as narrowly as possible, the Complaint fails to overcome the Policy's exclusionary language.

(Doc. 39, p. 12). The Court still cannot conceive of—and Plaintiff still offers no explanation for—how an...