Brunswick Panini's, LLC v. Zurich Am. Ins. Co.

520 F.Supp.3d 965

BRUNSWICK PANINI'S, LLC, et al., Plaintiffs,

v.ZURICH AMERICAN INSURANCE COMPANY, Defendant.

Case No. 1:20CV1895

United States District Court, N.D. Ohio, Eastern Division.

Signed February 19, 2021

Thomas J. Connick, Connick Law, Beachwood, OH, for Plaintiffs.

Kevin M. Young, Jennifer L. Mesko, Tucker Ellis, Cleveland, OH, Archis A. Parasharami, Pro Hac Vice, Evan M. Tager, Pro Hac Vice, Mayer Brown, Washington, DC, Bronwyn F. Pollock, Pro Hac Vice, Douglas A. Smith, Pro Hac Vice, Mayer Brown, Los Angeles, CA, Debra L. Bogo-Ernst, Pro Hac Vice, Mayer Brown, Chicago, IL, for Defendant.

OPINION AND ORDER

CHRISTOPHER A. BOYKO, SR. J.:

This matter comes before the Court upon the Motion (ECF DKT #14) of Defendant Zurich American Insurance Company to Dismiss Plaintiffs’ Complaint pursuant to Fed.R.Civ.P. 12(b)(6). For the following reasons, the Motion is granted. Defendant's Request (ECF DKT #15) for Incorporation by Reference and for Judicial Notice in Support of Motion to Dismiss is granted as unopposed.

I. FACTUAL BACKGROUND

Plaintiffs Brunswick Panini's and Kent Entertainment Group originally filed this Complaint in Cuyahoga County Common Pleas Court and amended their Complaint on July 22, 2020. The case was removed to federal court on August 25, 2020, on the basis of diversity and CAFA jurisdiction.

Defendant Zurich American Insurance Company issued Property Portfolio Protection Policy No. CPO 1051670-05 to Plaintiffs for the coverage period from May 10, 2019 to May 10, 2020. Plaintiffs operate full-service restaurant/bar facilities in Kent and Brunswick, Ohio. They made a claim under the policy for Business Income Loss and Extra Expense and Civil Authority Coverage due to the COVID-19 coronavirus pandemic, which Defendant denied.

Plaintiffs’ Amended Complaint alleges claims for Declaratory Relief, Breach of Contract and Breach of Implied Covenant of Good Faith and Fair Dealing on behalf of themselves and all individuals and entities throughout the United States who, from January 1, 2020 to the present, have been insured by Commercial and/or Business Owner Policies issued by Defendant and were denied Business Income Loss, Extra Expense and/or Civil Authority Coverage due to COVID-19.

Plaintiffs allege that on March 15, 2020, the Ohio Department of Health (ODH) restricted food and beverage sales in the state to carry-out and delivery only, with no onsite consumption permitted because of the COVID-19 pandemic. The stated goal of this order was to slow the pandemic by minimizing in-person interaction "in an environment with a multitude of hard surfaces." Effective March 23, 2020, all Ohio residents were ordered to stay at home and all non-essential businesses in Ohio were required to cease all activities. (Stay-at-Home Order).

After Plaintiffs halted operations and shut their businesses by order of the State of Ohio, they made claims under their Property Portfolio Protection Policy with Defendant.

In their Amended Complaint (ECF DKT 1-3), Plaintiffs allege:

9. Under the Policies, Plaintiffs agreed to make premium payments to Defendant in exchange for Defendant's promise to indemnify Plaintiffs for losses including, but not limited to, business income loss at their commercial property location ("Property").

10. The Policies are currently in full effect, providing property, business personal property, business income and extra expense, and additional coverages for the effective period, which includes January 1, 2020 to the present.

11. Plaintiffs faithfully paid policy premiums to Defendant, specifically to provide additional coverage for "Business Income and Extra Expense Coverage" in the event of business closures by order of Civil Authority.

12. Under the Policies, insurance is extended to apply to the actual loss of business income sustained and the actual, necessary and reasonable extra expenses incurred when access to the Property is specifically prohibited by order of Civil Authority as the direct result of a covered loss to property in the immediate area of Plaintiffs’ Property. The covered physical loss includes, without limitation, loss of use.

13. COVID-19's actual or suspected physical presence at or in the vicinity of Plaintiffs’ Property prevent [sic] Plaintiffs from making full use of the Property, especially in cases where the business must close in part or in full. Under the terms and condition of the Policy, this kind of loss constitutes a physical loss to the Property in that there has been a loss of use of the Property. Moreover, the COVID-19 virus is a "physical" thing, not an abstract fear. For example, restaurants, such as Plaintiffs, forced to close due to COVID-19 in or near the restaurants have suffered a "physical loss" of use of their Property, with resulting business interruption loss.

14. Under the terms and conditions of the subject Policies, physical loss does not mean and/or require tangible "physical damage."

15. The Policies are "all-risk" policies, in so far as they provide that a covered cause of loss under the policy means direct physical loss of or damage to the property unless the loss is specifically excluded or limited in the Policies. Here, no specific exclusion applies to reasonably justify the denial of Plaintiffs’ claims.

* * *

30. Based on the prevalence of the virus in northeast Ohio, it is probable that Plaintiffs sustained direct physical loss of or damage due to the presence of coronavirus, and has unquestionably sustained direct physical loss as the result of the pandemic and/or civil authority orders issued by the Governor of Ohio.

Relevant Policy Provisions

Coverage

According to the Zurich insuring agreement: We will pay for direct physical loss of or damage to "real property" and "personal property" at a "premises" directly caused by a "covered cause of loss."

"Covered cause of loss" means "fortuitous cause or event, not otherwise excluded."

Business Income - 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 a "premises" at which a Limit of Insurance is shown on the Declarations for Business Income. The loss or damage must be directly caused by a "covered cause of loss." We will not pay more than the applicable Limit of Insurance shown on the Declarations for Business Income at that "premises."

We will pay for the actual loss of "business income" you sustain due to the: (a). Necessary "suspension" of your "operations" from direct physical loss of or damage to Covered Property caused by "microorganisms" when the "microorganisms" are the result of a "covered cause of loss;" or (b). Prolonged "period of restoration" due to the remediation of "microorganisms" from a covered loss.

"Operations" means your business activities occurring at the covered location prior to the physical loss or damage ...

"Period of restoration" means the period of time that begins when ... the direct physical loss or damage that causes "suspension" of your "operations" occurs ... If you do not resume "operations", or do not resume "operations" with reasonable speed (whether at your "premises" or "reported unscheduled premises" or elsewhere), the "period of restoration" will end on the date ... which would have been necessary to make the location physically capable of resuming the level of "operations" which existed prior to the loss or damage after the completion of repairs, replacement, or rebuilding. (Emphasis added).

Civil Authority - We will pay for the actual loss of "business income" you sustain for up to the number of days shown on the Declarations for Civil Authority resulting from the necessary "suspension," or delay in the start, of your "operations" if the "suspension" or delay is caused by order of civil authority that prohibits access to the "premises" or "reported unscheduled premises’ " That order must result from a civil authority's response to direct physical loss of or damage to property located within one mile from the "premises" or "reported unscheduled premises" which sustains a "business income" loss. The loss or damage must be directly caused by a "covered cause of loss."

"Extra expense " means operating expenses you incur during the "period of restoration" that would not have been necessary to incur if there had been no direct physical loss or damage to the property, provided such expenses are incurred:

a. In an attempt to avoid a "suspension" of or to continue those "operations" which have been affected by the direct physical loss or damage to the property ; or

b. In an attempt to minimize the "period of restoration."

Exclusions

Loss of Market or Delay - We will not pay for loss or damage caused by or resulting from loss of market, loss of use , or delay. This exclusion applies even if one of these excluded causes of loss was caused by or resulted from a "mistake" or "malfunction."

Microorganisms - We will not pay for loss or damage consisting of, directly or indirectly caused by , contributed to, or aggravated by the presence, growth, proliferation, spread, or any activity of "microorganisms," unless resulting from fire or lightning. Such loss or damage is excluded regardless of any other cause or event , including a "mistake," "malfunction" or weather condition, that contributes concurrently or in any sequence to the loss , even if such other cause or event would otherwise be covered.

We will also not pay for loss, cost, or expense arising out of any request, demand, order , or statutory or regulatory requirement that requires any insured or others to test for, monitor, clean up, remove, treat, detoxify, or neutralize, or in any way respond to, or assess the effects of "microorganisms."

"Microorganism " means any type or form of organism of microscopic or ultramicroscopic size including, but not limited to, "fungus", wet or dry rot, virus , algae, or bacteria, or any by-product.

The...