Vision Serv. Plan v. Ill. Union Ins. Co.

• Decision Date: 27 October 2022
• Docket Number: 2:22-cv-00743-KJM-DB
• Parties: Vision Service Plan, Plaintiff, v. Illinois Union Insurance Company, et al., Defendants.
• Court: U.S. District Court — Eastern District of California

Vision Service Plan, Plaintiff,
v.
Illinois Union Insurance Company, et al., Defendants.

No. 2:22-cv-00743-KJM-DB

United States District Court, E.D. California

October 27, 2022

ORDER

The plaintiff in this insurance coverage dispute (Vision Service Plan or “VSP”) alleges its insurer (Illinois Union Insurance Company) wrongly denied coverage for losses arising out of the COVID-19 pandemic. VSP argues the virus created an insured “pollution condition.” Illinois Union disagrees, and moves to dismiss for failure to state a claim. VSP has not shown that its claim fell within the basic scope of coverage. Its complaint is dismissed without leave to amend.

I. ALLEGATIONS

VSP is the parent of several companies harmed by the coronavirus pandemic. Compl. ¶¶ 25-43, ECF No. 1-1. It alleges the pandemic and related public health orders interrupted its business and increased its cleaning and sanitation costs. See, e.g., id. ¶¶ 18, 24, 36-39, 71-72. VSP has an insurance policy with Illinois Union and submitted a claim. See generally Policy, id. Ex. A, ECF No. 1-1; Compl. ¶ 65. Under that policy, Illinois Union agreed to pay for loss

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resulting from claims and first-party claims “arising out of . . . a ‘pollution condition' on, at, under or migrating from a ‘covered location' . . . .” Policy at 1. The policy defines “pollution condition” at length:

The discharge, dispersal, release, escape, migration, or seepage of any solid, liquid, gaseous or thermal irritant contaminant, or pollutant, including soil, silt sedimentation, smoke, soot, vapors, fumes, acids, alkalis chemicals, electromagnetic fields (EMFs), hazardous substances, hazardous materials, waste materials, “low-level radioactive waste”, “mixed waste” and medical, red bag, infectious or pathological wastes, on, in, into, or upon land and structures thereupon, the atmosphere, surface water, or groundwater.

d. at 9-10. Illinois Union denied the claim because it determined a viral pandemic was not a “pollution condition.” Compl. ¶ 66.

After Illinois Union denied the claim, VSP filed this action in California state court. See generally id. VSP claims Illinois Union breached its obligations under the policy, Id. ¶¶ 74-85, and denied coverage in bad faith, Id. ¶¶ 86-99. VSP also seeks declaratory relief and specific performance. Id. ¶¶ 100-17. Illinois Union removed the case to this court, relying on this court's diversity jurisdiction. See Not. Removal, ECF No. 1. Illinois Union now moves to dismiss for failure to state a claim under Rule 12(b)(6). See generally Mot., ECF No. 10; Mem., ECF No. 10-1. VSP opposes, ECF No. 12, and the court submitted the matter after full briefing and oral argument. See Reply, ECF No. 13; Mins. (July 8, 2022), ECF No. 15. Cecilia Miller appeared at argument for VSP, and Susan Sullivan appeared for Illinois Union.

After the motion was submitted, Illinois Union filed a notice of supplemental authority, citing a brief decision by a New York State trial court about a similar claim and a similar Illinois Union policy. ECF No. 16. VSP requested leave to file a response to that notice. ECF No. 17. Illinois Union objects to that request. ECF No. 18. VSP's request for leave to respond is granted. The court has considered the supplemental filing. See ECF No. 17-1.

II. RULE 12

A motion to dismiss under Rule 12(b)(6) may be granted if the complaint lacks a “cognizable legal theory” or if its factual allegations do not support a cognizable legal theory.

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Godecke v. Kinetic Concepts, Inc., 937 F.3d 1201, 1208 (9th Cir. 2019) (quoting Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1988)). The court assumes all factual allegations are true and construes “them in the light most favorable to the nonmoving party.” Steinle v. City & Cnty. of San Francisco, 919 F.3d 1154, 1160 (9th Cir. 2019) (quoting Parks...