Kamakura, LLC v. Greater N.Y. Mut. Ins. Co.

• Decision Date: 09 March 2021
• Docket Number: Civil Action No. 20-11350-FDS
• Parties: KAMAKURA, LLC and Atlántico, LLC, on behalf of themselves and all others similarly situated, Plaintiffs, v. GREATER NEW YORK MUTUAL INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — District of Massachusetts

525 F.Supp.3d 273

KAMAKURA, LLC and Atlántico, LLC, on behalf of themselves and all others similarly situated, Plaintiffs,

v.GREATER NEW YORK MUTUAL INSURANCE COMPANY, Defendant.

Civil Action No. 20-11350-FDS

United States District Court, D. Massachusetts.

Signed March 9, 2021

Adam M. Stewart, Edward F. Haber, Michelle H. Blauner, Shapiro Haber & Urmy LLP, Boston, MA, for Plaintiffs.

Gregory P. Varga, Jonathan E. Small, Robinson & Cole LLP, Hartford, CT, Julianna M. Charpentier, Robinson & Cole, Boston, MA, for Defendant.

MEMORANDUM AND ORDER ON DEFENDANT'S MOTION TO DISMISS

SAYLOR, C.J.

This is a dispute concerning insurance coverage. Jurisdiction is based on diversity of citizenship.

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. Plaintiffs Kamakura, LLC and Atlántico, LLC operate restaurants in Boston. They seek a judgment, on behalf of themselves and those similarly situated, that insurance policies issued by defendant Greater New York Mutual Insurance Company ("GNY") cover the losses they sustained following those orders. They also seek damages for breach of contract and unfair trade practices arising out of GNY's denial of their claims. GNY has moved to dismiss the complaint for failure to state a claim upon which relief can be granted, contending that the policies on their face do not provide coverage.

The Court is certainly sympathetic to the hardships faced by restaurant owners as a result of the pandemic. It also notes that the pandemic is the type of occurrence—a widespread disaster for which a small business cannot possibly prepare—where insurance coverage ought to be routinely available. Nonetheless, the Court cannot avoid the language of the policies as written. It therefore joins, albeit with some reluctance, the great majority of courts that has concluded that no insurance coverage is available under these policies for the losses caused by the pandemic.

Accordingly, and for the following reasons, the motion to dismiss will be granted.

I. Background

A. Factual Background

The following facts are presented as alleged in the complaint unless otherwise noted.

1. Parties

Kamakura, LLC and Atlántico, LLC are limited liability companies. (Compl. ¶¶ 11-12). Kamakura operates the Kamakura restaurant, a Japanese-style restaurant located in downtown Boston. (Id. ¶ 17). Atlántico operates the Atlántico restaurant, a Spanish and Portuguese seafood restaurant located in Boston's South End. (Id. ¶ 18).

Greater New York Mutual Insurance Company ("GNY") is a New York company with a principal place of business in New York. (Id. ¶ 13). It is licensed to provide property and casualty insurance in Massachusetts. (Id. ).

2. COVID-19 Pandemic

In late 2019 and early 2020, the infectious disease COVID-19 began to spread around the world. (Id. ¶ 22). The City of Boston announced its first confirmed case on February 1, 2020. (Id. ). Later that month, one of the first "super-spreader" events in the United States, a medical conference hosted by Biogen, was held in Boston. (Id. ¶ 23). That conference alone was linked to at least 100 confirmed cases of COVID-19. (Id. ). Over the course of the following year, Massachusetts reported more than 550,000 confirmed cases of COVID-19 and more than 16,000 deaths from the disease. See Mass.gov, COVID-19 Interactive Data Dashboard, https://www.mass.gov/info-details/covid-19-response-reporting (last visited Mar. 8, 2021).

According to the World Health Organization, COVID-19 is transmitted "through respiratory droplets, by direct contact with infected persons, or by contact with contaminated objects and surfaces." (Id. ¶ 25 (emphasis omitted)). It is spread "primarily from person to person through small droplets from the nose or mouth" when people "breathe in these droplets from a person infected with the virus." (Id. ¶ 26). Airborne transmission is "especially acute" in indoor or enclosed environments, particularly those that are crowded, have inadequate ventilation, or expose individuals to others for extended periods of time. (Id. ¶ 32).

COVID-19 is also spread when respiratory droplets from infected individuals "land on objects and surfaces," and others touch those surfaces and then touch their eyes, nose, or mouth. (Id. ¶ 26 (emphasis omitted)). According to a study published in the New England Journal of Medicine, COVID-19 is detectable for up to six days on certain types of surfaces. (Id. ¶ 28).

To slow the spread of the disease, state and local governments across the country issued orders that, among other things, required residents to "socially distance" and to remain at home unless performing "essential" activities. (Id. ¶ 34). In Massachusetts, Governor Baker issued an order on March 15, 2020, that suspended "on-premises consumption of food or drink" at restaurants. (Def. Mem. Ex. 1, at 4; Compl. ¶ 36).¹ That suspension was extended several times in March, April, and May 2020. (Compl. ¶¶ 38, 39, 41-42; Def. Mem. Ex. 1, at 6, 20, 25, 28).

On June 6, 2020, Governor Baker issued an order that permitted restaurants to provide outdoor table service, subject to several restrictions concerning seating capacity, social distancing, and cleaning. (Compl. ¶ 46; Def. Mem. Ex. 1, at 40). Two weeks later, he authorized indoor table service to resume under similar restrictions. (Compl. ¶ 48; Def. Mem. Ex. 1, at 49).

Kamakura and Atlántico, like other restaurants, have been subject to the orders issued by Governor Baker. (Compl. ¶ 51). The complaint alleges that the orders and the spread of COVID-19 have had a "devastating effect" on their business. (Id. ). Pursuant to the orders, the restaurants have been limited either to take-out and delivery services, which are not their "normal and primary forms of providing food and beverages," or to restricted levels of on-premises dining. (Id. ¶ 52). The complaint further alleges that the orders "have operated to prohibit access" to the restaurants. (Id. ¶ 72). Kamakura and Atlántico have therefore suspended their operations "due to their inability to use their properties for their intended purposes due to COVID-19 and the civil authority orders." (Id. ).

3. The Insurance Policies and the Claims

Kamakura and Atlántico separately purchased insurance policies from GNY. (Id. ¶¶ 55-56; see also id. Ex. 1 ("Kamakura Policy"); id. Ex. 2 ("Atlántico Policy")).² The policies provide identical "Business Income," "Extra Expenses," and "Civil Authority" coverage. (Compare Kamakura Policy, at 94-95, with Atlántico Policy, at 93-94). The scope of that coverage is defined by the "Business Income (and Extra Expense) Coverage Form." That form first provides "Business Income" coverage on 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 premises which are described in the Declarations and for which a Business Income Limit of Insurance is shown in the Declarations. The loss or damage must be caused by or result from a Covered Cause of Loss.

(Kamakura Policy at 94; Atlántico Policy at 93). The same form then 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 "Civil Authority" coverage:

When a Covered Cause of Loss causes damage to property other than property at the described premises, 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, provided that both of the following apply:

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

(2) 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.

(Kamakura Policy at 95; Atlántico Policy at 94).

The Business Income (and Extra Expense) Coverage Form is a standardized form drafted by the Insurance Services Office ("ISO"). (Compl. ¶ 62). ISO drafts standard policy language used by insurers in the United States. (Id. ). In November 2006, following the outbreaks of Severe Acute Respiratory Syndrome ("SARS") and H5N1 avian flu

, ISO drafted a form exclusion for losses "due to disease-causing agents such as viruses and bacteria." (Id. ¶ 66). According to the complaint, "many insurers" added that form or a similar exclusion to standard commercial insurance policies. (Id. ¶ 65). The Kamakura and Atlántico policies, which include multiple ISO forms, do not contain exclusions for viruses or pandemics. (Id. ¶¶ 60-61, 69).

Kamakura and Atlántico submitted claims to GNY seeking coverage for losses sustained due to the COVID-19 pandemic and the resulting orders. (Id. ¶¶ 78, 87). GNY denied those claims. (Id. ). Its denial letters stated that "there is no physical loss of or damage to your property from a covered cause of loss, nor have the local authorities prohibited access to the area immediately surrounding your property due to damage to property not more than one mile away from your business." (Id. Ex. 4, at 1 ("Kamakura Denial"); see also id. Ex. 5, at 1 ("Atlántico Denial")).³ They further stated that the orders "do[ ] not constitute physical loss of or damage to either covered property at the described premises or...