Selery Fulfillment, Inc. v. Colony Ins. Co.

• Decision Date: 15 March 2021
• Docket Number: Civil Action No. 4:20-cv-853
• Parties: SELERY FULFILLMENT, INC., Plaintiff, v. COLONY INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Eastern District of Texas

525 F.Supp.3d 771

SELERY FULFILLMENT, INC., Plaintiff,

v.COLONY INSURANCE COMPANY, Defendant.

Civil Action No. 4:20-cv-853

United States District Court, E.D. Texas, Sherman Division.

Signed March 15, 2021

Matthew Ryan McCarley, Sherri Ann Saucer, Fears Nachawati Law Firm, PLLC, Dallas, TX, for Plaintiff.

Matthew Patrick Rigney, Stephen Andrew Melendi, Tollefson Bradley Mitchell & Melendi LLP, Dallas, TX, for Defendant.

MEMORANDUM OPINION AND ORDER

AMOS L. MAZZANT, UNITED STATES DISTRICT JUDGE

Pending before the Court is Defendant Colony Insurance Company's Rule 12(b)(6) Motion to Dismiss (Dkt. #11). Having considered the motion and the relevant pleadings, the Court finds that the motion should be GRANTED .

BACKGROUND

In early 2020, the COVID-19 pandemic caused sweeping changes to normal life across the United States. Due to rising infection rates and concerns about public health, state and local authorities across the nation responded by implementing measures that—among other things—temporarily halted business activities. The Parties’ dispute here arises from the circumstances caused by some of these measures in Texas, Denton County, and the City of Carrollton, Texas.

Plaintiff Selery Fulfillment, Inc., ("Selery") is an eCommerce logistics provider in Carrollton, Texas, who helps businesses by providing warehousing and personalized order fulfillment (Dkt. #9 ¶¶ 3–9). During October 2019, Selery began negotiations to obtain insurance coverage for its business and eventually purchased commercial insurance policy number 101 CP 0161431-00 ("Policy") from Defendant Colony Insurance Company ("Colony") (Dkt. #9 ¶ 16). The Policy applied to Selery's commercial property at 1809 Frankford Road, Carrollton, Texas, 75007, and ran from November 21, 2019, to November 21, 2020 (Dkt. #9 ¶ 16).

As part of the Policy, Colony promised to pay "for direct physical loss of or damage to Covered Property ... caused by or resulting from any Covered Cause of Loss" (Dkt. #9, Exhibit 1 at p. 17). Relevant here, Colony agreed to provide coverage for lost business income in specific situations by stating it would "pay for the actual loss of Business Income [Selery] sustain[s] due to the ‘necessary suspension’ of [Selery's] ‘operations’ during the ‘period of restoration.’ The ‘suspension’ must be caused by direct physical loss of or damage to property at premises which are described in the Declarations ...." (Dkt. #9, Exhibit 1 at p. 32). In addition to this coverage, the Policy also provided for situations where a civil authority restricted Selery's access to the property. Specifically, the Policy states:

When a Covered Cause of Loss causes damage to property other than property at the described premises, [Colony] will pay for the actual loss of Business Income [Selery] sustain[s] ... caused by action of civil authority that prohibits access to the described premises, provided that both of the following apply: (1) [a]ccess 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) [t]he action of civil authority is taken in response to dangerous physical conditions resulting from the damage or condition ... that caused the damage, or the action is taken to enable a civil authority to have unimpeded access to the damaged property.

(Dkt. #9, Exhibit 1 at p. 33).

Selery performed its obligations under the Policy but ran into a disagreement with Colony on how to interpret the above provisions early last year (Dkt. #9 ¶¶ 16–50). From March to April 2020, various measures were put in place by the state of Texas, Denton County, and the City of Carrollton to respond to rising COVID-19 numbers, which forced Selery to cease business operations at its facility (Dkt. #9 ¶¶ 27–32). As a result, Selery alleges its business suffered substantial loss during this period (Dkt. #9 ¶ 44). Believing the Policy covered this suspension of business activity, Selery submitted an insurance claim with Colony (Dkt. #9 ¶ 46).

On June 5, 2020, Colony responded in a letter that it would not provide coverage to Selery because Colony believed the Policy did not cover Selery's claim (Dkt. #9 ¶ 47); see also (Dkt. #11 at pp. 1–2). Selery filed a lawsuit in state court on July 27, 2020, alleging that Colony breached the agreement by not providing coverage (Dkt. #1 at pp. 1–2). Colony then removed the action to this Court on October 30, 2020 (Dkt. #1 at p. 1). Selery filed its Amended Complaint on November 27, 2020, and alleged it should recover against Colony on multiple grounds, including (1) breach of contract, (2) violation of the Texas Insurance Code Chapter 541, (3) breach of the duty of good faith and fair dealing, (4) violations of the Texas Deceptive Trade Practices Act, (5) negligence, (6) negligent misrepresentation, and (7) declaratory judgment under Texas law (Dkt. #11 ¶¶ 47–87). In response, Colony filed a Rule 12(b)(6) motion to dismiss on December 17, 2020 (Dkt. #11). Selery filed its response on December 31, 2020 (Dkt. #13).

LEGAL STANDARD

The Federal Rules of Civil Procedure require that each claim in a complaint include a "short and plain statement ... showing that the pleader is entitled to relief." FED. R. CIV. P. 8(a)(2). Each claim must include enough factual allegations "to raise a right to relief above the speculative level." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007).

A Rule 12(b)(6) motion allows a party to move for dismissal of an action when the complaint fails to state a claim upon which relief can be granted. FED. R. CIV. P. 12(b)(6). When considering a motion to dismiss under Rule 12(b)(6), the Court must accept as true all well-pleaded facts in the plaintiff's complaint and view those facts in the light most favorable to the plaintiff. Bowlby v. City of Aberdeen , 681 F.3d 215, 219 (5th Cir. 2012). The Court may consider "the complaint, any documents attached to the complaint, and any documents attached to the motion to dismiss that are central to the claim and referenced by the complaint." Lone Star Fund V (U.S.), L.P. v. Barclays Bank PLC , 594 F.3d 383, 387 (5th Cir. 2010). The Court must then determine whether the complaint states a claim for relief that is plausible on its face. "A claim has facial plausibility when the plaintiff pleads factual content that allows the [C]ourt to draw the reasonable inference that the defendant is liable for the misconduct alleged." Gonzalez v. Kay , 577 F.3d 600, 603 (5th Cir. 2009) (quoting Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) ). "But where the well-pleaded facts do not permit the [C]ourt to infer more than the mere possibility of misconduct, the complaint has alleged—but it has not ‘show[n]’—‘that the pleader is entitled to relief.’ " Iqbal , 556 U.S. at 679, 129 S.Ct. 1937 (quoting FED. R. CIV. P. 8(a)(2) ).

In Iqbal , the Supreme Court established a two-step approach for assessing the sufficiency of a complaint in the context of a Rule 12(b)(6) motion. First, the Court should identify and disregard conclusory allegations, for they are "not entitled to the assumption of truth." Iqbal , 556 U.S. at 664, 129 S.Ct. 1937. Second, the Court "consider[s] the factual allegations in [the complaint] to determine if they plausibly suggest an entitlement to relief." Id. "This standard ‘simply calls for enough facts to raise a reasonable expectation that discovery will reveal evidence of the necessary claims or elements.’ " Morgan v. Hubert , 335 F. App'x 466, 470 (5th Cir. 2009) (citation omitted). This evaluation will "be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Iqbal , 556 U.S. at 679, 129 S.Ct. 1937.

Thus, "[t]o 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.’ "

Id. at 678, 129 S.Ct. 1937 (quoting Twombly , 550 U.S. at 570, 127 S.Ct. 1955 ).

ANALYSIS

The Parties offer different interpretations on the Policy's provisions. In its motion to dismiss, Colony asserts Selery fails to state a plausible claim because the Policy provisions plainly require any property to suffer concrete structural damage—which COVID-19 did not cause.

On the other hand, Selery argues COVID-19 is encompassed within the Policy's language because it caused a "direct physical loss of or damage to" its property. Selery also points to the Civil Authority provision in the Policy and contends that this too justifies its claim because the Texas, Denton County, and Carrollton governments restricted access to the covered property and prevented Selery from using it for its intended function.

Interpreting a contract is a question of law the Court must decide. Colony Ins. Co. v. Custom Ag Commodities, LLC , 272 F. Supp. 3d 948, 956 (E.D. Tex. 2017) ; Lubbock Cty. Hosp. Dist. v. Nat'l Union Fire Ins. Co. of Pittsburgh, Pennsylvania , 143 F.3d 239, 241–42 (5th Cir. 1998). "Under Texas law, the general rules of contract interpretation govern a court's review of an insurance policy." Citigroup Inc. v. Fed. Ins. Co. , 649 F.3d 367, 371 (5th Cir. 2011) (citing Utica Nat'l Ins. Co. of Tex. v. Am. Indem. Co. , 141 S.W.3d 198, 202 (Tex. 2004) ). Therefore, the Court's goal is to determine the Parties’ intent based on the written words of the policy itself. Id. ; Tanner v. Nationwide Mut. Fire Ins. Co., 289 S.W.3d 828, 831 (Tex. 2009). This inquiry is based on the Parties’ written agreement—not their own present interpretations. Colony Ins. Co. , 272 F. Supp. 3d at 957 (citing Nicholas Petroleum, Inc. v. Mid-Continent Cas. Co. , No. 05-13-01106-CV, 2015 WL 4456185, at *5 (Tex. App.—Dallas July 21, 2015, no pet.) ).

"Whether a contract is ambiguous is also a question of law." Oceans Healthcare, L.L.C. v. Illinois Union Ins. Co. , 379 F. Supp....