Body Xchange Sports Club, LLC v. Zurich Am. Ins. Co.

648 F.Supp.3d 1205

BODY XCHANGE SPORTS CLUB, LLC, a California Limited Liability Company, Plaintiff, v. ZURICH AMERICAN INSURANCE COMPANY,a New York corporation; and Does 1-25, inclusive, Defendants.

Case No. 1:20-CV-01518-JLT-CDB

United States District Court, E.D. California

Signed December 30, 2022

Michael John Bidart, Ricardo Echeverria, Charles Anthony Mayr, Kristin E. Hobbs, Steven Martin Schuetze, Shernoff Bidart Echeverria Bentley, Claremont, CA, for Plaintiff.

Jeffry Butler, Dentons U.S. LLP, Oakland, CA, Shari L. Klevens, PHV, Pro Hac Vice, Dentons U.S. LLP, Washington, DC, for Defendant Zurich American Insurance Company.

ORDER GRANTING DEFENDANT'S MOTION FOR JUDGMENT ON THE PLEADINGS

Jennifer L. Thurston, UNITED STATES DISTRICT JUDGE

Body Xchange Sports Club, LLC initiated this action to recover lost business income caused by having to suspend operations pursuant to government closure orders issued to mitigate the spread of the COVID-19 pandemic. (Doc. 1-1 at 4-25.) Body Xchange claims that Zurich American Insurance Company breached its insurance contract and breached the implied covenant of good faith and fair dealing by refusing coverage for the lost business income. (Id.) On May 12, 2021, Zurich filed a motion for judgment on the pleadings seeking dismissal of all claims. (Doc. 15.) For the reasons set forth below, the Court GRANTS Zurich's motion.

I. FACTUAL BACKGROUND

Body Xchange owns and operates six fitness centers in Bakersfield, California. (Doc. 1-1 at 13, ¶ 36.) On March 19, 2020, in response to the rapid growing COVID-19 pandemic, the governor of California issued a stay-at-home order that required the closure of any non-essential businesses. (Id. at 15-16, 255-56.) On April 2, 2020, the public health officer of Kern County ordered all gyms and fitness centers to remain closed as part of the government's efforts to slow the spread of COVID-19. (Id. at 16, ¶ 55, 258-60.) Body Xchange, as a non-essential business, complied with these orders and ceased its operations until June 8, 2020, when the government permitted the reopening of fitness centers. (Id. at 16-17.)

Body Xchange entered into an insurance agreement with Zurich that provided coverage from September 3, 2019 to September 3, 2020. (Doc. 1-1 at 9, ¶ 20.) The insurance policy included several coverage provisions, two of which Body Xchange asserts as its basis for liability. First, Body Xchange alleges the Business Income provision provides coverage for lost income due to the government ordered closures. (Id. at 9-11.) The Business Income provision states that Zurich will pay for lost business income sustained due the suspension of operations caused by "direct physical loss of or damage to property" at Body Xchange's premises. (Id. at 171.) The policy limits coverage to loss or damage caused by a "Covered Cause of Loss." (Id.) The definition of Covered Cause of Loss includes all risks except those explicitly excluded under the policy. (Id. at 180.)¹ Second, Body Xchange asserts coverage under the Civil Authority provision which reimburses Body Xchange for actual losses sustained by an action of civil authority that prohibits access to their properties if the civil authority action was taken as a result of damage within one mile of Body Xchange's property and was taken in response to dangerous physical conditions resulting from damage or a Covered Cause of Loss that impedes access. (Id. at 12, 172.) The policy contains an exclusion for any damage or loss caused by a virus. (Id. at 192.)

On March 31, 2020, Body Xchange tendered a claim under its insurance policy to Zurich for "business interruption loss resulting from the government-ordered closure of its fitness centers." (Doc. 1-1 at 17, ¶ 61.) After a limited exchange with a claim adjuster, Zurich sent Body Xchange a letter denying coverage, explaining the risk of loss was excluded under the "Exclusion of Loss Due to Virus or Bacteria." (Id. at 17-20; 262-66.) Body Xchange contends Zurich's denial constitutes a breach of contract and a breach of the implied covenant of good faith and fair dealing. (Id. at 20-24.)

II. LEGAL STANDARDS

Federal Rule of Civil Procedure 12(c) provides that: "After the pleadings are closed—but early enough not to delay trial—a party may move for judgment on the pleadings." A motion for judgment on the pleadings "challenges the legal sufficiency of the opposing party's pleadings and operates in much the same manner as a motion to dismiss under Rule 12(b)(6)." Morgan v. Cnty. of Yolo, 436 F. Supp. 2d 1152, 1154-55 (E.D. Cal. 2006), aff'd, 277 F. App'x 734 (9th Cir. 2008). In reviewing a motion brought under Rule 12(c), the court "must accept all factual allegations in the complaint as true and construe them in the light most favorable to the nonmoving party." Fleming v. Pickard, 581 F.3d 922, 925 (9th Cir. 2009).

The same legal standard applicable to a Rule 12(b)(6) motion applies to a motion brought under Rule 12(c). See Dworkin v. Hustler Magazine, Inc., 867 F.2d 1188, 1192 (9th Cir. 1989). Accordingly, "judgment on the pleadings is properly granted when, taking all the allegations in the non-moving party's pleadings as true, the moving party is entitled to judgment as a matter of law." Marshall Naify Revocable Trust v. United States, 672 F.3d 620, 623 (9th Cir. 2012) (quoting Fajardo v. Cnty. of Los Angeles, 179 F.3d 698, 699 (9th Cir. 1999)); see also Fleming, 581 F.3d at 925 (stating that "judgment on the pleadings is properly granted when there is no issue of material fact in dispute, and the moving party is entitled to judgment as a matter of law"). The allegations of the complaint must be accepted as true, and any allegations made by the moving party that contradict the allegations of the complaint are assumed to be false. See MacDonald v. Grace Church Seattle, 457 F.3d 1079, 1081 (9th Cir. 2006). The court also draws reasonable inferences in favor of the non-moving party. See Ventress v. Japan Airlines, 603 F.3d 676, 683 (9th Cir. 2010). However, the Court will enter judgment in favor of the movant, "when, taking all the allegations in the non-moving party's pleadings as true," the non-moving party fails to plead all required elements of the cause of action. Id. at 681; see also Student Loan Marketing Assoc. v. Hanes, 181 F.R.D. 629, 634 (S.D. Cal. 1998).

III. REQUEST FOR JUDICIAL NOTICE

With its motion for judgment on the pleadings, Zurich filed a request for judicial notice of Body Xchange's insurance policy with Zurich (Doc. 15-1 at 276-524 (Exhibit B)); a hearing transcript from a lawsuit regarding insurance coverage for COVID-19 losses from the Southern District of New York (id. at 525-44 (Exhibit C)); a list and copies of unpublished federal and state decisions regarding similar COVID-19 insurance claims (id. at 545-904 (Exhibit D)); Governor Newsom's Executive Order N-33-20 (id. at 905-08 (Exhibit E)); and Kern County's April 2, 2020, Order of the Health Officer (id. at 909-13 (Exhibit F)). (Doc. 16.) Body Xchange did not oppose these requests. In reaching its decision, the Court does not rely upon Exhibits C and D, and therefore, will only address Zurich's request as to the parties' insurance policy and the two government orders.

Federal Rule of Evidence 201 permits a court to take judicial notice of any facts not subject to reasonable dispute and which may be "accurately and readily determined from sources whose accuracy cannot reasonably be questioned." Fed. R. Evid. 201(b)(2). Even where judicial notice is not appropriate, on a motion for judgment on the pleadings, the Court may consider "material which is properly submitted as part of the complaint" or incorporated by reference into the complaint. Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001); Coto Settlement v. Eisenberg, 593 F.3d 1031, 1038 (9th Cir. 2010); Special Dist. Risk Mgmt. Auth. v. Munich Reinsurance Am., Inc., 562 F. Supp. 3d 989, 994 (E.D. Cal. 2021) (applying the incorporation by reference doctrine to a motion for judgment on the pleadings). Documents are properly incorporated into the complaint "in situations where the complaint necessarily relies upon a document or the contents of the document are alleged in a complaint, the document's authenticity is not in question and there are no disputed issues as to the document's relevance." Coto Settlement, 593 F.3d at 1038; see also United States v. Corinthian Colls., 655 F.3d 984, 999 (9th Cir. 2011).

First, with respect to the insurance policy, the Court may take judicial notice of the existence and terms contained within the agreement. Body Xchange attached the same policy with its complaint and does not dispute the authenticity or relevancy of the policy. (Doc. 1-1 at 35-253); see also Carver v. Am. Family Mut. Ins. Co., 2022 WL 2239237, at *1 n.1 (E.D. Cal. June 22, 2022) (granting request for judicial notice of insurance agreement where plaintiff did not oppose the request and relied upon the agreement's contents in its complaint); see also Granite Outlet, Inc. v. Hartford Cas. Ins. Co., 190 F. Supp. 3d 976, 984-85 (E.D. Cal. 2016) (taking judicial notice of insurance policy attached to a motion to dismiss because plaintiff's claims "necessarily rely" on the policy, plaintiff refers to it "extensively" in the complaint, and plaintiff submitted a version of the same policy with its complaint). The doctrine of incorporation also permits the Court to consider the policy and its contents because Body Xchange submitted it as material with the complaint and referred to extensively as part of its claims for relief. See 730 I St. Invs., LLC v. Evanston Ins. Co., 2019 WL 1869851, at *1 (E.D. Cal. Apr. 25, 2019).

Second, with respect to Governor Newsom's and Kern County's closure orders, a court may take judicial notice of the orders and decisions of other courts and administrative agencies. Kurtcu v. U.S. Parking Inc., 2008 WL 2445080, at *2 (N.D. Cal. June 16, 2008) (citing Papai v. Harbor Tug & Barge Co., 67 F.3d...