Beniak Enters., Inc. v. Indem. Ins. Co. of N. Am.

556 F.Supp.3d 437

BENIAK ENTERPRISES, INC., Plaintiff,

v.INDEMNITY INSURANCE COMPANY OF NORTH AMERICA, Defendant.

Civ. No. 20-5536 (KM)(JBC)

United States District Court, D. New Jersey.

Signed August 26, 2021

Christopher A. Seeger, Seeger Weiss LLP, Ridgefield Park, NJ, Lindsey H. Taylor, James E. Cecchi, Carella Byrne Cecchi Olstein Brody & Agnello, P.C., Roseland, NJ, for Plaintiff.

Daren S. McNally, Clyde & Co. US LLP, Florham Park, NJ, for Defendant.

KEVIN MCNULTY, U.S.D.J.:

Plaintiff Beniak Enterprises, Inc. d/b/a Benito Ristorante ("Beniak") is a New Jersey corporation that operates a restaurant in Union New Jersey. Defendant Indemnity Insurance Company of North America ("IINA") issued to Beniak a commercial-property insurance policy. Beniak alleges that the "all-risk" commercial insurance it purchased from IINA indemnifies it for actual business losses incurred when business operations are involuntarily suspended, interrupted, or curtailed, and when access to the premises is prohibited, because of (1) direct physical loss or damage to the property, or (2) by a civil authority order that restricts access to the property ("business interruption coverage"). Beniak unsuccessfully sought coverage pursuant to that policy when its restaurant operations were halted as a result of measures put in place by civil authorities to stop the spread of COVID-19.

Beniak initiated this action against IINA¹ for declaratory judgment that the COVID-19 global pandemic and the responses taken by civil authorities to stop the spread of the virus (1) triggers coverages, (2) has caused physical property loss and damage to the insured property, and (3) provides coverage for future civil authority orders that result in future suspension of business operations. Beniak also seeks declaratory judgment that IINA is liable for the losses Beniak suffered. Additionally, Beniak brings breach of contract claims for IINA's failure to indemnify Beniak and other similarly situated for business losses and extra expenses related to actions taken by civil authority to stop the spread of the COVID-19 outbreak. Beniak brings this action on behalf of a proposed class of policyholders who paid premiums in exchange for an all-risk commercial property insurance policy that covered such loss of business income and extra expenses.

IINA now moves for judgment on the pleadings on the grounds that (1) Beniak's business income and extra expenses claim fails because it does not allege direct physical loss or damage to its property, (2) Beniak's civil authority claim fails because it does not allege that any authority prohibited access to the property due to physical damage, and (3) the policy's virus exclusion bars coverage.

For the reasons provided herein, I will grant IINA's motion.

I. Summary²

a. Factual Allegations

The Policy in Issue

IINA issued to Beniak Policy No. MCRD38178813 (the "Policy") for the period between August 1, 2019 and August 1, 2020. (Compl. ¶16; Ans. ¶16.) Plaintiff alleges that it paid the premiums on that Policy specifically "for coverage of lost business income and extra expenses in the event of an involuntary business interruption." (Compl. ¶17.)

In pertinent part, the Policy included a Business Income (And Extra Expense) Coverage Form, which provided:

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. With respect to loss of or damage to personal property in the open or personal property in a vehicle, the described premises include the area within 100 feet of such premises.

(Id. ¶38.)

"Causes of loss" are defined and "means direct physical loss unless the loss is excluded or limited in this policy." (Id. ¶42.) One such exclusion is the "Exclusion of Loss Due To Virus or Bacteria" (the "virus exclusion"). (Id. ¶43.) Pursuant to that endorsement, the Policy excludes coverage for "loss or damage caused by or resulting from any virus, bacterium or other microorganism that induces or is capable of inducing physical distress, illness or disease." (Id. )

The Policy also contained "Additional Coverages" which included, in relevant part, coverage for losses sustained when access to covered property is prohibited by a civil authority:

5. Additional Coverages

a. Civil Authority

In this Additional Coverage, Civil Authority, the described premises are premises to which this Coverage Form applies, as shown in the Declarations. 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 and necessary Extra Expense 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.

Civil Authority Coverage for Business Income will begin 72 hours after the time of the first action of civil authority that prohibits access to the described premises and will apply for a period of up to four consecutive weeks from the date on which such coverage began.

Civil Authority Coverage for Extra Expense will begin immediately after the time of the first action of civil authority that prohibits access to the described premises and will end:

(1) Four consecutive weeks after the date of that action; or

(2) When your Civil Authority Coverage for Business Income ends;

whichever is later.

(Id. ¶39.)

Restrictions Placed on Beniak's Restaurant

On March 16, 2020, New Jersey Governor Murphy ordered closures of all "gyms, movie theaters, bars, and casinos" in response to the COVID-19 global pandemic (the "Closure Order"). (Id. ¶31.) Pursuant to the Closure Order, "[r]estaurants were limited to take-out and delivery orders only." (Id. ) On March 21, 2020, Governor Murphy issued a "stay at home" order which required "New Jersey residents to stay at home except for necessary travel and mandated that all non-essential business close until further notice." (Id. ) Due to those Closure Orders, Beniak's Restaurant was "unable to operate in the ordinary course of business." (Id. ¶32.)

Beniak alleges that the interruption of its business, and the businesses of the other proposed class members, was not caused by any of the circumstances contained in the exclusions set forth in the Policy. (Id. ¶42.) Beniak also alleges that it and all similarly situated proposed class members "have suffered a direct physical loss of and damage to their property because they have been unable to use their property for its intended purpose."³ (Id. ¶44.) Beniak's claims under the Policy's business interruption coverage were denied by the insurer. (Id. ¶46.)

b. Procedural History

Beniak initiated this action on May 5, 2020. (DE 1.) The Complaint asserts the following causes of action on behalf of itself and the proposed class members:

Count I – Declaratory Judgment (Business Income Coverage)

Count II – Breach of Contract (Business Income Coverage)

Count III – Anticipatory Breach of Contract (Business Income Coverage)

Count IV – Declaratory Judgment (Civil Authority Coverage)

Count V – Breach of Contract (Civil Authority Coverage)

Count VI – Declaratory Judgment (Extra Expense Coverage)

Count VII – Breach of Contract (Extra Expense Coverage)

(Compl. ¶¶73-129.)

On September 9, 2020, IINA filed its Answer to Beniak's Complaint. (DE 8). IINA now moves for judgment on the pleadings, pursuant to Fed. R. Civ. P. 12(c).

II. Legal Standards

a. Judgment on the Pleadings

Federal Rule of Civil Procedure Rule 12(c) provides for judgment on the pleadings after the pleadings have been closed. A motion for judgment on the pleadings will be granted "if, on the basis of the pleadings, the movant is entitled to judgment as a matter of law. The court will accept the complaint's well-pleaded allegations as true, and construe the complaint in the light most favorable to the nonmoving party, but will not accept unsupported conclusory statements." DiCarlo v. St. Mary Hosp. , 530 F.3d 255, 262-263 (3d Cir. 2008) (internal citations omitted). For present purposes, there is no material difference in the legal standards between a Rule 12(c) motion and a Rule 12(b)(6) motion. See Spruill v. Gillis , 372 F.3d 218, 223 n.2 (3d Cir. 2004).

Federal Rule of Civil Procedure Rule 12(b)(6) provides for the dismissal of a complaint if it fails to state a claim upon which relief can be granted. The defendant, as the moving party, bears the burden of showing that no claim has been stated. Animal Science Products, Inc. v. China Minmetals Corp. , 654 F.3d 462, 469 n.9 (3d Cir. 2011). For the purposes of a motion to dismiss, the facts alleged in the complaint are accepted as true and all reasonable inferences are drawn in favor of the plaintiff. New Jersey Carpenters & the Trustees Thereof v. Tishman Const. Corp. of New Jersey , 760 F.3d 297, 302 (3d Cir. 2014).

Federal Rule of Procedure 8(a) does not require that a complaint contain detailed factual allegations. Nevertheless, "a plaintiff's obligation to provide the ‘grounds’ of his ‘entitlement to relief’ requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atl. Corp. v. Twombly , 550 U.S. 544,...