Town Kitchen LLC v. Certain Underwriters At Lloyd's, London Known Co.

• Decision Date: 26 February 2021
• Docket Number: Case Number: 20-22832-CIV-MORENO
• Citation: 522 F.Supp.3d 1216
• Parties: TOWN KITCHEN LLC, individually and on behalf of those similarly situated, Plaintiff, v. CERTAIN UNDERWRITERS AT LLOYD'S, LONDON Known as Syndicate ENH 5151, NEO 2468 XLC 2003, TAL 1183, TRV 5000, AGR 3268, ACS 1856, NVA 2007, HDU 382, PPP 1980, AMA 1200, ASC 1414 and VSM 5678; Indian Harbor Insurance Company; and HDI Global Specialty SE, Defendants.
• Court: U.S. District Court — Southern District of Florida

522 F.Supp.3d 1216

TOWN KITCHEN LLC, individually and on behalf of those similarly situated, Plaintiff,

v.CERTAIN UNDERWRITERS AT LLOYD'S, LONDON Known as Syndicate ENH 5151, NEO 2468 XLC 2003, TAL 1183, TRV 5000, AGR 3268, ACS 1856, NVA 2007, HDU 382, PPP 1980, AMA 1200, ASC 1414 and VSM 5678; Indian Harbor Insurance Company; and HDI Global Specialty SE, Defendants.

Case Number: 20-22832-CIV-MORENO

United States District Court, S.D. Florida, Miami Division.

Signed February 26, 2021

Jason Seth Mazer, Cimo Mazer Mark, Miami, FL, Kevin Bruce Love, Lindsey Caryn Grossman, Michael Elliot Criden, Criden & Love PA, South Miami, FL, Linda P. Nussbaum, Pro Hac Vice, Nussbaum Law Group, P.C., New York, NY, for Plaintiff.

Jason Alexander Pill, Sarah Beth Van Schoyck, John David Mullen, Phelps Dunbar LLP, Tampa, FL, for Defendants.

ORDER GRANTING MOTION TO DISMISS

FEDERICO A. MORENO, UNITED STATES DISTRICT JUDGE

THIS CAUSE came before the Court upon Defendant's Motion to Dismiss(D.E. 15) , filed on August 20, 2020.

THE COURT has considered the motion, the response in opposition, the reply, supplemental authorities, and pertinent portions of the record, and being otherwise fully advised in the premises, it is

ADJUDGED that the motion is GRANTED.

I.Background

This suit is one of many in a long line of insurance disputes stemming from the COVID-19 pandemic and its related effects on businesses.PlaintiffTown Kitchen, LLC operates a restaurant at 7301 SW 57th Court, Suite 100, South Miami, Florida 33143.Defendant Certain Underwriters at Lloyd's, London issued all-risk commercial property insurance policy AVS011418900 to Plaintiff.Plaintiffs submitted an insurance claim, and on July 7, 2020, Defendants denied the claim.Now Plaintiff sues for breach of contract and a declaratory judgment.

The following facts are accepted as true at this stage in the litigation.As an aside, the parties do not materially contest the facts—the dispute is principally a legal one.Plaintiffs allege that the policy at issue is an "all-risk" policy, which covers loss or damage to the covered premises resulting from all risks other than those expressly excluded.The Policy includes "business interruption coverage," which "promises to indemnify the insured for lost income and certain expenses in the event of a business interruption."More specifically, each Policy includes a "Business Income (and Extra Expense) Coverage Form," which provides coverage for "Business Income" and "Extra Expense," as well as additional coverage for actions taken by a "Civil Authority."

The Policy has several sections relevant to this litigation.They are recounted here before the Court moves to legal analysis.

A.Coverage

1.Business Income

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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 premises which are described in the Declarations and for which a Business Income Limit Of Insurance is shown in the Declarations.The loss or damage must be caused by or result from a Covered Cause of Loss.

D.E. 6-1 at CP 00 30 10 12p. 1.(emphasis added).According to the Policy, "covered cause of loss means direct physical loss unless the is excluded or limited in this Policy."D.E. 6-1 at CP 10 30 09 17, p. 1.(emphasis added).This is the most important part of the Policy because it describes what event would trigger the remainder of the Policy in the first instance.There is also a coverage extension for actions by a Civil Authority.

When a Covered Cause of Loss causes damage to property other than property at the described premises,we will pay for the actual loss of Business Income you sustain caused by action of civil authority that prohibits access to the described premises, provided that both of the following apply:

(1) Access 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) The action of civil authority is taken in response to dangerous physical conditions resulting from the damage or continuation of the Covered Cause of Loss that caused the damage, or the action is taken to enable a civil authority to have unimpeded access to the damaged property.

D.E. 6-1 at CP 10 30 0917, p. 1-2.(emphasis added).The key question is: What constitutes a "direct physical loss"?No matter what it is, it is a prerequisite for coverage under either the Business Income provision or the Civil Authority provision.

Therein lies the true dispute.Plaintiffs argue that the effects of COVID-19 and the various government responses are direct physical losses and/or actions taken by Civil Authorities that trigger Defendants’ obligation to pay out on the Policy.Defendants on the other hand argue that no property loss or damage has even occurred, and Plaintiffs cannot plausibly state a claim for relief because Town Kitchen is left physically unchanged.

Finally, Defendants argue that even if Plaintiff could establish an affirmative right to coverage by plausibly alleging that COVID-19 was physically present at Town Kitchen, coverage is barred by the "Pollution Exclusion."The Policy contains an exclusion for loss or damage caused by or resulting from "[d]ischarge, dispersal, seepage, migration, release or escape of ‘pollutants.’ "Pollutants is not defined in the Causes of Loss form, but is defined in the Business Income (And Extra Expense) Coverage Form as "any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste."D.E. 6-1at p. 45, CP 00 10 10 12.

II.Legal Standard

To state a claim, Federal Rule of Civil Procedure 8(a)(2) requires only "a short and plain statement of the claim showing that the pleader is entitled to relief."While the Court must consider the allegations contained in the plaintiff's complaint as true, this rule "is inapplicable to legal conclusions."Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868(2009).In addition, the complaint's allegations must include "more than an unadorned, the-defendant-unlawfully-harmed-me accusation."Id.(citingBell Atlantic Corp. v. Twombly , 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929(2007) ).Thus, "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice."Id.(citingTwombly , 550 U.S. at 555, 127 S.Ct. 1955 ).

In practice, to survive a motion to dismiss, "a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim of relief that is plausible on its face.’ "Id.(quotingTwombly , 550 U.S. at 570, 127 S.Ct. 1955 ).A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.Id.The plausibility standard requires more than a sheer possibility that a defendant has acted unlawfully.Id.Where a complaint pleads facts that are merely consistent with a defendant's liability, it stops short of the line between possibility and plausibility of entitlement to relief.Id.Determining whether a complaint states a plausible claim for relief is a context-specific undertaking that requires the court to draw upon its judicial experience and common sense.Id. at 679, 129 S.Ct. 1937.A court may dismiss a case with prejudice if the allegations of a complaint, even when taken as true, afford no basis for relief or when amendment would be futile.E.g.,Burger King Corp. v. Weaver , 169 F.3d 1310, 1320(11th Cir.1999);Chiron Recovery Ctr., LLC v. United Healthcare Servs., Inc. , 438 F. Supp. 3d 1346, 1356(S.D. Fla.2020)

III.Analysis

A.Florida Contract Law Principles

Florida law governs interpretation of the policy.As such, a court's inquiry begins with the plain language of the policy.Auto-Owners Ins. Co. v. Anderson , 756 So. 2d 29, 34(Fla.2000).Insurance contracts are construed according to their plain meaning.Garcia v. Federal Ins. Co. , 473 F.3d 1131, 1135(11th Cir.2006).However, where the language is "susceptible to more than one reasonable interpretation, one providing coverage and the other limiting coverage, the insurance policy is considered ‘ambiguous,’ and must be ‘interpreted liberally in favor of the insured and strictly against the drafter who prepared the policy.’ "State Farm Fire & Cas. Co. v. Steinberg , 393 F.3d 1226, 1230(11th Cir.2004)(internal citation omitted).Although the Court later holds the policy does not cover Plaintiff's claims, it is reasonable to understand the "direct physical loss or damage to the premises" language as covering COVID-19 harms.Several state and federal courts(although none in Florida) have found that way and it would be wrong to say those decisions were wholly irrational.

"[I]nsurance coverage must be construed broadly and its exclusions narrowly."Evanston Ins. Co. v. Budget Grp. Inc. , 199 F. App'x. 867, 868(11th Cir.2006)(citingDemshar v. AAACon Auto Transport, Inc. , 337 So. 2d 963, 965(Fla.1976) ).Similarly, policies "are to be construed most strongly against the insurer and liberally in favor of the insured."Id.(citingHartnett v. Southern Ins. Co. , 181 So.2d 524, 528(Fla.1965) ).Therefore, exclusionary clauses restricting the insured's coverage are generally disfavored.Hartford Acc. & Indem. Co. v. Beaver , 466 F.3d 1289, 1296(11th Cir.2006)(citingNorthland Cas. Co. v. HBE Corp. , 160 F. Supp. 2d 1348, 1359(M.D. Fla.2001) ).The burden falls on the insurer to prove that an exclusionary clause precludes coverage, and it must do so by "demonstrating that the allegations of the complaint are cast solely and entirely within the policy exclusion and are subject to no other reasonable interpretation."Id.(c...