Nari Suda LLC v. Or. Mut. Ins. Co.
| Decision Date | 06 September 2021 |
| Docket Number | 3:20-cv-01476-HZ |
| Citation | 558 F.Supp.3d 1017 |
| Parties | NARI SUDA LLC, a Delaware corporation, dba Nari; and Pakin Corporation, a California corporation, dba Kin Khao, on behalf themselves and all others similarly situated, Plaintiffs, v. OREGON MUTUAL INSURANCE COMPANY, an Oregon corporation, Defendant. |
| Court | U.S. District Court — District of Oregon |
Steve D. Larson, Elizabeth K. Bailey, Stoll Stoll Berne Lokting & Schlachter P.C., 209 SW Oak Street, Suite 500, Portland, OR 97204.
Robert J. Nelson, Fabrice N. Vincent, Jacob H. Polin, Lieff Cabraser Heimann & Bernstein, LLP, 275 Battery Street, 29th Floor, San Francisco, CA 94111-3339.
Alexandra L. Foote, Law Office of Alexandra L. Foote, P.C., 275 Battery Street, 29th Floor, San Francisco, CA 94111-3339, Attorneys for Plaintiffs.
R. Lind Stapley, SOHA & LANG P.S., 1325 Fourth Avenue, Suite 2000, Seattle, WA 98101-2750.
Clarke Benbow Holland, Pacific Law Partners, LLP, 2000 Powell Street, Suite 950, Emeryville, CA 94608, Attorneys for Defendant.
Plaintiffs, Nari Suda LLC dba Nari ("Nari"), and Pakin Corporation dba Kin Khao ("Kin Khao"), are California restaurants insured by Defendant, Oregon Mutual Insurance Company. Plaintiffs bring class action claims for breach of contract, breach of the implied covenant of good faith and fair dealing, and declaratory relief based on Defendant's denial of their claims for insurance coverage for financial losses stemming from state and local government closure orders issued in response to the COVID-19 pandemic. Plaintiffs also bring a claim for violation of California's unfair competition law. Defendant moves to dismiss.
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 as a result of the government closure orders. Plaintiffs’ business insurance policy, however, does not cover its loss of business income. The Court grants Defendant's motion to dismiss.
Plaintiffs operate dine-in Thai influenced restaurants located in San Francisco, California. Compl. ¶ 1, ECF 1. Plaintiffs allege that in March 2020, the state of California and the San Francisco Department of Public Health issued orders in response to the COVID-19 pandemic that forced Plaintiffs to temporarily close their restaurants, close their dining rooms, and "create new business models" to serve take out. Id. ¶¶ 2, 108. The orders imposed social distancing guidelines, restricted nonessential business operations, and restricted all restaurants to providing only takeout and delivery services. Id. ¶¶ 27–31. Plaintiffs filed an insurance claim seeking coverage for financial losses stemming from their reduced business operations. Id. ¶¶ 76, 79. Plaintiffs allege that several provisions of their business insurance policies cover their financial losses. Id. ¶¶ 62, 64. Defendant denied coverage. Id. ¶¶ 77, 79, 88.
Section I of the Policy, which provides property coverage, states: "We will pay for direct physical loss of or damage to Covered Property at the premises described in the Declarations caused by or resulting from any Covered Cause of Loss." Compl. Ex. 9 (Nari Suda Policy) at 9, ECF 1-9; Compl. Ex. 10 (Pakin Policy) at 10. The capitalized phrases in that sentence are defined terms. The phrase "direct physical loss of or damage to" is not defined in the policy. "Covered Property" includes Buildings, Business Personal Property, or both, unless it is a kind of Property Not Covered. Policy 9.1 A "Covered Cause of Loss" is a risk of "direct physical loss" unless the loss is excluded or limited by other provisions in Section I. Id. at 10.
The Policy provides "Additional Coverages" that include "Business Income," "Extended Business Income," "Extra Expense," and "Civil Authority" coverages. Id. at 13–15. The Business Income coverage provision states, in part:
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 the described premises. The loss or damage must be caused by or result from a Covered Cause of Loss.
Id. at 13. The Extended Business Income coverage provides, in part:
If the necessary suspension of your "operations" produces a Business Income loss payable under this policy, we will pay for the actual loss of Business Income you incur[.] ... Loss of Business Income must be caused by direct physical loss or damage at the described premises caused by or resulting from any covered cause of loss.
Id. at 13–14. The word "suspension" means "[t]he partial slowdown or complete cessation of your business activities" and "[t]hat a part or all of the described premises is rendered untenantable, if coverage for Business Income applies." Id. at 13. Id. at 14. The Civil Authority coverage states, in part:
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 due to direct physical loss of or damage to property, other than at the described premises, caused by or resulting from any Covered Cause of Loss.
The Policy also includes several exclusions. One of those exclusions relates to the enforcement of an ordinance or law ("Ordinance or Law Exclusion"):
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 of or damage to" property occurred to invoke coverage under the Business Income and Civil Authority coverages, and no "direct physical loss or damage to" property occurred that would provide coverage under the Extra Expense coverage. Defendant also argues that the Ordinance or Law Exclusion excludes coverage for Plaintiffs’ losses.
Plaintiffs argue that the Policy's undefined terms "loss of," "damage to" and "direct physical loss" cover Plaintiffs’ loss of the functionality and use of its covered property for dine-in services due to the closure orders. The Court disagrees.
The parties assert that California law applies to the interpretation of the Policy. Def. Mot. Dismiss (Def. Mot.) 15, ECF 24; Pl. Resp. Mot. Dismiss (Pl. Opp'n) 4, ECF 25. The Court finds that Oregon law applies to the resolution of Defendant's motion to dismiss.
A federal court sitting in diversity applies the forum state's choice of law rules to determine what law applies. Alaska Rent-A-Car, Inc. v. Avis Budget Grp., Inc. , 738 F.3d 960, 975 (9th Cir. 2013). Thus, Oregon's choice of law rules will determine whether the Court should apply Oregon or California law to construe the terms of the Policy. Id.
Generally, when parties to a contract clearly express in the contract the law that applies, "the contractual rights and duties of the parties are governed by the law or laws that the parties have chosen." Or. Rev. Stat. § (" O.R.S.") 15.350(1) – (2). Because the insurance contract does not contain a choice of law provision, O.R.S. 15.360 applies. O.R.S. 15.360 established the process for...
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...to do under the express terms of the contract. That is, deny s loss it believes is not covered. See Nari Suda LLC v. Or. Mut. Ins. Co., 558 F.Supp.3d 1017, 1035 (D. Or. 2021) (“Each of the breaches identified by [the] Plaintiffs seeks a remedy for an act that [the] Defendant was permitted t......