N. Pac. Mgmt., Inc. v. Liberty Mut. Fire Ins. Co.
| Decision Date | 07 September 2021 |
| Docket Number | 3:21-cv-00404-HZ |
| Citation | 558 F.Supp.3d 1097 |
| Parties | NORTH PACIFIC MANAGEMENT, INC., et al., Plaintiffs, v. LIBERTY MUTUAL FIRE INSURANCE COMPANY, a Wisconsin Company, Defendant. |
| Court | U.S. District Court — District of Oregon |
Kyle A. Sturm, Nicholas A. Thede, Foreman Sturm & Thede LLP, P.O. Box 13098, Portland, OR 97213, Nicholas A. Kahl, Nick Kahl, LLC, 209 SW Oak Street, Suite 400, Portland, OR 97204, Attorneys for Plaintiffs
John A. Bennett, Stuart Duncan Jones, Bullivant Houser Bailey PC, One SW Columbia Street, Suite 800, Portland, OR 97204, James Kitces, Robins, Kaplan, Miller & Ciresi, LLP, 800 LaSalle Avenue, Suite 2800, Minneapolis, MN 55402, Taylore Karpa, Robins Kaplan LLP, 800 Boylston Street, Suite 2500, Boston, MA 02199, Attorneys for Defendant
Plaintiffs North Pacific Management, Inc., Airport Inn, LLC, BPS Associates, LLC, Bean & Company, LLC, COHO.Res, LLC, JBH Property Acquisitions, LLC, Suntek Park, LLC, TFBP Holdings, Inc., and Triple S Enterprises, Inc. bring this class action lawsuit against Defendant Liberty Mutual Fire Insurance Company seeking a declaratory judgment that their insurance policies, provided by Defendant, cover their business income losses stemming from the COVID-19 pandemic. Plaintiffs allege that Defendant breached its insurance contracts with Plaintiffs and similarly situated policyholders when Defendant denied coverage for Plaintiffs' pandemic-related business income losses. Plaintiffs seek a declaratory judgment that their insurance policies cover their alleged losses and seek damages for breach of contract. Defendant moves to dismiss Plaintiffs' Complaint for failure to state a claim.
Many businesses suffered extreme hardship and financial loss as a result of the government shutdown orders that state and local governments nationwide issued to curb the spread of COVID-19 infections throughout the country. People across the world have lost their lives and livelihood as a result of the pandemic. The Court sympathizes with the plight of businessowners who suffered significant and even catastrophic financial losses due to the government closure orders. Plaintiffs' business insurance policies, however, does not cover their loss of business income. The Court grants Defendant's motion to dismiss.
Plaintiff North Pacific Management, Inc. (North Pacific) operates a property management company in Tigard, Oregon. Compl. ¶ 1, ECF 1. Plaintiff Airport Inn, LLC operates the Radisson Hotel Portland Airport and a restaurant called Lakeside Bar & Grill in Portland, Oregon. Id. Plaintiff BPS Associates owns and operates athletic clubs in Portland and Lake Oswego, Oregon. Id. Plaintiff Bean & Company owns and operates a restaurant in Aurora, Oregon, called Filberts Farmhouse Kitchen. Id. Plaintiff COHO.Res, LLC "owns and operates an electronic inventory distribution for independent hotels" and is located in Tigard, Oregon. Id. Plaintiff Heathman Garage Associates owns and operates a parking garage in Portland. Id. Plaintiff JBH Property Acquisitions owns and/or operates hotels in Portland and Beaverton, Oregon. Id. Plaintiff Suntek Park owns and operates office buildings and retail centers in Portland. Id. Plaintiffs TFBP Holdings and Triple S Enterprises own and operate restaurants in Portland, Oregon. Id. Plaintiff North Pacific obtained business insurance on behalf of all Plaintiffs from Defendant Liberty Mutual. Id. ¶ 6.
Due to the COVID-19 pandemic and business closure orders issued by the state of Oregon, Plaintiffs "were forced to suspend, in whole or in part, their business operations" leading to financial losses. Id. ¶¶ 11–12. Plaintiffs tendered an insurance claim seeking coverage for their financial losses stemming from its reduced business operations. Id. ¶ 17. Defendant denied Plaintiffs' claim. Id. ¶ 22. Plaintiff alleges that the "business income," "extended period of restoration," and "extra expense" coverages in its business insurance policy require Defendant to cover Plaintiffs' financial losses resulting from reducing their business operations. Id. ¶¶ 19–21.
The Policy covers "risks of direct physical loss or damage to covered property as a result of an occurrence, unless excluded." Schollard Decl. Ex. 1 (Policy) at 131 , ECF 15-1. The Policy does not define the phrase "direct physical loss or damage." Section B of the Policy's Declarations (form RM1000) demonstrates that the Policy covers real property, personal property, and personal property of others. Id. The Policy also covers loss of business income, including "[t]he actual loss of business income you incur during a period of restoration directly resulting from damage by a peril insured against to the type of property covered by this policy at a covered location." Id. at 19.
Perils insured against are "causes of loss for which this policy provides coverage." Id. at 52. A covered loss under the Policy means "a loss to covered property at a covered location resulting from a peril insured against." Id. at 49. Covered property "means property insured by this policy." Id. "Personal property" includes "tangible things, other than real property, including improvements and betterments you have made in buildings you do not own." Id. at 53. Real property "means buildings and any other structure, including: (1) Completed additions, extensions, permanent fittings or fixtures; (2) Machinery and equipment used to service the buildings; and (3) Yard fixtures." Id. at 54.
The Policy also covers extra expenses, including necessary expenses the insured incurs in excess of its normal operating expenses that reduces its loss of business income. Id. at 19, 21. The Policy provides an additional sixty days of loss of business income coverage under certain circumstances:
If loss of business income coverage is provided, we will pay the actual loss of business income you sustain due to a reduction in sales, earnings or rental income that directly results from direct physical loss or damage to your covered property by a peril insured against, for the additional time required, when you use reasonable speed, to restore your business to the condition it would have been in if no loss had occurred.
The Policy also covers loss of business income due to the action of civil authority, which covers:
Plaintiffs' Policy also covers "[t]he actual loss of business income you incur if your ingress to or egress from a covered location is prevented as the direct result of a peril insured against to the type of property covered by this policy within one (1) statute mile of a covered location." Id. The business income and extra expense provisions of the Policy exclude coverage for "[a]ny consequential, indirect or remote loss." Id. at 20, 21.
A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) tests the sufficiency of the claims. Navarro v. Block , 250 F.3d 729, 732 (9th Cir. 2001). When evaluating the sufficiency of a complaint's factual allegations, the court must accept all material facts alleged in the complaint as true and construe them in the light most favorable to the non-moving party. Wilson v. Hewlett-Packard Co. , 668 F.3d 1136, 1140 (9th Cir. 2012). A motion to dismiss under Rule 12(b)(6) will be granted if a plaintiff alleges the "grounds" of his "entitlement to relief" with nothing "more than labels and conclusions, and a formulaic recitation of the elements of a cause of action[.]" Bell Atl. Corp. v. Twombly , 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). "Factual allegations must be enough to raise a right to relief above the speculative level on the assumption that all the allegations in the complaint are true (even if doubtful in fact)[.]" Id. (citations and footnote omitted).
To survive a motion to dismiss, 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, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (internal quotation marks omitted). A plaintiff must "plead[ ] factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. In other words, a complaint must state a plausible claim for relief and contain "well-pleaded facts" that "permit the court to infer more than the mere possibility of misconduct[.]" Id. at 679, 129 S.Ct. 1937.
Defendant moves to dismiss Plaintiffs' Complaint because no "direct physical loss or damage to covered property" occurred that would trigger coverage under any provisions of the Policy and that a virus exclusion bars Plaintiffs' claims. Plaintiffs argue that the Policy's undefined terms "loss of," "damage to" and "direct physical loss" cover Plaintiffs' losses and that the virus exclusion does not bar their claims.
Defendant argues that Plaintiffs' pandemic-related business losses are not covered under the terms of the Policy because no risk of direct physical loss or damage to Plaintiffs' business property occurred. Determining whether insurance coverage exists is a two-step process. First, the insured bears the burden to establish that the loss falls within the policy's grant of coverage. ZRZ Realty Co. v. Beneficial Fire & Cas. Co. , 222 Or. App. 453, 465, 194 P.3d 167 (2008). If the insured meets that burden, then the insurer bears the burden of establishing that an exclusion applies. Id.
Oregon rules of policy interpretation provide that "[i]f an insurance policy defines the phrase in question, [then the court] applies that definition." Holloway v. Republic...
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