Branzino, Inc. v. Seneca Ins. Co.

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BRANZINO, INC., Plaintiff, v. SENECA INSURANCE COMPANY, INC., Defendant.

Civ. No. 20-4912

United States District Court, E.D. Pennsylvania

February 6, 2024

MEMORANDUM OPINION

PAUL S. DIAMOND, J.

Branzino Inc. a restaurant, sues its insurer, Defendant Seneca Insurance Company for Breach of Contract and Bad Faith alleging that Seneca wrongfully refused coverage for business losses caused by COVID-19 related government closure orders. (Compl.) Seneca moves for summary judgment, urging that the Third Circuit's recent decision in Wilson v. USI Insurance Service LLC “explicitly foreclose[s] Plaintiff's claim.” 57 F.4th 131 (3d Cir. 2023); (Doc. No. 26 at 2.) I agree that because Branzino cannot show direct physical loss or damage to its insured property Wilson precludes coverage, as does the Policy's Virus Exclusion. Accordingly, I will dismiss on those alternate grounds.

I. BACKGROUND

I have construed the evidence most favorably to Branzino.

A. Policy Provisions

From January 31, 2020 to January 31, 2021, Seneca insured Branzino's restaurant premises. (Statement of Undisputed Material Facts, Doc. Nos. 11, 14 at ¶ 3.) The Seneca Policy includes a “Business Income” provision, which applies to income losses from the suspension of operations caused by “direct physical loss of or damage to property . . . caused by a Covered Cause of Loss.” (Id. at 000044.) It also includes an “Extra Expense” provision, which covers “necessary expenses [incurred] during the period of restoration that . . . would not have [been] incurred if there had been no direct physical loss or damage to property caused by . . . a Covered Cause of Loss.” (Id.)

The Policy's “Additional Civil Authority Coverage” provision protects against “loss of Business Income [sustained] and necessary Extra Expense caused by action of civil authority that prohibits access” to the premises provided that: (1) access “to the area immediately surrounding the damaged property is prohibited by civil authority as a result of the damage;” 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.” (Id. at 000045 (emphasis added).) Covered Cause of Loss is defined as “direct physical loss unless the loss is excluded or limited in this policy.” (Id. at 000025, 000058; Statement of Undisputed Material Facts, Doc. Nos. 11, 14 at ¶¶ 8-9.)

The Policy excludes from coverage damage caused by “Ordinance or Law,” “Acts or decisions,” or “Virus or Bacteria." (Policy at 000055, 000058, 000061.) Under the Ordinance or Law Exclusion, Seneca will not cover losses or damage caused “directly or indirectly” by “compliance with any ordinance or law . . . whether the loss results from [] an ordinance or law that is enforced even if the property has not been damaged.” (Policy at 000058.) Under the Acts or Decisions Exclusion, Seneca will not pay for loss or damage caused by “[a]cts or decisions, including the failure to act or decide, of any person, group, organization or governmental body.” (Id. at 000061.) Under the Virus or Bacteria Exclusion, Seneca will not pay for “loss or damage caused by or resulting from any virus.” (Id. at 000055.)

B. Factual Allegations

In March 2020, Pennsylvania Governor Tom Wolf ordered the closure of nonessential businesses to stop the spread of COVID-19. (Doc. No. 1 Ex. 2.) Restaurants and bars were ordered to close their dine-in facilities, but could offer “carry-out, delivery, and drive-through food and beverage service.” (Id.) Although Branzino initially “closed the Restaurant premises . . . and ceased all business operations,” it eventually restarted operations and even profited. (Doc. No. 1 Ex. A ¶ 15; Doc. No. 14 at 14 ¶¶ 55-56.) To recover COVID-related business losses and expenses, Branzino sought coverage from Seneca under the Policy's Business Income and Extra Expense provisions which, as I have discussed, provide coverage for “direct physical loss of” or “damage to the [insured] property.” (Doc. No. 1 Ex. A ¶ 17.)

In denying coverage, Seneca determined that: (1) Branzino's “inability to operate [its] business due to government mandates related to COVID-19 does not arise out of direct physical loss or damage to the covered premises due to a covered loss,” and thus, “business income loss and/or extra expense coverage does not exist for this claim under the Policy;” (2) Branzino's claim does not relate to the Civil Authority provision because “access to the insured premises must be prohibited by action of civil authority in response to nearby property damage resulting from a Covered Cause of Loss;” (3) even if coverage existed, the Policy's Virus Exclusion provision “exclude[s] coverage for any property damage, business income loss, extra expense, or action of civil authority claim caused by or resulting from any virus;” and (4) the Policy's Acts or Decisions Exclusion provision “excludes coverage for all loss or damage caused by or resulting from acts or decisions, including the failure to act or decide, of any person, group, organization or governmental body.” (Doc. No. 1 Ex. 3 (alterations and internal quotations omitted).)

C. Procedural History

Branzino brought suit in Pennsylvania state court on July 21, 2020; on November 5, 2020, Seneca removed to this Court. (Doc. No. 1.) On November 30, 2020, Seneca moved for summary judgment. (Doc. No. 10.) Once the matter was fully briefed, I placed it in suspense pending the Third Circuit's decision in Wilson, a consolidated appeal (of 14 similar COVID-19-related coverage actions), in which the Circuit addressed whether under Pennsylvania law, a “business' inability to use their properties for their intended business purposes constituted ‘physical loss of' property as that phrase is used in the [various insurance] policies.” See Wilson, 57 F.4th at 140; (Doc. Nos. 10, 14, 15, 17.) Predicting how the Pennsylvania Supreme Court would rule, the Wilson Court held that it did not. Wilson, 57 F.4th at 140.

Taking this matter from suspense, I asked the Parties to address Wilson's application here. (Doc. No. 24.) Once again, the matter is fully briefed. (See Doc. Nos. 10, 14, 15, 25, 26.)

II. LEGAL STANDARDS

A. Summary Judgment

Summary judgment is warranted if the moving party shows that “there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). An issue is material only if it could affect the result of the suit under governing law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

Summary judgment is also warranted when the movant shows that there is an absence of evidence to support the non-movant's case. Celotex, 477 U.S. at 325. The non-moving party “must [then] rebut the motion with facts in the record and cannot rest solely on assertions made in the pleadings, legal memoranda, or oral argument.” Berckeley Inv. Grp., Ltd. v. Colkitt, 455 F.3d 195, 201 (3d Cir. 2006); Est. of Smith v. Marasco, 318 F.3d 497, 514 (3d Cir. 2003) (opposing party “must present affirmative evidence-whether direct or circumstantial-to defeat summary judgment”); see also Liberty Lobby, 477 U.S. at 252 (“The mere existence of a scintilla of evidence in support of the plaintiff's position will be insufficient; there must be evidence on which the jury could reasonably find for the plaintiff. The judge's inquiry, therefore, unavoidably asks whether reasonable jurors could find by a preponderance of the evidence that the plaintiff is entitled to a verdict.”).

B. Policy Interpretation

In construing an insurance policy, I must, as with most contracts, “ascertain the intent of the parties as manifested by the language of the written instrument,” reviewing the policy in its entirety and in accordance with the plain and ordinary meaning of its terms. Am. Auto. Ins. Co. v. Murray, 658 F.3d 311, 320 (3d Cir. 2011) (quotation marks omitted) (applying Pennsylvania law); Riccio v. Am. Republic Ins. Co., 705 A.2d 422, 427 (Pa. 1997). Where the policy language is clear and unambiguous, I apply its terms as written. 401 Fourth Street v. Inv'rs Ins. Group, 879 A.2d 166, 171 (Pa. 2005).

Ambiguous provisions-those “reasonably susceptible of different constructions”- must be construed in favor of the insured and against the insurer. Hutchison v. Sunbeam Coal Corp., 513 Pa. 192, 519 A.2d 385, 390 (1986); see Med. Protective Co. v. Watkins, 198 F.3d 100, 104 (3d Cir. 1999) (applying Pennsylvania law). I may not “rewrite the terms of a policy or give them a construction in conflict with the accepted and plain meaning of the language of the policy,” or “distort the meaning of the language or resort to a strained contrivance in order to find an ambiguity.” Imperial Cas. & Indem. Co. v. High Concrete Structures, Inc., 858 F.2d 128, 131 (3d Cir. 1981); Madison Const. Co. v. Harleysville Mut. Ins. Co., 735 A.2d 100, 106 (Pa. 1999). Rather, I “interpret the policy so as to avoid ambiguities and give effect to all of its provisions.” Murray, 658 F.3d at 321.

III. DISCUSSION

Under Pennsylvania law, “an insured bears the initial burden to make a prima facie showing that its claim falls within the policy's grant of coverage.” State Farm Fire & Cas. Co. v. Est. of Mehlman, 589 F.3d 105, 111 (3d Cir. 2009) (applying Pennsylvania law). If the insurer then denies coverage, it must show that the policy does not cover the claim or that an exclusion applies. Id.

Branzino initially sought coverage under the Seneca Policy's “Business Income Loss and Extra Expense” provisions. (Doc. No. 1 at 7 ¶ 17.) It now contends for the first time that it is also entitled to coverage under the...