Stanford Dental, PLLC v. Hanover Ins. Grp., Inc.

• Decision Date: 10 February 2021
• Docket Number: Case No. 20-cv-11384
• Citation: 518 F.Supp.3d 989
• Court: U.S. District Court — Eastern District of Michigan
• Parties: STANFORD DENTAL, PLLC, Plaintiff, v. The HANOVER INSURANCE GROUP, INC., et al., Defendants.

518 F.Supp.3d 989

STANFORD DENTAL, PLLC, Plaintiff,

v.The HANOVER INSURANCE GROUP, INC., et al., Defendants.

Case No. 20-cv-11384

United States District Court, E.D. Michigan, Southern Division.

Signed February 10, 2021

Jason J. Thompson, Robert B. Sickels, Andrew Kochanowski, Sommers Schwartz, P.C., Southfield, MI, Jennifer M. Grieco, Kenneth F. Neuman, Stephen T. McKenney, Altior Law, P.C., Birmingham, MI, for Plaintiff.

Kyle M. Asher, Lori M. McAllister, Dykema Gossett PLLC, Lansing, MI, for Defendants.

OPINION AND ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS (ECF No. 14)

MATTHEW F. LEITMAN, UNITED STATES DISTRICT JUDGE

Plaintiff Stanford Dental, PLLC purchased what it calls an "all-risk" insurance policy from Defendant Citizens Insurance Company of America (the "Policy"). In 2020, Stanford Dental made a claim for coverage under the Policy for losses it allegedly suffered after Michigan Governor Gretchen Whitmer issued an Executive Order that forced it to close for a period of time. Governor Whitmer issued the Executive Order to combat the COVID-19 pandemic. Citizens denied Stanford Dental's coverage claim for several reasons, including that the Policy precluded coverage for losses caused by viruses like COVID-19.

On May 29, 2020, Stanford Dental brought this putative class action against Citizens and The Hanover Insurance Group, Inc., the claims handler for Citizens. (See Compl., ECF No. 1.) Stanford Dental alleges that Defendants wrongfully denied its claim for coverage under the Policy. (See id. ) Defendants have now moved to dismiss Stanford Dental's Complaint. (See Mot. to Dismiss, ECF No. 14.) The Court concludes that Stanford Dental lacks standing to sue Hanover and that the Policy exclusion for losses caused by viruses precludes coverage for Stanford Dental's alleged losses. Therefore, for the reasons explained in more detail below, the Court GRANTS Defendants’ motion to dismiss and DISMISSES Stanford Dental's Complaint.

I

A

Stanford Dental owns and operates a dental practice in Livonia, Michigan. (See Compl. at ¶11, ECF No. 1, PageID.5.) At some point before June of 2019, Stanford Dental purchased the Policy from Citizens "in order to protect [its] dental practice" from a variety of losses. (Id. ) Stanford Dental renewed the Policy for a one-year term beginning on June 8, 2019. (See id. ; see also Policy Renewal Declarations, ECF No. 1-2, PageID.40.)

B

On March 24, 2020, Governor Whitmer issued Executive Order No. 2020-21 in an effort to slow the spread of the COVID-19 pandemic in the State of Michigan (the "Executive Order"). (See Executive Order, ECF No. 14-2.¹ ) Governor Whitmer noted that "[t]he novel coronavirus (COVID-19) is a respiratory disease that can result in serious illness or death." (Id. , PageID.242.) She explained that "there [was] an increased risk of rapid spread of COVID-19 among persons in close proximity to one another" and that there was, at that time, "no approved vaccine or antiviral treatment for the disease." (Id. ) Governor Whitmer then made clear that the purposes of the Executive Order were to "suppress the spread of COVID-19," "prevent the state's health care system from being overwhelmed" by the virus, and "avoid needless deaths" caused by the virus. (Id. )

In order to accomplish these goals, the Executive Order required, to the extent possible, "all individuals currently living within the State of Michigan ... to stay home or at their place of residence." (Id. , PageID.243.) In addition, subject to certain exceptions, the Executive Order provided that "[n]o person or entity shall operate a business or conduct operations that require workers to leave their homes or places of residence except to the extent that those workers are necessary to sustain or protect life or to conduct minimum business operations." (Id. )

C

Stanford Dental says the Executive Order "barred [it] from operating [its] business" and thereby caused it to lose business income. (Compl. at ¶28, ECF No. 1, PageID.10.) The forced shutdown also caused Stanford Dental to suffer damage to its "dental equipment, certain lease equipment, medications with expiration dates, and other depreciating assets." (Id. at ¶31, PageID.11.) It says that "[e]ach of these [items] has suffered loss of use, loss of functionality, decay, loss of value, and other forms of damage and/or loss."² (Id. ) Stanford Dental insists that the Executive Order was the "sole cause" of its losses and that the losses were not caused by COVID-19. (Id. at ¶36, PageID.12.) Indeed, it says that "there is no evidence at all that the [COVID-19] virus [ ] enter[ed its] property or that [its property] had to be de-contaminated" due to contamination from the virus. (Id. at ¶8, PageID.3-4.)

D

On May 1, 2020, Stanford Dental "provided notice of its losses and expenses to Defendants" and sought insurance coverage for those losses under the "terms and procedures of the Policy." (Id. at ¶37, PageID.13.) Stanford Dental says that it is entitled to coverage under three of those Policy "terms": the Business Income provision, the Extra Expense provision,³ and the Civil Authority provision. (Id. at ¶10, PageID.4.) The Business Income provision states that Citizens will "pay for the actual loss of Business Income that [Stanford Dental] sustain[ed] due to [a] necessary ‘suspension’ of [its] operations .... caused by ... a Covered Cause of Loss."⁴ (Policy, ECF No. 1-2, PageID.58.) The Extra Expense provision says that if "loss or damage ... [is] caused by ... a Covered Cause of Loss," Citizens will "pay the necessary Extra Expense [Stanford Dental] incur[ed] ... that [it] would not have incurred if there had been no direct physical damage to property at the described premises." (Id. , PageID.60.) Finally, the "Civil Authority" provision says that if "a Covered Cause of Loss cause[d] damage to property other than" Stanford Dental's property, and if a civil authority "prohibit[ed] access" to Stanford Dental's premises as a result of that loss to the other property, Citizens will "pay for the actual loss of Business Income [ ] sustain[ed] and necessary Extra Expense caused by [the] action of [the] civil authority." (Id. , PageID.61.)

Citizens denied Stanford Dental's claim for coverage in a letter written on Hanover letterhead. (See Compl. at ¶37, ECF No. 1, PageID.13.⁵ ) As mentioned above, Hanover provides claims handling for Citizens. (See id. at ¶12, PageID.5.)

In the denial letter, Citizens said that Stanford Dental did not qualify for coverage under the Business Income or Civil Authority provisions identified above.⁶ (See Denial Ltr., ECF No. 1-4, PageID.161, 163-164.) Citizens also said that the Policy's Exclusion for Loss Due to Virus or Bacteria (the "Virus Exclusion") "preclude[d] coverage under all of the coverage provisions" identified by Stanford Dental. (Id. , PageID.164.)

The Virus Exclusion provides that:

We 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.

[....]

i. Virus or Bacteria

(1) Any virus, bacterium or other microorganism that induces or is capable of inducing physical distress, illness or disease. (2) However, the exclusion in paragraph (1) above, does not apply to loss or damage caused by or resulting from "fungi", wet rot or dry rot ... (3) With respect to any loss or damage subject to the exclusion in paragraph (1) above, such exclusion supersedes any exclusion relating to "pollutants." ...

(Policy, ECF No. 1-2, PageID.88, 90.)

II

After Citizens denied Stanford Dental's insurance claim, Stanford Dental filed this putative class action against Citizens and Hanover. (See Compl., ECF No. 1.) Stanford Dental seeks a declaratory judgment that it is entitled to coverage under the Business Income, Extra Expense, and Civil Authority provisions of the Policy. (id. at Counts I, III, and V.) Stanford Dental also seeks damages for Defendants’ alleged breach of contract and wrongful denial of coverage. (See id. at Counts II, IV, and VI.)

Defendants have now moved to dismiss Stanford Dental's Complaint. (See Mot. to Dismiss, ECF No. 14.) The Court held a video hearing on Defendants’ motion on January 27, 2021.

III

Hanover has moved to dismiss for lack of standing pursuant to Federal Rule of Civil Procedure 12(b)(1). (See id. , PageID.224-225.) In the alternative, and together with Citizens, Hanover moves to dismiss Stanford Dental's under Federal Rule of Civil Procedure 12(b)(6). (See id. , PageID.225-239.)

Where, as here, a party raises a "facial attack on subject matter jurisdiction" under Rule 12(b)(1), "a trial court takes the allegations in the complaint as true, which is a similar safeguard employed under 12(b)(6) motions to dismiss." Ohio Nat. Life Ins. Co. v. U.S. , 922 F.2d 320, 325 (6th Cir. 1990). See also DLX Inc. v. Kentucky , 381 F.3d 511, 516 (6th Cir. 2014) (explaining that where a Rule 12(b)(1) motion "attack[s] the claim of jurisdiction on its face," then "all allegations of the plaintiff must be considered as true"). The court then determines whether it has subject matter jurisdiction based on those allegations. See id.

"To survive a motion to dismiss" under Rule 12(b)(6) "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) (quoting Bell Atlantic Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). A claim is facially plausible when a plaintiff pleads factual content that permits a court to reasonably infer that the defendant is liable for the alleged misconduct. See id. When assessing the sufficiency of a plaintiff's claim, a district court must accept all of a complaint's factual allegations as true. See Ziegler v. IBP Hog Mkt., Inc. , 249 F.3d 509, 512 (6th Cir. 2001). "Mere conclusions," however, "are...