Mt. Hawley Ins. Co. v. City of Richmond Heights

CourtUnited States District Courts. 8th Circuit. United States District Court (Eastern District of Missouri)
Decision Date14 March 2022
Docket Number4:20-cv-01587-SEP



No. 4:20-cv-01587-SEP

United States District Court, E.D. Missouri, Eastern Division

March 14, 2022



Before the Court is Plaintiff's Motion to Dismiss Defendant's Counterclaim. Doc. [19]. The motion is fully briefed and ready for disposition. Docs. [19], [27], [32]. For the reasons set forth below, the Court will grant Plaintiff's Motion.


This case arises out of an insurance dispute between the City of Richmond Heights and Mt. Hawley Insurance Company over coverages contained in a commercial property insurance policy. Docs. [1], [15], [15-1]. The policy insures the City's anticipated sales tax revenues from the following five retail properties: the St. Louis Galleria, the Schnucks Richmond Center Development, The Boulevard St. Louis, The Crossings, and the Menards Development. Docs. [15] ¶¶ 1, 14, [15-1] at 5, 8. The COVID-19 pandemic began during the policy term. On March 17, 2020, the St. Louis County Executive issued an executive order closing all non-essential businesses, Doc. [15] ¶ 31, which curtailed the operation of some of the covered establishments. Id. ¶ 32.

In May of 2020, the City presented a claim to Mt. Hawley under its insurance policy seeking reimbursement for sales tax revenues that were lost from the five properties on account of the COVID-19 pandemic. Id. ¶¶ 35-36. On September 15, 2020, the City received notice that Mt. Hawley had rejected the claim. Id. ¶ 37. The parties attempted negotiations, which were unsuccessful, and then Mt. Hawley filed the present declaratory judgment action. Docs. [1], [15] ¶¶ 38-39. The City thereafter filed a Counterclaim, asserting five causes of action:

Count I: Breach of Contract
Count II: Vexatious Refusal to Pay
Count III: Fraud in the Inducement/Fraudulent Misrepresentation
Count IV: Negligent Misrepresentation
Count V: Breach of Fiduciary Duty

Doc. [15] at 6, 7, 8, 10, 11.

With respect to Count I, the City asserts coverage under three policy provisions: (1) the Business Income coverage provision, (2) the Civil Authority coverage provision, and (3) the Additional Covered Property Endorsement (ACPE). Docs. [27] at 7, 8, 10, 17. The Business Income provision says:

A. Coverage

1. Business Income
a. Sales Tax Revenue that would have been earned
We will pay for the actual loss of Business Income you sustain due to the necessary “suspension” of “operations” during the “period of restoration”. [sic] 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

Doc. [15-1] at 30. The “Civil Authority” provision states:

A. Coverage
4. Additional Coverages
b. Civil Authority
We will pay for the actual loss of Business Income you sustain 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 that at the described premises, caused by or resulting from any Covered Cause of Loss. This coverage begins 72 hours after the time of that action, and will apply for a period of up to three consecutive weeks from the date on which the coverage begins.

Id. at 31. The Loss of Sales Tax Revenue Form, which contains the Business Income and Civil Authority provisions, id. at 30-31, also provides the following definitions:

F. Definitions

1. “Operations” means:
a. business activities occurring at the described premises; and
b. The tenant ability [sic] of the described premises, if coverage for Business Income including “Rental Value” or “Rental Value” [sic] applies.
2. “Period of Restoration” means the period of time that:
a. Begins 72 hours after the time of direct physical loss or damage caused by or resulting from any Covered Cause of Loss at the described premises; and
b. Ends on the earlier of:
(1) The date when the property at the described premises should be repaired, rebuilt or replaced with reasonable speed and similar quality; or
(2) The date when business is resumed at a new permanent location.
“Period of restoration” does not include any increased period required due to the enforcement of any ordinance or law that:
(1) Regulates the construction, use or repair, or required the tearing down of any property; or
(2) Requires any insured or others to test for, monitor, clean up, remove, contain, treat, detoxify or neutralize, or in any way respond to, or assess the effects of “pollutants”.
. . .
4. “Sales Tax Revenue” means Business Income that consists of:
a. Sales Tax Revenue that would have been earned or incurred from the premises described in the Declarations
5. “Suspension” means:
a. The slowdown or cessation of business activities; or
b. That a part or all of the described premises is rendered untenantable, if coverage for Business Income applies.

Id. at 34. Finally, the policy includes an additional provision entitled “Additional Covered Property Endorsement.” Docs. [15-1] at 43, [27] at 7-8. That provision contains one sentence which states that “[t]his policy is changed to include the following even though the item(s) listed may be excluded elsewhere in this policy: Sales Tax Revenue.” Doc. [15-1] at 43.

Mt. Hawley moves for dismissal of all counts of the City's Counterclaim under Federal Rule of Civil Procedure 12(b)(6). Doc. [19].

Legal Standard

To survive a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), “a 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 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).


The plaintiff generally need not allege specific facts, but “must include sufficient factual information to provide the ‘grounds' on which the claim rests, and to raise a right to relief above a speculative level.” Schaaf v. Residential Funding Corp., 517 F.3d 544, 549 (8th Cir. 2008) (citing Twombly, 550 U.S. at 555, n.3). Formulaic recitation of the elements of a cause of action is insufficient, Twombly, 550 U.S. at 555, and the Court is not required to accept as true allegations that consist of legal conclusions, Iqbal, 556 U.S. at 678.


I. The City fails to state a claim for breach of contract.

For a breach of contract action, the claimant must allege and prove four elements: (1) the existence and terms of a contract, (2) that claimant performed or tendered performance under the contract, (3) that opponent breached the contract, and (4) that claimant suffered damages.[1]Moore v. Armed Forces Bank, N.A., 534 S.W.3d 323, 327 (Mo. App. 2017) (quoting Keveney v. Mo. Military Acad., 304 S.W.3d 98, 104 (Mo. banc 2010)). In the insurance context, the party seeking recovery under the policy bears the initial burden of proving coverage. Am. Fam. Mut. Ins. v. Coke, 413 S.W.3d 362, 368 (Mo. App. 2013) (citing Citizens Ins. Co. of Am. v. Leiendecker, 962 S.W.2d 446, 451 (Mo. App. 1998)). Once coverage is proven, the burden shifts to the insurer to prove that a policy exclusion applies or that the insured forfeited the right to coverage by failure to abide by policy conditions. Id. (citing Nichols v. Preferred Risk Grp., 44 S.W.3d 886, 896-97 (Mo. App. 2001)). Thus, to defeat Mt. Hawley's motion to dismiss stage, the City bears the initial burden of alleging facts that, taken as true, show that the Policy covers its claim.

Assessing the City's allegations requires the Court to construe the insurance policy. Schmitz v. Great Am. Assur. Co., 2010 WL 2160748, at *3 (Mo. App. June 1, 2010) (“In the absence of a statute or public policy dictating insurance coverage, our review of whether insurance coverage is applicable is governed by a review of the underlying insurance contract.”) (citing Rodriguez v. Gen. Accident Ins. Co. of Am., 808 S.W.2d 379, 382 (Mo. banc 1991)). “The interpretation of an insurance policy is a question of law[, ]” McCormack Baron Mgmt. Servs., Inc. v. Am. Guarantee & Liab. Ins. Co., 989 S.W.2d 168, 171 (Mo. banc 1999), and Missouri courts apply general contract-interpretation principles. Gohagan v. Cincinnati Ins. Co., 809 F.3d 1012, 1015 (8th Cir. 2016) (citing Todd v. Mo. United Sch. Ins. Council, 223 S.W.3d 156, 160 (Mo. banc 2007)). “The policy is read as a whole to determine the parties' intent, and the language used in the policy is given its plain and ordinary meaning.” Phila. Consol. Holding Corp. v. LSI-Lowery Sys., Inc.,


775 F.3d 1072, 1077 (8th Cir. 2015) (citing Thiemann v. Columbia Pub. Sch. Dist., 338 S.W.3d 835, 839-40 (Mo. App. 2011)). “In disputes over the meaning of contract language, ‘[t]he key is whether the contract language is ambiguous or unambiguous.'” Gohagan, 809 F.3d at 1015 (quoting Todd, 223 S.W.3d at 160). “[A]mbiguity arises in an insurance policy when, ‘due to duplicity, indistinctness, or uncertainty in the meaning of the words used, the policy is reasonably open to different constructions.'” Nat'l Union Fire Ins. Co. of Pittsburgh, Pa. v. Maine, 277 S.W.3d 754, 758 (Mo. App. 2009) (quoting Farm Bureau Town & Country Ins. Co. of Mo. v. Barker, 150 S.W.3d 103, 106 (Mo. App. 2004), abrogated on other grounds by Ritchie v. Allied Prop. & Cas. Ins. Co., 307 S.W.3d 132 (Mo. banc 2009)). Where the policy is unambiguous, the rules of construction are inapplicable and the policy must enforced as written absent a public policy to the contrary. Id. at 758 (quoting Krombach v. Mayflower Ins. Co.,...

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