Q Clothier New Orleans LLC v. Twin City Fire Ins. Co.

• Decision Date: 23 April 2021
• Docket Number: CIVIL ACTION NO. 20-1470
• Citation: 535 F.Supp.3d 574
• Parties: Q CLOTHIER NEW ORLEANS LLC et al. v. TWIN CITY FIRE INSURANCE COMPANY and Hartford Fire Insurance Company
• Court: U.S. District Court — Eastern District of Louisiana

535 F.Supp.3d 574

Q CLOTHIER NEW ORLEANS LLC et al.

v.TWIN CITY FIRE INSURANCE COMPANY and Hartford Fire Insurance Company

CIVIL ACTION NO. 20-1470

United States District Court, E.D. Louisiana.

Signed April 23, 2021

David J. Schexnaydre, Schexnaydre Law Firm, LLC, Mandeville, LA, for Q Clothier New Orleans, LLC, Q Shirtmakers West Village, LLC, Q Custom Clothier Houston, LLC, Q Custom Clothier OKC, LLC, Q Custom Clothier Atl, LLC, Q Clothier Tulsa, LLC, Q Clothier Ft. Worth, LLC, Q Fifty One Digital, LLC, Q Fifty One, LLC.

Seth Andrew Schmeeckle, Nicole M. Babb, Lugenbuhl, Wheaton, Peck, Rankin & Hubbard, New Orleans, LA, Alexandra Regina Galdos, Frank Winston, Jr., Pro Hac Vice, Sarah D. Gordon, Steptoe & Johnson LLP, Washington, DC, for Twin City Fire Insurance Company.

SECTION "B"(2)

ORDER AND REASONS

Ivan L.R. Lemelle, SENIOR UNITED STATES DISTRICT JUDGE Before the Court are defendant Twin City Fire Insurance Company's motion for judgment on the pleadings (Rec. Doc. 27), plaintiffs’ opposition (Rec. Doc. 35), and defendant's reply (Rec. Doc. 40). For the reasons discussed below,

IT IS ORDERED that the motion (Rec. Doc. 27) is GRANTED .

PROCEDURAL HISTORY AND FACTS OF THE CASE

The instant matter arises from an insurance dispute over coverage for losses allegedly sustained during the statewide COVID-19 lockdown. Rec. Doc. 1. Plaintiffs Q Clothier New Orleans, LLC; Q Shirtmakers West Village, LLC; Q Custom Clothier Houston, LLC; Q Custom Clothier OKC, LLC; Q Custom Clothier ATL, LLC; Q Clothier Tulsa, LLC; Q Clothier Ft. Worth, LLC; Q Fifty One Digital, LLC; and Q Fifty One, LLC (collectively "Q Clothier") are a collective of limited liability companies that own and manage custom men's clothing stores located in Louisiana, Texas, Georgia, Oklahoma, and Arkansas. Rec. Doc. 35 at 1. Plaintiffs purchased a business owner's policy from defendant Twin City Fire Insurance Company ("Twin City") to cover their multiple locations, which provided property; business personal property; business income and extra expense; stretch coverages; limited fungi, bacteria, or virus coverage; and additional coverage between the period of June 19, 2019 to June 19, 2020. Rec. Doc. 1 at 3.

In March 2020, Louisiana Governor John Bel Edwards and New Orleans Mayor Latoya Cantrell issued a mandatory lockdown of non-essential businesses in response to the COVID-19 global pandemic, including plaintiffs’ New Orleans location. Rec. Doc. 1 at 5. Q Clothier submitted a claim to Twin City for losses allegedly incurred by the mandatory closure of non-essential businesses in response to the COVID-19 global pandemic. Rec. Doc. 27-1 at 5. On March 27, 2020, Twin City denied the claim, stating "even if the virus did cause damage, it is excluded from the policy, and the limited coverage available for losses caused by virus does not apply to the facts of your loss." Id. ; Rec. Doc. 1 at 7.

On May 18, 2020, Q Clothier filed the instant complaint in this Court based on complete diversity and an amount in controversy exceeding $75,000 pursuant to 28 U.S.C. § 1332.¹ Rec. Doc. 1 at 2. Q Clothier asserts that it is entitled to coverage under the Business Owner's Policy No. 59 SBA IW5221 SC ("the Policy") for losses from business interruption, extra expenses, action of civil authority, limitations on ingress and egress, and expenses to reduce loss. Id. at 4; Rec. Doc. 35 at 1-2. The Policy provides that Twin City "will pay for direct physical loss of or physical damage to Covered Property ... caused by or resulting from a Covered Cause of Loss." Rec. Doc. 27-2 at 45. The policy thereafter defines "Covered Cause of Loss" as "risks of direct physical loss," unless the loss is otherwise excluded or limited by the Policy. Id. at 46.

Q Clothier further asserts that it is entitled to additional coverage under the "Business Income" provision, which states, in pertinent part:

[Twin City] 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 physical damage to property at the "scheduled premises" ... caused by or resulting from a Covered Cause of Loss.

Id. at 54. The Policy also covers any "reasonable and necessary Extra Expense" incurred during the period of restoration that would not have otherwise been incurred "if there had been no direct physical loss or physical damage to property at the ‘scheduled premises.’ " Id.

Q Clothier maintains that coverage should likewise be extended under the Policy's "Civil Authority" provision ("Civil Authority Coverage"), which is applicable to loss of business income the insured sustains "when access to your ‘scheduled premises’ is specifically prohibited by order of a civil authority as the direct result of a Covered Cause of Loss to property in the immediate area of your ‘scheduled premises’." Id. at 55.

According to the complaint, the Policy indicated that coverage for Business Income would begin 72 hours after the order of a civil authority, and coverage will end at the earlier of (a) when access to the premises is permitted, or (b) 30 consecutive days after the order of the civil authority, plus an additional 60 days pursuant to Section B(4) of the Stretch coverage form for a total of 87 days. Rec. Doc. 1 at 6.

On January 5, 2021, Twin City filed the instant motion for judgment on the pleadings. Rec. Doc. 27. In general, Twin City argues that the Policy's "Virus Exclusion" precludes Q Clothier's claims for pandemic-related losses. Id. The Virus Exclusion states:

[Twin City] will not pay for loss or damage caused directly or indirectly by any of the following. Such loss or damage is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss:

(1) The presence, growth, proliferation, spread or any activity of "fungi", wet rot, dry rot, bacteria or virus.

Rec. Doc. 27-3 at 34. The Virus Exclusion has two express exceptions: (1) when the virus results from fire or lightning or (2) when certain limited additional coverage is applicable. Id. Twin City asserts that the Virus Exclusion applies to the Business Income, Extra Expense, and Civil Authority coverages Q Clothier seeks. Rec. Doc. 27-1 at 4.

On January 26, 2021, Q Clothier timely opposed the motion. Rec. Doc. 35. Q Clothier argues that coverage is not barred by the Virus Exclusion but is found under the "Limited Fungi, Bacteria or Virus Coverage" ("Limited Virus Coverage") for which plaintiffs paid an additional premium. Id. at 2. The Limited Virus Coverage provides:

a. The [Limited Virus Coverage] below only applies when the ... virus is the result of one or more of the following causes that occurs during the policy period and only if all reasonable means were used to save and preserve the property from further damage at the time of and after that occurrence.

(1) A "specified cause of loss" other than fire or lightning;

(2) Equipment Breakdown Accident occurs to Equipment Breakdown Property, if Equipment Breakdown applies to the affected premises.

b. We will pay for loss or damage by ... virus. As used in this Limited Coverage, the term loss or damage means:

(1) Direct physical loss or direct physical damage to Covered Property caused by ... virus, including the cost of removal of the ... virus.

Rec. Doc. 27-3 at 35 ("Subpart B.1.a."). Even if Limited Virus Coverage is excluded, Q Clothier argues that coverage is reinstated under the "Time Element Coverage", which states:

If the loss which resulted in ... virus does not in itself necessitate a suspension of "operations", but such suspension is necessary due to loss or damage to property caused by ... virus, then our payment under the Time Element Coverage is limited to the amount of loss and expense sustained in a period of not more than 30 days unless another number of days is indicated in the Declarations. The days need not be consecutive. If a covered suspension of "operations’ " was caused by loss or damage other than ... virus, but remediation of ... virus prolongs the "period of restoration", we will pay for loss and expense sustained during the delay (regardless of when such a delay occurs during the "period of restoration"), but such coverage is limited to 30 days unless another number of days is indicated in the Declarations. The days need not be consecutive.

Rec. Doc. 35 at 5-6, 17; Rec. Doc. 27-3 at 35-36 ("Subpart B.1.f.").

On February 5, 2021, Twin City was granted leave to file a reply. Rec. Doc. 40. Because the Virus Exclusion and Limited Coverage provisions were set forth in the same endorsement, Twin City argues that the Limited Virus Coverage does not effectively override the Virus Exclusion. Id. at 3. Moreover, Twin City argues that Q Clothier failed to plausibly allege any loss or damage that would trigger the Policy's Limited Coverage exception for a virus. Id. at 4.

LAW AND ANALYSIS

A. Rule 12(c) Standard

Federal Rule of Civil Procedure 12(c) states, "[a]fter the pleadings are closed – but early enough not to delay trial – a party may move for judgment on the pleadings." See Fed. R. Civ. P. 12(c). A Rule 12(c) motion is "designed to dispose of cases where the material facts are not in dispute and a judgment on the merits can be rendered by looking to the substance of the pleadings and any judicially noticed facts." Hebert Abstract Co. v. Touchstone Props., Ltd. , 914 F.2d 74, 76 (5th Cir. 1990) (per curiam). As such, the pleadings "should be construed liberally, and judgment on the pleadings is appropriate only if there are no disputed issues of fact and only questions of law remain." Hughes v. Tobacco Inst., Inc. , 278 F.3d 417, 420 (5th Cir. 2001).

When reviewing the complaint, courts "will accept all well-pleaded facts as true, viewing them in the light most favorable to the plaintiff." Jones v. Greninger , 188 F.3d 322, 324 (5th Cir. 1999) (per curiam). In analyzing Rule 12(c) motions, courts are generally concerned...