Coventry Deli v. State Auto Prop. & Cas. Ins., Co.

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COVENTRY'S DELI, et al., Plaintiffs, v. STATE AUTO PROPERTY AND CASUALTY INSURANCE, CO., Defendant.

No. 2:21-cv-2708

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

September 28, 2022

Kimberly A. Jolson, Magistrate Judge.

OPINION & ORDER

ALGENON L. MARBLEY, CHIEF UNITED STATES DISTRICT JUDGE.

This matter is before this Court on Defendant State Auto Property and Casualty Insurance, Co.'s (“State Auto”) Motion to Dismiss. (ECF No. 22). For the following reasons Defendant's Motion is GRANTED. Plaintiffs' Amended Complaint (ECF No. 20) is hereby DISMISSED.

I. BACKGROUND

A. The Parties and Policies

This action has been filed by four businesses: Coventry's Deli, Joseph Anthony Hair Studio (“Joseph Anthony”), Van Joe LLC DBA Joseph Anthony Retreat Spa and Dry Bar (“Van Joe”) and Steck Eye Care, LLC. (ECF No. 20 at ¶¶1-4). Plaintiff Coventry's Deli owns and operates a well-known delicatessen located in a high-rise office building in the heart of the Philadelphia, Pennsylvania business district. (Id., ¶ 1). Plaintiff Joseph Anthony is a day spa in Glen Mills and Center City Philadelphia, offering a host of salon, spa, and med spa services. (Id., ¶ 2). Plaintiff Van Joe is a full-service salon and spa located within the Springfield Country Club in Springfield, Pennsylvania. (Id., ¶ 3). And, Plaintiff Steck Eye Care is an eye care clinic located in the Mayfair Mall, in Wauwatosa, Wisconsin. (Id., ¶ 4). Defendant State Auto, meanwhile, is an insurance company organized under the laws of Iowa, with its principal place of business in Columbus, Ohio.

(Id., ¶ 31). State Auto is authorized to write, sell, and issue insurance policies providing property and business income coverage in all 50 states, as well as the District of Columbia and Puerto Rico. (Id.). At all times material hereto, State Auto conducted and transacted business through the selling and issuing of insurance policies within Pennsylvania, Wisconsin and Ohio. (Id.).

In return for the payment of a premium, State Auto issued each Plaintiff several different insurance policies. (Id., ¶¶ 32-35). There are five separate policies at issue in this case:

• The Coventry's Deli Policies: Renewal Policy Number BOP 2934541 01 for the policy period of June 1, 2019, to June 1, 2020, and Businessowners Renewal Policy Number BOP 2934541 02 for a policy period of June 1, 2020, to June 1, 2021, both of which included The Businessowners Special Property Coverage Form. (Id., ¶ 32).

• The Joseph Anthony & Van Joe Policies: Renewal Policy Number BOP 2847543 04 S for a policy period of June 25, 2019, to June 25, 2020, and Renewal Policy Number 2847543 05 S for a policy period of June 25, 2020, to June 25, 2021, both of which include the Businessowners Special Property Coverage Form. (Id., ¶ 34).

• The Steck Eye Care Policy: Businessowners Renewal Policy Number Renewal Policy Number BOP 2462397 12 for a policy period of August 25, 2019, to August 25, 2020, which includes the Businessowners Special Property Coverage Form. This policy has been in place since 2007. (Id., ¶ 35).

Plaintiffs maintain that their policies did not exclude or limit coverage for losses from the spread of viruses. (Id., ¶ 37). And, as a result, Plaintiffs represent that “[l]osses due to COVID-19 are a Covered Cause of Loss under the State Auto Policies within the Businessowners Special Property Coverage Form.” (Id., ¶ 38).

Each Policy provides commercial property coverage for “direct physical loss of or damage to” the types of property listed therein, including machinery, equipment, and outdoor furniture. (ECF No. 22 at 9). When a property detailed in the policy suffers “direct physical loss,” the “Loss Payment” provision covers the cost to repair or replace the property. (Id.). In addition to this core coverage, each Policy provides various “Additional Coverages” including coverage for Business Income, Extended Business Income, Extra Expense, and Civil Authority, which apply during the period that the lost or damaged property is being repaired, rebuilt, or replaced. (Id.).

State Auto represents that “direct physical loss of or damage to” property is a threshold requirement for coverage under the Business Income, Extra Expense, and Civil Authority policy provisions. (Id.). Coverage under each of these policy provisions requires several things:

• Business Income Provision - Coverage for loss of business income due to (1) direct physical loss of or direct physical damage to property at the insureds' premises, (2) which then causes suspended operations, and (3) which results in a “period of restoration” during which the lost or damaged property is being repaired or replaced. (Id.).

• Extra Expense Provision - Coverage for expenses incurred due to the “direct physical loss or damage to property,” that the insured otherwise would not have incurred. (Id.).

• Civil Authority Provision - Coverage for damage to property other than the insured premises, which then resulted in an action by a civil authority prohibiting access to its insured premises. (Id.).

In addition to these provisions, which are in each Plaintiffs' policies, Coventry's Deli's policy includes a further provision--Limited Extension for Food-Borne Illness Endorsement (“FBIE”). (Id. at 10). This provision covers a suspension of Coventry's's operations at its deli due to an order of civil authority or adverse public communication or media report resulting from the food poisoning of a customer or exposure to an infectious disease at the described premises. (Id.). Each Policy also contains certain duties the insured must comply with as a condition precedent to coverage, including taking all reasonable steps to protect the covered property from further damage, and keeping a record of expenses necessary to protect the covered property. (Id.).

B. The Closure Orders

In early 2020, the Covid-19 virus began ravaging the United States and the world at large. Considering its widespread impact, this Court need not detail the extent to the global pandemic (in which we are still living). The spread and presence of COVID-19 has caused civil authorities throughout the country to issue orders requiring the suspension of business at a wide range of establishments, including civil authorities with jurisdiction over Plaintiffs' businesses- Pennsylvania and Wisconsin. (ECF No. 20 at ¶ 10). The Closure Orders in both these jurisdictions began quite strictly, requiring complete closures of all non-essential business. (Id., ¶¶ 94-95, 107109). As infection rates leveled, and a vaccine became available, these restrictions were lifted, and non-essential business were permitted to reopen in some limited capacity. (Id. at ¶¶ 99-102, 111). The lifting of these restrictions, however, was stalled as new Covid-19 variants arose and infection rates rose. (Id.). Ultimately, as of the dates of filing, the restrictions have generally been lifted, although many of the public health recommendations and/or restrictions remain in place (masking, plexiglass barriers, etc.). (Id., ¶ 106, 113).

Plaintiffs allege they have suffered direct physical loss or damage because of both the physical presence of Covid-19 in their properties and the business interruptions caused by the Closure Orders. (Id., ¶ 114). To the first point, Plaintiffs maintain that “the prolonged presence of COVID-19 in . . . Plaintiffs' insured properties made it unavoidable that individuals with COVID-19 or otherwise carrying the coronavirus . . . would be physically present at the insured premises on various dates since the earliest days of the pandemic.” (Id., ¶ 120). Plaintiffs have been forced to close, reopen, close again, and reopen again, as well as having their employees test positive for the virus. (Id., ¶¶ 134-135). Plaintiffs were required to implement deep cleaning processes, modify their HVAC systems, install air purifiers and plexiglass shields, among other measures. (Id., ¶¶ 139, 142-43). Ultimately, Plaintiffs assert that “because the spread and presence of COVID-19 altered the structure of the air, the physical space, and property surfaces, there have been many . . . structural alterations, changes and/or repairs made [to] the insured premises so that Plaintiffs can continue their business after experiencing direct property damage which was caused by COVID-19 and to avoid the imminent threat of further property damage.” (Id., ¶ 154). Similarly, Plaintiffs represent that the Closure Orders prohibited access to their properties, and the area immediately surrounding their properties, in response to dangerous physical conditions resulting from an alleged “Covered Cause of Loss.” (Id., ¶ 155).

Following these alleged losses, Plaintiffs submitted claims for loss to State Auto under their policies but State Auto denied their claims. (Id., ¶ 167). Plaintiffs maintain that they reasonably believed State Auto would pay their business interruption claims, and its failure to do so is a direct breach of the parties' contract and has caused significant damages. (Id., ¶ 173).

C. Procedural Background

As a result of this alleged breach, on May 21, 2021, Plaintiffs filed suit in this Court against Defendant State Auto. (ECF No. 1). State Auto timely answered the Complaint with a Motion to Dismiss. (ECF No. 24). Before the Motion could be briefed, however, Plaintiffs amended their Complaint, which necessarily mooted Defendant's Motion. (ECF No. 20).

In the First Amended Complaint, Plaintiffs assert class and individual claims for breach of contract and declaratory judgment. (See generally id.). As relief, Plaintiffs seek an order certifying the proposed nationwide Classes, judgment in their favor on Counts I-V, declaratory judgments on Counts VI-X, and any such other relief as may be just and proper. (...