Mac Prop. Grp. LLC v. Selective Fire & Cas. Ins. Co.
| Decision Date | 20 June 2022 |
| Docket Number | DOCKET NOS. A-0714-20,A-0962-20,A-1034-20,A-1110-20,A-1111-20,A-1148-20 |
| Parties | MAC PROPERTY GROUP LLC & THE CAKE BOUTIQUE LLC, Plaintiff-Appellant, v. SELECTIVE FIRE AND CASUALTY INSURANCE COMPANY, Defendant-Respondent. Precious Treasures LLC, Plaintiff-Appellant, v. Markel Insurance Company, Defendant-Respondent. FAFB, LLC (d/b/a Salted Lime Bar & Kitchen), Plaintiff-Appellant, v. Blackboard Insurance Company, Defendant-Respondent. Country Diner of Mullica Hill, Inc. d/b/a Harrison House, Plaintiff-Appellant, v. Wesco Insurance Company, Defendants-Respondents, and Amtrust Financial Services, Inc., Defendants. Pearl Three Two LLC d/b/a Route 40 Diner, Plaintiff-Appellant, v. Wesco Insurance Company, Defendants-Respondents, and Amtrust Financial Services, Inc., Defendants. Mattdogg, Inc. (d/b/a Pure Focus Sports Club ), Plaintiff-Appellant, v. Philadelphia Indemnity Insurance Company, Defendant-Respondent. |
| Court | New Jersey Superior Court — Appellate Division |
Ashley S. Nechemia, Cherry Hill, argued the cause for appellant Precious Treasures, LLC, (Mattleman Weinroth & Miller, PC, attorneys; Robert W. Williams, Cherry Hill, on the briefs).
Kevin J. Kotch argued for the cause for appellants FAFB, LLC and Mattdogg, Inc. (Ferrara Law Group, PC, attorneys; Ralph P. Ferrara, Trenton, and Kevin J. Kotch, of counsel and on the briefs).
Mattleman, Weinroth & Miller, PC, attorneys for appellants MAC Property Group, LLC & The Cake Boutique, LLC, Country Diner of Mullica Hill, Inc., and Pearl Three Two, LLC, (Robert W. Williams, Cherry Hill, on the briefs).
Bennett Evan Cooper (Dickinson Wright PLLC) of the Arizona and California bars, admitted pro hac vice, argued the cause for respondent Markel Insurance Company (Bennett Evan Cooper, Timothy M. Strong (Dickinson Wright PLLC) of the Arizona bar, admitted pro hac vice, and Peter E. Doyle (Dickinson Wright PLLC), attorneys; Bennett Evan Cooper, Timothy M. Strong and Peter E. Doyle, on the brief).
Keith Moskowitz (Dentons US LLP) of the Connecticut, Illinois and New York bars, admitted pro hac vice, argued for respondent Blackboard Insurance Company (Dentons US LLP, attorneys; Shawn L. Kelly, Kelly Lloyd Lankford, Short Hills, and Keith Moskowitz, on the brief).
Stephen E. Goldman (Robinson & Cole LLP) of the Connecticut bar, admitted pro hac vice, argued the cause for respondent Philadelphia Indemnity Insurance Company (Walsh Pizzi O'Reilly Falanga LLP, and Dentons US LLP, attorneys; John R. Vales, Stephen M. Turner, Short Hills, and Jeffrey A. Zachman (Dentons US LLP) of the Georgia bar, admitted pro hac vice, on the brief).
Day Pitney LLP, attorneys for respondent Selective Fire and Casualty Insurance Company (Elizabeth J. Sher, Parsippany, and Joseph K. Scully, on the brief).
Dilworth Paxson, LLP, attorneys for respondent Wesco Insurance Company (Thomas E. Hastings and Richard J. Orr, Princeton, of counsel and on the briefs).
Before Judges Sumners, Vernoia, and Firko.
The opinion of the court was delivered by
SUMNERS, JR., J.A.D.
These six back-to-back appeals arising from Law Division orders in two vicinages have been consolidated for the issuance of a single opinion. They require us to consider an issue of first impression—whether in the context of Rule 4:6-2(e) motions to dismiss with prejudice, insurance policies issued by defendants did not cover business losses incurred by plaintiffs that were forced to close or limit their operations as a result of Executive Orders (EOs) issued by Governor Philip Murphy to curb the COVID-19 global health crisis.
Plaintiffs Pearl Three Two, LLC d/b/a Route 40 Diner (Pearl), Precious Treasures, and Mac Property Group, LLC & The Cake Boutique, LLC (MPG) each sued their respective defendant insurance companies, Wesco Insurance Company (Wesco), Amtrust Financial Services, Inc. (Amtrust), Markel Insurance Company (Markel), and Selective Fire and Casualty Insurance Company (Selective), alleging breach of contract by refusing to cover plaintiffs’ insurance claims for business losses they sustained due to the EOs. Plaintiffs Mattdogg, Inc. d/b/a/ Pure Focus Sports (Mattdogg) and FAFB, LLC d/b/a Salted Lime & Kitchen (FAFB) sued defendants Blackboard Insurance Company (Blackboard) and Philadelphia Indemnity Insurance Company (Philadelphia Indemnity) seeking declaratory judgments requiring payment of plaintiffs’ business loss claims sustained due to the EOs.
We affirm because we conclude the motion judges were correct in granting Rule 4:6-2(e) dismissals of plaintiffs’ complaints with prejudice for failure to state a claim on the basis that plaintiffs’ business losses were not related to any "direct physical loss of or damage to" covered properties as required by the terms of their insurance policies. We conclude plaintiffs’ business losses were also not covered under their insurance policies’ civil authority clauses, which provided coverage for losses sustained from governmental actions forcing closure or limiting business operations under certain circumstances. We further conclude defendants’ denial of coverage was not barred by regulatory estoppel. In the alternative, we conclude that even if plaintiffs’ business losses otherwise satisfied the requirements of the relevant clauses, coverage was barred by their insurance policies’ virus exclusions and endorsements because the EOs were a direct result of COVID-19.
We begin with a brief discussion of the events and procedural postures precipitating these appeals.
On January 30, 2020, the World Health Organization (WHO) declared the COVID-19 outbreak to be "a Public Health Emergency of International Concern" that would require "a global coordinated effort." The next day, the Secretary of the United States Department of Health and Human Services declared a public health emergency for the nation in response to COVID-19.
On March 9, Governor Murphy issued EO 103 in response to the COVID-19 outbreak, which was spreading globally, including in the United States. Exec. Order No. 103 (Mar. 9, 2020), 52 N.J.R. 549(a) (Apr. 6, 2020). The EO stated COVID-19 "is a contagious, and at times fatal, respiratory disease caused by the SARS-CoV-2 virus," with symptoms including "fever, cough
, and shortness of breath." Ibid. The order explained that the disease "can spread from person to person via respiratory droplets." Ibid. EO 103 also stated the Center for Disease Control (CDC) "expect[ed] that additional cases of COVID-19 [would] be identified in the coming days ... and that person-to-person spread [was] likely to continue to occur." Ibid. Accordingly, Governor Murphy declared a "Public Health Emergency and State of Emergency ... in the State of New Jersey" and directed several State agencies and officials to take action to protect "the health, safety and welfare" of New Jersey citizens from the virus outbreak. Ibid.
On March 16, to "mitigate [the] community spread" of the disease, Governor Murphy issued EO 104, which "limit[ed] the unnecessary movement of individuals in and around their communities and person-to-person interactions in accordance with CDC and DOH guidance"; designated a subset of businesses within the state as "essential"; and limited the scope of service and hours of operation for restaurants and some retail establishments. Exec. Order No. 104 (Mar. 16, 2020), 52 N.J.R. 550(a) (Apr. 6, 2020). Five days later, on March 21, due to the increase of confirmed COVID-19 cases nationally and in our state, and based upon the CDC's advice, EO 107 was issued, which "established statewide social mitigation strategies for combatting COVID-19," including further limiting social gatherings and requiring that all brick-and-mortar premises of "non-essential" businesses remain "close[d] to the public" for as long as the order remained in effect. Exec. Order No. 107 (Mar. 21, 2020), 52 N.J.R. 554(a) (Apr. 6, 2020). Specific to plaintiffs, the order required that: (1) "All recreational and entertainment businesses" close to the public, including a non-exhaustive list of such businesses such as "gyms and fitness centers and classes;" (2) "[a]ll public, private, and parochial preschool program premises, and elementary and secondary schools, including charter and renaissance schools" remain "closed to students" for the duration of the order; and (3) restaurants and other "dining establishments" were "permitted to operate their normal business hours," but were "limited to offering only food delivery and/or take-out services." Ibid. EO 107 concluded by stating it was "the duty of every person or entity in this State or doing business in this State ... to cooperate fully in all matters concerning this Executive Order."1 Ibid.
Mattdogg owns and operates a full-service, twenty-four-hour gym, Pure Focus Sports Club, in Brick, which was forced to close due to the EOs. In anticipation of seeking insurance coverage for its business losses, Mattdogg filed a declaratory judgment complaint in Mercer County against Philadelphia Indemnity, which insured the gym from November 15, 2019 to November 15, 2020. Mattdogg alleged that because of the EOs, it was "forced to close its business to the public," causing a loss of income. It stated that the EOs "physically impact[ed]" it, and that "[a]ny effort by Philadelphia Indemnity to deny" coverage under its policy "would constitute a false and potentially fraudulent misrepresentation that could endanger [Mattdogg] and the public." Mattdogg stated that to its knowledge, no employee or patron of its gym had been "diagnosed with COVID-19." Mattdogg did not state that it had submitted a claim for coverage to Philadelphia Indemnity related to its losses. The complaint was dismissed with prejudice when the motion judge granted Philadelphia Indemnity's Rule 4:6-2(e) motion to dismiss for failure to state a claim based on the...
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