Newchops Rest. Comcast LLC v. Admiral Indem. Co.

• Decision Date: 17 December 2020
• Docket Number: CIVIL ACTION NO. 20-1949, CIVIL ACTION NO. 20-1869
• Citation: 507 F.Supp.3d 616
• Parties: NEWCHOPS RESTAURANT COMCAST LLC d/b/a Chops v. ADMIRAL INDEMNITY COMPANY LH Dining L.L.C. d/b/a River Twice Restaurant v. Admiral Indemnity Company
• Court: U.S. District Court — Eastern District of Pennsylvania

507 F.Supp.3d 616

NEWCHOPS RESTAURANT COMCAST LLC d/b/a Chops

v.ADMIRAL INDEMNITY COMPANY

LH Dining L.L.C. d/b/a River Twice Restaurant

v.Admiral Indemnity Company

CIVIL ACTION NO. 20-1949

CIVIL ACTION NO. 20-1869

United States District Court, E.D. Pennsylvania.

Filed December 17, 2020

Arnold Levin, Daniel C. Levin, Fred S. Longer, Laurence S. Berman, Levin Sedran & Berman, Kenneth J. Grunfeld, Richard M. Golomb, Golomb & Honik PC., Philadelphia, PA, for Newchops Restaurant Comcast LLC., LH Dining L.L.C.

Eric A. Fitzgerald, Goldberg Segalla LLP, Hillary Ladov, Goldberg Segalla, Philadelphia, PA, Antonia B. Ianniello, John F. O'Connor, Jr., Steptoe & Johnson LLP, Washington, DC, for Admiral Indemnity Company.

MEMORANDUM OPINION

Savage, District Judge

Like many restaurants in Philadelphia and Pennsylvania, plaintiffs Newchops Restaurant Comcast LLC and LH Dining L.L.C. were forced to close or severely limit operations in March 2020 due to the shutdown orders issued by the Governor of Pennsylvania and the Mayor of Philadelphia in response to the COVID-19 pandemic. As a result, they suffered business losses and sought indemnity from their insurance carrier, Admiral Indemnity Company, under their commercial lines policies. Admiral denied the claims.

Newchops and LH Dining ("insureds") then brought these actions seeking a declaration that Admiral must cover the business losses resulting from the mandatory closing of their restaurants pursuant to the shutdown orders.¹ The insureds claim that their business losses are covered under the civil authority and business income provisions of their policies. Admiral argues that the insureds have not alleged facts establishing coverage under either provision. If they did, their claims are barred by the virus exclusion.

We conclude that the alleged facts establish that their losses are not covered. Even if they were, the virus exclusion bars coverage. Therefore, we shall grant Admiral's motions to dismiss.

Factual Background

Newchops owns and operates Chops, a steakhouse located in Center City Philadelphia,² and LH Dining operates River Twice Restaurant in South Philadelphia.³ The insureds each served hundreds of customers weekly in outdoor and indoor dining spaces.⁴

In September 2019, Admiral issued commercial lines policies to the insureds, providing property, business personal property, business income, extra expenses and other coverage through September 2020.⁵ They are "all risks" policies.

On March 16, 2020, in response to the rapidly worsening COVID-19 pandemic, the City of Philadelphia ordered the closure of all non-essential businesses (the "Philadelphia Order").⁶ The Philadelphia Order mandated that "[f]ood establishments may only accommodate online and phone orders for delivery and pick-up, and cannot allow dine-in service, for the duration of these restrictions."⁷ Three days later, Pennsylvania Governor Tom Wolf issued an order requiring all "non-life-sustaining businesses" across the Commonwealth to cease operations and close all physical locations (the "Pennsylvania Order").⁸ The Pennsylvania Order noted that "[a]ll restaurants and bars previously have been ordered to close their dine-in facilities" and ordered that "[b]usinesses that offer carry-out, delivery, and drive-through and beverage service may continue, so long as social distancing and other mitigation measures are employed to protect workers and patrons."⁹

Complying with the shutdown orders, the insureds closed their restaurants on March 16, 2020.¹⁰ Newchops laid off twenty-five employees.¹¹ LH Dining furloughed eight.¹²

The insureds each filed an action seeking a declaration that its business losses were covered.¹³ Admiral answered the complaints and filed a motion for judgment on the pleadings in each.¹⁴ In response to the motions, the insureds filed amended complaints on June 29, 2020.¹⁵ Admiral responded with motions to dismiss.¹⁶

Interpreting Insurance Contracts

The interpretation of an insurance contract is a question of law. Am. Auto. Ins. Co. v. Murray , 658 F.3d 311, 320 (3d Cir. 2011). A court must interpret the plain language of the insurance contract read in its entirety, giving effect to all its provisions. Id. (citation omitted); Sapa Extrusions, Inc. v. Liberty Mut. Ins. Co. , 939 F.3d 243, 258 (3d Cir. 2019) (quoting Mut. of Omaha Ins. Co. v. Bosses , 428 Pa. 250, 237 A.2d 218, 220 (1968) ); Contrans, Inc. v. Ryder Truck Rental, Inc. , 836 F.2d 163, 169 (3d Cir. 1987) (quoting 13 Appleman, Insurance Law and Practice , § 7383 at 34-37 (1976)). The words in the policy are construed by their "natural, plain and ordinary sense" meaning. Riccio v. Am. Republic Ins. Co. , 550 Pa. 254, 705 A.2d 422, 426 (1997) (citing Easton v. Wash. Cty. Ins. Co. , 391 Pa. 28, 137 A.2d 332, 335 (1958) ).

When the policy language is ambiguous, the provision is construed in favor of the insured. Ramara, Inc. v. Westfield Ins. Co. , 814 F.3d 660, 677 (3d Cir. 2016) (quoting Med. Protective Co. v. Watkins , 198 F.3d 100, 104 (3d Cir. 1999) ); Pa. Nat'l Mut. Cas. Ins. Co. v. St. John , 630 Pa. 1, 106 A.3d 1, 14 (2014) (quoting 401 Fourth St., Inc. v. Investors Ins. Grp. , 583 Pa. 445, 879 A.2d 166, 171 (2005) ). The policy is ambiguous where it is reasonably susceptible of more than one construction and meaning. Pa. Nat'l , 106 A.3d at 14 (citing Lititz Mut. Ins. Co. v. Steely , 567 Pa. 98, 785 A.2d 975, 978 (2001) ). However, policy language may not be stretched beyond its plain meaning to create an ambiguity. Meyer v. CUNA Mut. Ins. Soc. , 648 F.3d 154, 164 (3d Cir. 2011) (citing Madison Const. Co. v. Harleysville Mut. Ins. Co. , 557 Pa. 595, 735 A.2d 100, 106 (1999) ); Trizechahn Gateway LLC v. Titus , 601 Pa. 637, 976 A.2d 474, 483 (2009) (citation omitted). It is not ambiguous merely because the parties disagree about its meaning. Meyer , 648 F.3d at 164 (citing Williams v. Nationwide Mut. Ins. Co. , 750 A.2d 881, 885 (Pa. Super. 2000) ).

The guiding principle in interpreting an insurance contract is to effectuate the reasonable expectations of the insured. Reliance Ins. Co. v. Moessner , 121 F.3d 895, 903 (3d Cir. 1997) (citations omitted); Safe Auto Ins. Co. v. Berlin , 991 A.2d 327, 331 (Pa. Super. 2010) (citation omitted). Under Pennsylvania law, even if the terms of the insurance contract are clear and unambiguous, the insured's reasonable expectations may prevail over the express terms of the contract. Bensalem Twp. v. Int'l Surplus Lines Ins. Co. , 38 F.3d 1303, 1309 (3d Cir. 1994) ; see also Safe Auto Ins. Co. , 991 A.2d at 332 ("[A] court's decision to look beyond the policy language is not erroneous under all circumstances.") (citation omitted). Nonetheless, the language of the insurance contract itself serves as the best evidence of the parties' reasonable expectations. Safe Auto Ins. Co. , 991 A.2d at 332 (quoting Allstate Ins. Co. v. McGovern , No. 07-2486, 2008 WL 2120722, at *2 (E.D. Pa. May 20, 2008) ). At times, the Pennsylvania Superior Court has ruled out reasonable expectations when the insurance contract is clear and unambiguous. See Regis Ins. Co. v. All Am. Rathskeller, Inc. , 976 A.2d 1157, 1166 n.11 (Pa. Super. 2009) ("However, an insured may not complain that his or her reasonable expectations were frustrated by policy limitations which are clear and unambiguous.") (citations and quotations omitted); Millers Capital Ins. Co. v. Gambone Bros. Dev. Co. , 941 A.2d 706, 717 (Pa. Super. 2007).

The insured has the initial burden of establishing coverage under the policy. State Farm Fire & Cas. Co. v. Estate of Mehlman , 589 F.3d 105, 111 (3d Cir. 2009) (citing Koppers Co. v. Aetna Cas. and Sur. Co. , 98 F.3d 1440, 1446 (3d Cir. 1996) ). Where the insured meets that burden and the insurer relies on a policy exclusion as the basis for denying coverage, the insurer then has the burden of proving that the exclusion applies. Id. ; Wolfe v. Ross , 115 A.3d 880, 884 (Pa. Super. 2015) (citing Donegal Mut. Ins. Co. v. Baumhammers , 595 Pa. 147, 938 A.2d 286, 290 (2007) ). Policy exclusions are strictly construed against the insurer. Nationwide Mut. Ins. Co. v. Cosenza , 258 F.3d 197, 206-7 (3d Cir. 2001) (citing Selko v. Home Ins. Co. , 139 F.3d 146, 152 n.3 (3d Cir. 1998) ); Peters v. Nat'l Interstate Ins. Co. , 108 A.3d 38, 43 (Pa. Super. 2014) (quoting Swarner v. Mut. Benefit Grp. , 72 A.3d 641, 644-45 (Pa. Super. 2013) ).

Analysis

The insureds assert coverage under the civil authority and the business income provisions of the policy.¹⁷ Admiral contends that there is no covered loss under either provision.¹⁸ It also relies on the virus exclusion as a basis for denying coverage.¹⁹ Pointing out that the virus exclusion expressly applies to both the civil authority and business income provisions, Admiral asserts that the exclusion bars coverage.²⁰

Under Pennsylvania law, we first determine whether the insureds have met their burden of establishing coverage under either the civil authority or the business income provision before considering whether the virus exclusion applies. See State Farm , 589 F.3d at 111 (citations omitted); Wolfe , 115 A.3d at 884 (citations omitted).

The civil authority provision states in relevant part:

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

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