Nue, LLC v. Or. Mut. Ins. Co.
| Decision Date | 04 September 2021 |
| Docket Number | 3:20-cv-01449-HZ |
| Citation | 558 F.Supp.3d 1000 |
| Parties | NUE, LLC d/b/a NUE SEATTLE, individually and on behalf of all others similarly situated, Plaintiff, v. OREGON MUTUAL INSURANCE COMPANY, Defendant. |
| Court | U.S. District Court — District of Oregon |
Amy Williams-Derry, Gretchen Freeman Cappio, Ian S. Birk, Irene Margret Hecht, Lynn L. Sarko, Maureen M. Falecki, Nathan Nanfelt, Keller Rohrback, LLP, 1201 Third Avenue, Suite 3200, Seattle, WA 98101, Attorneys for Plaintiff.
Clark Benbow Holland, Pacific Law Partners, LLP, 2000 Powell Street, Suite 950, Emeryville, CA 94608, Jay W. Beattie, Lindsay Hart LLP, 1300 SW Fifth Avenue, Suite 3400, Portland, OR 97201, R. Lind Stapley, Rachel A. Ruben, Soha Lang, P.S., 1325 Fourth Avenue, Suite 2000, Seattle, WA 98101, Attorneys for Defendant.
Plaintiff NUE, LLC d/b/a NUE SEATTLE brings this class action lawsuit against Defendant Oregon Mutual Insurance Company, seeking a declaratory judgment that its insurance policy, provided by Defendant, covers its business income losses stemming from the COVID-19 pandemic. Plaintiff alleges that Defendant breached its insurance contracts with Plaintiff and similarly situated policyholders when Defendant denied coverage for Plaintiff's pandemic-related business income losses and seeks damages for breach of contract. Defendant moves to dismiss Plaintiff's 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 as a result of the government closure orders. Plaintiff's business insurance policy, however, does not cover its loss of business income. The Court grants Defendant's motion to dismiss.
Plaintiff operates a restaurant and bar in Seattle, Washington, that serves "global street food." Compl. ¶¶ 5, 8, ECF 1. Plaintiff insured its business with a business insurance policy from Defendant. Id. ¶ 11. Due to the COVID-19 pandemic and business closure orders issued by the state of Washington, Plaintiff had to "suspend or dramatically reduce its restaurant business operations," leading to financial losses. Id. ¶ 9–10. Although the closure orders allowed restaurants to serve take-out food for off-premises consumption, Plaintiff's business revenues have significantly reduced because Plaintiff has been unable to use its dining room and full-service bar for on-premises food and beverage consumption. Id. ¶¶ 20–25. Plaintiff admits that the COVID-19 virus has not been detected in its restaurant. Id. ¶ 26.
Plaintiff filed an insurance claim seeking coverage for its financial losses stemming from its reduced business operations. Id. ¶ 31. Defendant denied coverage after it determined that Plaintiff's covered property did not suffer direct physical loss or damage. Id. ¶¶ 31–32. Plaintiff alleges that the "business income," "extra expense," "civil authority," and "ingress or egress" coverages in its business insurance policy require Defendant to cover Plaintiff's financial losses resulting from reducing its business operations. Id. ¶¶ 28, 30.
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." Stapley Decl. Ex. A ("Policy") at 8, ECF 8. 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. Id. A "Covered Cause of Loss" includes risks of "direct physical loss" unless the loss is excluded or limited by other provisions in Section I. Id. at 9.
The Policy provides "Additional Coverages" that include "Business Income," "Extended Business Income," "Extra Expense," and "Civil Authority" coverages. Id. at 12–14. 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 12. 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 12. 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.
The Extra Expense coverage provides, in part:
We will pay necessary Extra Expense you incur during the "period of restoration" that you would not have incurred if there had been no direct physical loss 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 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 an endorsement that covers problems with ingress or egress due to direct loss or damage to adjacent property ("Ingress or Egress Endorsement"):
We will pay for the actual loss of Business Income you sustain and necessary Extra Expense caused when ingress or egress to the described premises is physically prevented due to direct loss 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 Plaintiff's 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 and Ingress or Egress coverages. Defendant also argues that the Ordinance or Law Exclusion excludes coverage for Plaintiff's losses. Plaintiff argues that the Policy's undefined terms "loss of," "damage to" and "direct physical loss" cover Plaintiff's loss of the functionality and use of its covered property for dine-in services due to the closure orders. The Court disagrees with Plaintiff.
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