In re Erie Covid-19 Bus. Interruption Prot. Ins. Litig.
| Decision Date | 14 October 2022 |
| Docket Number | MDL 2969,Master 1:21-mc-1 |
| Parties | IN RE ERIE COVID-19 BUSINESS INTERRUPTION PROTECTION INSURANCE LITIGATION This Document Relates to All Cases |
| Court | U.S. District Court — Western District of Pennsylvania |
Plaintiffs in this multidistrict litigation all operate distinct businesses-from a retail clothing store in the Shady side neighborhood of Pittsburgh, Pennsylvania, to a Ford/Lincoln car dealership in Cook County, Illinois, to a mussel bar in the Nation's Capital, and more. Different as their businesses may be, Plaintiffs' legal claims are far less so-as compared to each other and to claims asserted by business owners in a multitude of similar cases nationwide.
Beginning in March 2020, Plaintiffs began to suffer significant financial consequences when they reduced their business operations or temporarily closed their businesses altogether following the outbreak of the global coronavirus pandemic (referred to herein as COVID-19), which has been one of the most serious public health events in history with devastating consequences across all aspects of life, including the loss of life itself. Plaintiffs filed insurance claims for their business losses with Defendant Erie Insurance Group (“Erie”)[1] under the commercial property insurance policies Plaintiffs had purchased from Erie. Erie denied those claims. The resulting legal actions making up this litigation are 32 of thousands of actions in state and federal courts in which property owners with commercial insurance policies issued by Erie and other insurance carriers have alleged that their property insurers wrongfully denied COVID-19-related claims covered by their policies.
Against that backdrop and the law that has developed in this arena over the past two-plus years, the Court is not short of guidance from the parties and from the decisions of other courts as to how it should resolve the issues of law that these cases raise. Having thoroughly reviewed those sources and considered the parties' arguments, the Court will GRANT Defendants' pending Motion to Dismiss (ECF No 238).
On January 7, 2021, the Judicial Panel on Multidistrict Litigation created and transferred to this Court this multidistrict litigation (“MDL”). (ECF No. 1.) The MDL currently consists of 32 actions involving 47 Plaintiffs, all of which seek insurance coverage for business losses following the onset of COVID-19.[2]
After the actions in this MDL were transferred to this Court, the Court sought and received the parties' input on case administration matters, including whether the parties suggested that the Court resolve the fully briefed dispositive motions already pending in some of the member cases or instead sought to file a Consolidated Amended Complaint (“CAC”). (ECF No. 210, at 2.) The Court permitted Plaintiffs to file a CAC only if all Plaintiffs in the MDL desired to do so, agreed that the CAC would serve as the operative complaint moving forward, and agreed to not seek further leave to amend absent a change in intervening, controlling law, or the discovery of facts previously unknowable. (Id. at 9.) All but one Plaintiff requested to move forward with a CAC, and the Court allowed Plaintiffs to file a CAC on behalf of all but that one Plaintiff, Steven A. Udesky OD & Associates P.C., finding good cause to do so based on briefing from all parties. (ECF No. 224, at 1-3.) The Court then stayed without prejudice the action by Plaintiff Udesky pending the Court's disposition of an anticipated dispositive motion as to the CAC. (ECF No. 233.)
Plaintiffs filed the CAC on October 28, 2021. (ECF No. 228). In it, Plaintiffs assert nine claims for relief[3]: (1) declaratory relief for Plaintiffs and class members under Erie's Ultrapack Plus Policy (one of the two Erie policies at issue in this case), specifically a declaratory judgment that Plaintiffs' asserted business interruption losses are covered under that Policy (Count One); (2) the same declaratory relief sought at Count One but as to Plaintiffs and class members under Erie's UltraFlex Policy (the other of the two Erie polices at issue in this case) (Count Two); (3) relief for breach of contract on behalf of Plaintiffs and class members under the Ultrapack Plus Policy (Count Three); (4) relief for breach of contract on behalf of Plaintiffs and class members under the UltraFlex Policy (Count Four); (5) relief under Illinois law for bad faith denial of insurance on behalf of Illinois-based Plaintiffs and class members (Count Five); (6) relief under New York General Business Law § 349 on behalf of New York-based Plaintiffs and class members (Count Six); (7) relief under New York law for breach of the fiduciary duty of good faith and fair dealing on behalf of New York-based Plaintiffs and class members (Count Seven); (8) relief under West Virginia law for breach of the duty of good faith and fair dealing on behalf of West Virginia-based Plaintiffs and class members (Count Eight); and (9) relief under Tennessee law for breach of the duty of good faith and fair dealing on behalf of Tennessee-based Plaintiffs and class members (Count Nine). (ECF No. 228, at 62-74.)
On January 10, 2022, Erie filed the pending Motion to Dismiss Counts One, Two, Three, and Four of the CAC pursuant to Federal Rule of Civil Procedure 12(b)(6) (ECF No. 238) and a brief in support of the Motion (ECF No. 239). Pursuant to a stipulation by the parties that this Court approved, the Motion to Dismiss seeks dismissal only of Counts One, Two, Three, and Four, and Erie's deadline to respond to the remaining asserted Counts is currently stayed without prejudice pending the Court's decision as to the Motion to Dismiss Counts One through Four. (See ECF No. 236, at 1.)[4] Plaintiffs filed their Brief in Opposition to the Motion to Dismiss on March 21, 2022 (ECF No. 246), and Erie filed its Reply Brief on April 11, 2022 (ECF No. 249). Oral argument as to the Motion to Dismiss occurred on May 16, 2022 (ECF No. 263).[5] The parties have also filed various Notices of Supplemental Authority (ECF Nos. 252, 253, 258, 265, 266, 267, 268, 269, 272, 279, 280, 281, 282, 283, 284) while the Motion to Dismiss has been pending.
The Motion to Dismiss is now ripe for disposition.
Plaintiffs collectively consist of several businesses-such as retail stores, restaurants, car dealerships, hair salons, and dental practices-located in the District of Columbia, Illinois, Maryland, New York, Ohio, Pennsylvania, Tennessee, Virginia, and West Virginia. (ECF No. 228 ¶¶ 17-63.) At the times relevant to these actions, each Plaintiff had a contract of “all risk” commercial property insurance with Erie. (Id. ¶¶ 69, 72.) The contract was either the Ultrapack Plus Policy or the UltraFlex Policy (collectively, “the Policies”). (Id. ¶ 73.) Both Policies “provide substantially identical coverages in relevant part.” (Id. ¶ 74.)
Specifically, both Policies contain an “insuring agreement” that states: “[Erie] will pay for direct physical ‘loss' of or damage to covered property at the premises described in the ‘Declarations' caused by or resulting from a peril insured against.” (ECF No. 228-2, at 2.)[7] “Loss” wherever used in the Policies is defined as “direct and accidental loss of or damage to covered property” (id. at 36), and “peril insured against,” also called “covered cause of loss,” means “direct physical ‘loss,' except ‘loss' as excluded or limited in th[e] [P]olic[ies]” (id. at 6).
The Policies contain five primary categories of coverage encompassed within the “insuring agreement,” one of which is “additional income protection.” (Id. at 2-5 ().) “Additional income protection,” in turn, includes three types of income coverage that are relevant here.
The first type is “income protection,” which covers a policyholder's “loss of ‘income' and/or ‘rental income' [] sustain[ed] due to partial or total ‘interruption of business' resulting directly from ‘loss' or damage to property on the premises described in the ‘Declarations' from a peril insured against.” (Id. at 4.) Second, “extra expense” coverage covers a policyholder's “necessary expenses [] incur[red] due to partial or total ‘interruption of business' resulting directly from ‘loss' or damage to property on the premises described in the ‘Declarations' from a peril insured against.” (Id.) In both “income protection” and “extra expense” coverage, “‘interruption of business' means the period of time that [the policyholder's] business is partially or totally suspended . . . [b]egin[ning] with the date of direct ‘loss' to covered property caused by a peril insured against[,] and [] [e]nd[ing] on the date when the covered property should be repaired, rebuilt, or replaced with reasonable speed and similar quality.” (Id. at 36.)
The third relevant type of coverage contained within the Policies' “additional income protection” provisions is “civil authority” coverage. (Id. at 5.) Under civil authority coverage, Erie pays for a policyholder's lost income, lost rental income, and/or extra expenses incurred “[w]hen a peril insured against causes damage to property other than” the policyholder's property, “[a]ccess to the area immediately surrounding the damaged property is prohibited by civil authority as a result of the damage” to the other property, and the policyholder's property is within the area to which access is prohibited. (Id. (emphasis added).)
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