Big Tomato LLC v. State Auto Prop. & Cas. Ins. Co.

642 F.Supp.3d 552

BIG TOMATO LLC d.b.a. Tabella, Plaintiff v. STATE AUTO PROPERTY AND CASUALTY INSURANCE CO., Defendant

CIVIL ACTION NO. 2:20-cv-86-TBM-MTP

United States District Court, S.D. Mississippi, Eastern Division

Signed November 22, 2022

John W. Barrett, Don Barrett, PA, Lexington, MS, David Malcolm McMullan, Jr., Barrett Law Group, PA, Lexington, MS, Richard H. Taylor, Taylor Martino, PC, Mobile, AL, for Plaintiff.

Adam H. Fleischer, Pro Hac Vice, Lindsey D. Dean, Pro Hac Vice, Matthew P. Fortin, Pro Hac Vice, Bates Carey, LLP, Chicago, IL, Corey D. Hinshaw, Michael O'Mara Gwin, William F. Ray, Watkins & Eager, PLLC, Jackson, MS, for Defendant.

MEMORANDUM OPINION AND ORDER

TAYLOR B. McNEEL, UNITED STATES DISTRICT JUDGE

The COVID-19 pandemic and government shutdowns caused many businesses—like Big Tomato LLC—to lose money. In an attempt to recoup some losses, Big Tomato sued its insurance company, State Auto Property and Casualty Insurance. It alleged coverage under a commercial property insurance policy that carried business income and extra expense provisions. But State Auto avers that Big Tomato's government-shut-down claim for lost business income is not actually covered under the policy. Accordingly, it has moved to dismiss Big Tomato's suit. This Court agrees with State Auto. The Motion to Dismiss [38] is granted.

I. BACKGROUND AND PROCEDURAL HISTORY

Big Tomato operates an Italian restaurant in Hattiesburg, Mississippi. The restaurant is insured by a commercial property insurance policy issued by State Auto. [28], pp. 4, 9-10.

The insurance policy is an "all risk" policy which includes coverage for business income and extra expenses. It covers business income lost "due to the necessary suspension of . . . 'operations' . . . . The suspension must be caused by direct physical loss of or damage to property at the described premises. The loss or damage must be caused by or result from a Covered Cause of Loss." [38-1], p. 65. Also covered under the policy are extra expenses that Big Tomato incurred "during the 'period of restoration' " that Big Tomato "would not have incurred if there had been no direct physical loss or damage at the described premises." [38-1], p. 66. What is more, the policy carries a food-borne illness endorsement that extends coverage for the "Suspension of [Big Tomato's] 'operations' at the described premises due to the order of a civil authority . . . resulting from the actual or alleged . . . [e]xposure of the described premises to a contagious or infectious disease." [38-1], p. 117.

In March of 2020, Hattiesburg's Mayor and Mississippi's Governor issued orders restricting restaurants from offering dine-in services. [38-2], [38-3], [38-4]. Big Tomato complied with the orders and suspended its dine-in service. This pause negatively impacted Big Tomato's income.

Big Tomato initially filed a class action suit against State Auto in this Court seeking a declaratory judgment that its income loss is covered under the business income and extra expense provisions. [27], p. 1.¹ Big Tomato then sought leave to amend its complaint to include an assertion that coverage applied under the food-borne illness endorsement as well. [27], p. 2. The Magistrate Judge allowed that amendment. [27], p. 3.

In addition to seeking a declaratory judgment of coverage, Big Tomato also seeks damages based on State Auto's anticipatory breach of contract. [28], p. 18. As noted above, State Auto has moved to dismiss Big Tomato's complaint. It asserts that Big Tomato has failed to state a claim for coverage because Big Tomato has not alleged any direct physical loss or damage to its property. [39]. This Court now reviews that motion.

II. STANDARD OF REVIEW

"To survive a motion to dismiss, a plaintiff must plead 'enough facts to state a claim to relief that is plausible on its face.' " Ferrer & Poirot, GP v. Cincinnati Ins. Co., 36 F.4th 656, 658 (5th Cir. 2022) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007)). A "court accepts the 'well-pleaded facts as true,' and views 'them in the light most favorable to the plaintiff.' " Terry Black's Barbecue, L.L.C. v. State Auto. Mut. Ins. Co., 22 F.4th 450, 454 (5th Cir. 2022) (quoting Guidry v. Am. Pub. Life Ins. Co., 512 F.3d 177, 180 (5th Cir. 2007)).

III. ANALYSIS

This is a diversity case, so this Court applies the substantive law of the forum, here Mississippi. See Hyde v. Hoffmann-La Roche, Inc., 511 F.3d 506, 510 (5th Cir. 2007). "But the [Mississippi] Supreme Court has not interpreted the policy language at issue or whether the relevant provisions cover business interruption losses . . . during the COVID-19 pandemic." Terry Black's Barbecue, 22 F.4th at 454. Accordingly, this Court has to make an Erie guess at what the Mississippi Supreme Court would do in this case. See Erie Railroad v. Tompkins, 304 U.S. 64, 58 S. Ct. 817, 82 L. Ed. 1188 (1938).

This requires relying on (1) Mississippi Supreme Court decisions "in analogous cases" along with (2) the reasoning of Mississippi Supreme Court decisions on related issues, (3) Mississippi Supreme Court dicta, (4) decisions of other Mississippi state courts, (5) "the general rule on the question," (6) decisions of other courts that the Mississippi Supreme Court looks to when rendering its decisions, and (7) treatises or legal commentaries. Gulf & Miss. River Transp. Co., Ltd. v. BP Oil Pipeline Co., 730 F.3d 484, 488-89 (5th Cir. 2013) (quoting Am. Int'l Specialty Lines Ins. Co. v. Rentech Steel, L.L.C., 620 F.3d 558, 564 (5th Cir. 2010)).

A. Big Tomato's Claim for a Declaratory Judgment of Coverage

"In Mississippi, the interpretation of an insurance policy is a question of law." Barden Miss. Gaming LLC d/b/a Fitzgerald's Casino v. Great N. Ins. Co., 576 F.3d 235, 238 (5th Cir. 2009) (citing Progressive Gulf Ins. Co. v. Dickerson & Bowen, Inc., 965 So. 2d 1050, 1054 (Miss. 2007)). Analyzing a policy requires that courts "effect a determination of the meaning of the language used, not the ascertainment of some possible but unexpressed intent of the parties." Minn. Life Ins. Co. v. Columbia Cas. Co., 164 So. 3d 954, 968 (Miss. 2014) (quoting Cherry v. Anthony, Gibbs, Sage, 501 So. 2d 416, 419 (Miss. 1987)).

Thus it is a court's role "to render a fair reading and interpretation of the policy by examining its express language and applying the 'ordinary and popular meaning' to any undefined terms." Corban v. United Servs. Auto. Ass'n, 20 So. 3d 601, 609 (Miss. 2009) (quoting Noxubee Cnty. Sch. Dist. v. United Nat'l Ins. Co., 883 So. 2d 1159, 1165 (Miss. 2004)). "The Mississippi Supreme Court 'resort[s] to such compendia of knowledge as dictionaries, often the Merriam-Webster Dictionary, to determine these common and ordinary meanings.' " Jordan v. Evanston, 23 F.4th 555, 561 (5th Cir. 2022) (quoting Taylor Constr. Co., Inc. v. Superior Mat Co., Inc., 298 So. 3d 956, 959 (Miss. 2020)).

1. The Business Income and Extra Expense Provisions

The insurance policy requires Big Tomato to demonstrate a direct physical loss or damage in order to establish coverage. But the phrase "direct physical loss or damage" is not defined in the policy, so this Court will apply the factors laid out by the Fifth Circuit to guess how the Mississippi Supreme Court would determine the meaning of "direct physical loss or damage."

This Court begins with Mississippi precedent. Despite deciding several cases touching on "direct physical loss," neither the Mississippi Supreme Court nor the Mississippi Court of Appeals have fully defined the term in the insurance context, particularly the crucial adjective "physical." See Corban v. United Servs. Auto. Ass'n, 20 So. 3d 601, 609-14; Hoover v. United Servs. Auto. Ass'n, 125 So. 3d 636, 640-43 (Miss. 2013); Robichaux v. Nationwide Mut. Fire Ins. Co., 81 So. 3d 1030, 1039-40 (Miss. 2011). Generally, in those cases, the parties did not dispute the physical nature of the damage or loss. But, the Mississippi Supreme Court has noted that in the insurance context "loss" is distinct from "damage": "[a] 'loss' is incurred by an insured and typically, but not always, follows 'damage' to his or her property." Corban, 20 So. 3d at 612. Further, it has stated that " 'loss' has been defined as '1. An act or instance of losing. 2. One that is lost. 3. Injury or suffering caused by losing or by being lost.' " Id. Synthesizing these, the Mississippi Supreme Court found that one suffers loss to commercially insured property "when the insured suffers deprivation of, physical damage to, or destruction of the property insured." Id. at 613.

Turning now to the reasoning under-girding similar opinions, this Court now looks to dictionaries for the ordinary and popular meaning of the remaining terms. Direct is defined as "marked by an absence of an intervening agency, instrumentality, or influence," Direct, MERRIAM-WEBSTER'S COLLEGIATE DICTIONARY (11th ed. 2009), and as "free from extraneous influence; immediate," Direct, BLACK'S LAW DICTIONARY (11th ed. 2019). Physical is in turn defined as "having material existence: perceptible . . . of or relating to material things," Physical, MERRIAM-WEBSTER'S COLLEGIATE DICTIONARY (11th ed. 2009), and as "[o]f, relating to, or involving material things; retaining to real, tangible objects," Physical, BLACK'S LAW DICTIONARY (11th ed. 2019). Damage for its part means "harm resulting from injury to person, property, or reputation," Damage, MERRIAM-WEBSTER'S COLLEGIATE DICTIONARY (11th ed. 2009), or "injury to person or property; esp., physical harm that is done to something or to part of someone's body," Damage, BLACK'S LAW DICTIONARY (11th ed. 2019).

Taking these definitions together, this Court finds that, under Mississippi Supreme Court precedent, the meaning of "direct physical loss or damage" to property is immediate, tangible deprivation of, physical damage to, or destruction of property.

Big Tomato draws on the Mississippi Supreme Court's use of "de...