The Cordish Cos. v. Affiliated FM Ins. Co.

• Decision Date: 31 August 2021
• Docket Number: Civil Action ELH-20-2419
• Parties: THE CORDISH COMPANIES, INC. Plaintiff, v. AFFILIATED FM INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — District of Maryland

THE CORDISH COMPANIES, INC. Plaintiff, v. AFFILIATED FM INSURANCE COMPANY, Defendant.

Civil Action No. ELH-20-2419

United States District Court, D. Maryland

August 31, 2021

MEMORANDUM OPINION

ELLEN L. HOLLANDER UNITED STATES DISTRICT JUDGE

The World Health Organization declared COVID-19 a global pandemic on March 11, 2020. See Seth v. McDonough, 461 F.Supp.3d 242, 247 (D. Md. 2020). This insurance dispute arises from financial losses sustained by The Cordish Companies, Inc. (“Cordish”), plaintiff, due to the pandemic.

COVID-19 is caused by a highly contagious virus. See Coronavirus Disease 2019 (COVID-19), How COVID-19 Spreads, Ctrs. For Disease Control & Prevention (Apr. 2, 2020) https://bit.ly/2XoiDDh.^[1] Since at least March of 2020, the nation has been “in the grip of a public health crisis more severe than any seen for a hundred years.” Antietam Battlefield KOA v. Hogan, 461 F.Supp.3d 214, 223 (D. Md. 2020). As of August 16, 2021 COVID-19 has infected more than 36 million Americans and caused over 620, 000 deaths in this country. See COVID-19 Dashboard, The Johns Hopkins Univ https://bit.ly/2WD4XU9 (last accessed August 16, 2021).^[2]

The pandemic has impacted almost every aspect of our lives. As mitigation efforts began to take hold beginning in March 2020, efforts to thwart the spread of the virus included social distancing and avoidance of indoor spaces and public places. Many businesses limited their operations or shut their doors entirely, often because of governmental orders of civil authority. These efforts to stem the spread of COVID-19 took a huge “toll on businesses across the United States.” Hair Studio 1208, LLC v. Hartford Underwriters Ins. Co., No. 20-2171, 2021 WL 1945712, at *1 (E.D. Pa. May 14, 2021). This included many of the commercial properties operated by Cordish.^[3]

As a result of the losses that Cordish suffered during the pandemic, Cordish submitted a claim to its insurer, defendant Affiliated FM Insurance Company (“AFM” or “FM”), pursuant to an “all risk” business interruption insurance policy that it had purchased from AFM at a cost of about $2 million. ECF 4, ¶ 8.^[4] The policy covered 97 commercial properties. AFM denied Cordish's claim.

This suit followed. See ECF 4 (“Complaint”).^[5] Cordish asserts a claim for breach of contract and seeks a declaration that AFM “has a duty to indemnify Cordish under the Policy for the business interruption losses at the Covered Properties.” Id. ¶ 140. Cordish appended several exhibits to the suit. These include a copy of the insurance policy in issue and related correspondence (ECF 4-2 at 1-125, the “Policy”) as well as copies of various governmental emergency orders. ECF 4-2 at 126-130; ECF 4-3 at 1-56.

AFM answered the Complaint. ECF 9. Several months later, AFM moved to dismiss the Complaint for failure to state a claim, pursuant to Fed.R.Civ.P. 12(b)(6). ECF 24. The motion is supported by a memorandum. ECF 24-3 (collectively, the “Motion” or “Motion to Dismiss”). Plaintiff opposes the Motion (ECF 28), supported by 16 exhibits. Defendant has replied. ECF 31. Plaintiff filed a “Motion for Leave to File a Surreply” (ECF 32), along with the proposed surreply. ECF 32-1 (collectively, the “Motion for Surreply”). Defendant opposes the Motion for Surreply. ECF 34.

In resolving the Motion to Dismiss, the Court does not write on a clean slate. This case is one of many brought throughout the country by businesses against their insurance companies, alleging that the losses suffered during the pandemic are covered under business interruption insurance contracts. Indeed, since the filing of the reply, both sides have filed many notices of supplemental authority, bringing to the Court's attention decisions of other courts in some of these cases. See ECF 42; ECF 43; ECF 44; ECF 48; ECF 49; ECF 50; ECF 51; ECF 52; ECF 53. After plaintiff responded to one of defendant's notices of supplemental authority (ECF 45), defendant moved to strike plaintiff's response. ECF 46 (“Motion to Strike”). Plaintiff opposes the Motion to Strike. ECF 47.

No hearing is necessary to resolve the motions. See Local Rule 105.6. For the reasons that follow, I shall grant the Motion for Surreply and the Motion to Strike. And, I shall construe the Motion as a motion for judgment on the pleadings under Fed.R.Civ.P. 12(c) and grant it.

I. Factual Background^[6]

A. The Pandemic

Affiliates of Cordish develop and operate numerous entities throughout the United States, including casinos, dining and entertainment venues, retail malls, hotels, meeting and conference venues, and office and residential buildings. ECF 4, ¶ 2. As events began to unfold in March 2020 with regard to the coronavirus, many governmental authorities across the country issued orders prohibiting “customers, patrons, suppliers, vendors and employees” from accessing business properties, including many of Cordish's properties. Id. ¶ 10; see Id. ¶ 42. In particular, Cordish alleges that the pandemic led to the issuance of “numerous orders of civil authority” that “prohibited access” to the covered Properties or closure of its properties. Id. ¶ 12; see Id. ¶ 13.

For example, on March 5, 2020, Maryland Governor Lawrence Hogan, Jr. issued a Proclamation declaring a state of emergency due to the spread of SARS-Cov-2, the virus causing the COVID-19 disease. Id. ¶ 43; see ECF 4-2 at 126-27 (“State of Emergency Order”). Ten days later, in connection with the State of Emergency Order, Governor Hogan issued an order closing to the public 13 gaming and racing facilities, including casinos, racetracks, and simulcast betting facilities. ECF 4-2 at 129. This order pertained to some of Cordish's Covered Properties, including Live! Casino & Hotel in Hanover, Maryland and “Live! Casino Hotel” at “Horseshoe Casino Baltimore.” Id. at 130. Governor Hogan subsequently issued additional orders closing, inter alia, bars, restaurants, theaters, and malls. See ECF 4-3 at 1-31. And, on March 30, 2020, Governor Hogan issued a “stay at home” order that directed all persons in the State of Maryland to “stay in their homes or places of residence” except “to conduct or participate in Essential Activities” (defined in the order), and closing “Non-Essential Businesses” except for “Minimal Operations, ” which included allowing the presence of staff and owners to perform essential administrative functions. See Order of the Governor of the State of Maryland, Number 20-03-30-01 (Mar. 30, 2020).

In sum, plaintiff claims that the damage caused by the virus and these executive orders “resulted in hundreds of millions of dollars in business interruption losses for Cordish….” ECF 4, ¶ 1. As a result of these losses, plaintiff submitted a claim for business interruption losses under its Policy with AFM. Id. ¶ 112.^[7] By letter of May 6, 2020, AFM denied coverage. Id. ¶ 114. In that letter, AFM averred, among other things, that the Contamination Exclusion bars coverage for losses claimed under the business interruption extensions. Id. ¶ 115. The parties then exchanged additional letters about the applicability of the Contamination Exclusion. Id. ¶¶ 116-118.

B. The Policy

Cordish purchased an “‘all-risk' insurance policy” from AFM that provides up to $1, 000, 000, 000 in coverage for business interruption losses and property damage with respect to 97 properties located throughout the country, including approximately 33 in Maryland (“Covered Properties”). Id. ¶ 4; see ECF 4-2. Coverage under the Policy was issued on March 10, 2020, for the period of February 28, 2020 to February 28, 2021. ECF 4-2 at 24. As noted, the premium was almost $2 million. ECF 4, ¶ 8.

The Policy provides coverage for losses from the interruption of Cordish's business, which is commonly known as business interruption coverage. Broadly, the Policy provides for a limit of liability of $1, 000, 000, 000, and “covers property . . . against ALL RISKS OF PHYSICAL LOSS OR DAMAGE, ” except as otherwise excluded. ECF 4-2 at 26, 45 (capitals in original). Specifically, the Policy provides, id. at 26 (bold in original):

This Company's total limit of liability, including any insured Business Interruption loss, will not exceed the Policy Limit of $1, 000, 000, 000 as a result of any one occurrence subject to the respective sub-limits of liability shown elsewhere in this Policy.

Under the Policy, an occurrence is defined as “the sum total of all loss or damage of the type insured, including any insured Business Interruption loss, arising out of or caused by one discrete event of physical loss or damage ….” Id. at 87.

Further, the Policy states, id. at 63-66 (emphasis in original):

BUSINESS INTERRUPTION

The Business Interruption loss, as provided in the Business Interruption Coverage and Business Interruption Coverage Extensions of this section, is subject to all the terms and conditions of this Policy including, but not limited to, the limits of liability, deductibles and exclusions shown in the Declarations section.

A. LOSS INSURED

This Policy insures Business Interruption loss, as provided in the Business Interruption Coverage, as a direct result of physical loss or damage of the type insured:

1. To property as described elsewhere in this Policy and not otherwise excluded by this Policy;

2. Used by the Insured;

3. While at a location or while in transit as provided by this Policy; and

4. During the Period of Liability as described elsewhere in this Policy. Notably, the Policy does not define “physical loss or damage.”

The “Business Interruption Coverage” includes coverage for rental income losses, id. At 65-66:

B. BUSINESS INTERRUPTION COVERAGE

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3. Rental Income

The recoverable Rental Income loss is the actual loss sustained by the Insured of the following during the

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