Dakota Girls, LLC v. Phila. Indem. Ins. Co.

524 F.Supp.3d 762

DAKOTA GIRLS, LLC, et al., Plaintiffs,

v.PHILADELPHIA INDEMNITY INSURANCE CO., Defendant.

Case No. 2:20-cv-2035

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

Filed March 8, 2021

Charles Horne Cooper, Jr., Sean Alto, Cooper & Elliott, LLC, Columbus, OH, for Plaintiffs.

Richard M. Garner, Sunny Lane Horacek, Collins Roche Utley & Garner, LLC, Dublin, OH, Jeffrey A. Zachman, Pro Hac Vice, Dentons US LLP, Atlanta, GA, Richard L. Fenton, Pro Hac Vice, Dentons US LLP, Chicago, IL, for Defendant.

OPINION AND ORDER

SARAH D. MORRISON, UNITED STATES DISTRICT JUDGE

This case was filed by owner-operators of private preschools against their insurer over a dispute regarding insurance coverage for losses stemming from the COVID-19 global pandemic. As a result of the pandemic, Plaintiffs’ operations were shut down and/or suspended following orders, issued by the State of Ohio, aimed at limiting the spread of the virus. One or more of those orders interrupted Plaintiffs’ businesses and prohibited access to and operation of their business premises. The Second Amended Complaint ("SAC") alleges that Defendant Philadelphia Indemnity Insurance Co. ("PIIC") improperly denied coverage for lost business income, extra expense, and interruption by civil authority caused by those orders. (SAC, ECF No. 22.)

Currently pending before the Court are three motions. First, is PIIC's Motion to Dismiss the SAC. (Mot. to Dismiss, ECF No. 24.) Plaintiffs responded to that Motion (Resp. in Opp'n, ECF No. 32) and PIIC filed a reply (Reply, ECF No. 36). An amicus curiae brief was filed by United Policyholders on the issues raised in the Motion to Dismiss. (ECF No. 30-1.) Second is PIIC's Motion to Sever. (ECF No. 25.) Plaintiffs also oppose this Motion (ECF No. 27) and PIIC filed a reply (ECF No. 28). The third motion is the Motion of American Property Casualty Insurance Association ("APCIA") and National Association of Mutual Insurance Companies ("NAMIC") for Leave to File Amicus Curiae Brief. (ECF No. 67.) Plaintiffs oppose this motion (ECF No. 69) and the proposed amici replied. (ECF No. 70.)

All three motions are ripe for consideration. For the reasons that follow, PIIC's Motion to Dismiss is GRANTED . PIIC's Motion to Sever is, accordingly, DENIED AS MOOT . Finally, APCIA and NAMIC's Motion for Leave to File Amicus Curiae Brief is DENIED .

I. BACKGROUND

The following summary is drawn from the factual allegations in the SAC. On a Motion to Dismiss, all such factual allegations are taken as true.

A. The Policies

Plaintiffs own and operate private preschools in Ohio. (SAC, ¶ 1.) Each Plaintiff purchased commercial insurance policies¹ from PIIC ("the Policies"), which Policies were in place during the relevant time periods. (Id. , ¶¶ 1, 6–7.)

The Policies are "all-risk policies" that "covered all risks of loss except for risks that are expressly and specifically excluded." (Id. , ¶ 8.) The Policy provisions relevant to this action are as follows:

• Building and Personal Property Coverage. Covers "direct physical loss of or damage to Covered Property at the premises described in the Declarations caused by or resulting from any Covered Cause of Loss."² (Id. , ¶ 10.)

• Business Income Coverage. Covers actual lost Business Income sustained due to the necessary " ‘suspension’ of [their] ‘operations’ during the ‘period of restoration’ caused by direct physical loss of or damage to" the property described in the Policies. (Id. , ¶ 15.)

• Civil Authority Coverage. Triggered by damage to property other than property at the premises described in the Policies, covers "actual loss of Business Income [Plaintiffs] sustain and necessary Extra Expense caused by action of civil authority that prohibits access to the described premises, provided that both of the following apply: (1) Access to the area immediately surrounding the damaged property is prohibited by civil authority as a result of the damage, and the described premises are within that area but are not more than one mile from the damaged property; 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, or the action is taken to enable a civil authority to have unimpeded access to the damaged property." (Id. , ¶ 21.)

• Communicable Disease Coverage. Covers "actual loss of ‘business income’ you sustain and necessary ‘extra expense’ you incur during a ‘period of restoration’ as a result of having your entire ‘operations’ temporarily shut down or suspended. The shutdown or ‘suspension’ must be ordered by a local, state or federal Board of Health having jurisdiction over your ‘operations.’ Such shutdown must be due directly to an outbreak of a ‘communicable disease’ or a ‘water-borne pathogen’ that causes an actual illness at the insured premises described in the Declarations. An actual business shutdown must occur." (Id. , ¶ 25.)

The Building and Personal Property Coverage and the Business Income Coverage both generally provide that, when an insured experiences a "direct physical loss of or damage" to covered property, the loss is covered. (ECF No. 24-1,³ PAGEID # 5477, 5493.) Likewise, the Civil Authority Coverage kicks in when a civil authority bars access to covered property in response to "direct physical loss or damage to other property." (ECF No. 24-20, 7.) The Policies do not define the term "direct physical loss of or damage to," nor do they explain the distinction between "physical loss" and "damage." (SAC, ¶ 11.) Plaintiffs also have Communicable Disease Coverage. (SAC, ¶ 24. See also ECF No. 24-21.) That coverage does not require physical loss or damage, but will cover losses incurred during a Period of Restoration when a local, state, or federal Board of Health shuts down or suspends operations due to an outbreak of a communicable disease that causes an actual illness at the insured premises. (ECF 24-21.)

Plaintiffs assert that their losses caused by the COVID-19 pandemic are covered losses under the Policies. To that end, Plaintiffs allege that they have each submitted or attempted to submit a claim with PIIC, but PIIC has either refused to pay the claims or failed to adequately investigate the claims. (SAC, ¶¶ 36, 60-64.)

B. COVID-19 shutdown of Plaintiffs’ operations

As a result of the COVID-19 pandemic, Plaintiffs’ operations were shut down as of 11:59 p.m. on March 25, 2020. (Id. , ¶¶ 28, 34, 49.) This shutdown was a result of two orders from the State of Ohio (the "Closure Orders"). First, on March 22, 2020, Governor Mike DeWine ordered that "all day care programs must close by 11:59 p.m. on Wednesday, March 25, 2020." (Id. ¶ 46.) On March 24, then-Director of the Ohio Department of Health, Amy Acton, MD, MPH, signed a Director's Order to "Close Facilities Providing Child Care Services," stating that facilities providing child care services were being closed "to avoid an imminent threat with a high probability of widespread exposure to COVID-19 with a significant risk of substantial harm to a large number of people in the general population." (Id. , ¶ 47.) Childcare providers were permitted to re-open in May of 2020, with reduced staff-to-child ratios and other restrictions. (Id., ¶ 51.)

Each Plaintiff alleges that there had been individuals on their premises with symptoms consistent with COVID-19, including, but not limited to, fever or chills, cough, shortness of breath, fatigue, muscle or body aches, sore throat, congestion, or runny nose, or who potentially had contact with someone diagnosed with COVID-19. (Id. , ¶ 29.) However, due to the unavailability of widespread testing, in combination with the fact that children under age 2 were not being tested, Plaintiffs represent that it was impossible or impractical to receive a positive COVID-19 confirmation for those individuals. (Id. , ¶ 29.)

Because of the closures and the nature and extent of the COVID-19 disease, Plaintiffs’ facilities were rendered uninhabitable and unusable for periods of time in 2020. (Id. , ¶ 54.)

C. Procedural Background

The original Complaint was filed in this matter by Dakota Girls, LLC dba The Goddard School of Grove City and Elliott Care, LLC dba The Goddard School of Worthington on April 22, 2020. (ECF No. 1.) A First Amended Complaint was filed to add 13 more plaintiffs, each a preschool with substantively similar allegations. (ECF No. 8). The currently operative pleading is the SAC, which joined two more plaintiffs and certain additional allegations. (ECF No. 20.) The SAC seeks a declaratory judgment and asserts claims for bad faith and breach of contract. (See generally , SAC.) PIIC's Motion to Dismiss and Motion to Sever were filed in response to the SAC.

II. SUBJECT MATTER JURISDICTION

Plaintiffs assert that this Court has jurisdiction over their claims under 28 U.S.C. § 1332. (SAC, ¶ 3.) Because the SAC did not include sufficient information to determine whether complete diversity existed among the parties, the Court ordered Plaintiffs to file a notice supplementing its jurisdictional allegations. (ECF No. 48.) In response, Plaintiffs provided sufficient information for the Court to establish that complete diversity of citizenship in fact exists among the parties. (ECF No. 66.) This Court has jurisdiction over the claims.

III. MOTION FOR LEAVE TO FILE AMICUS CURIAE BRIEF

The APCIA and the NAMIC moved for leave to file Amicus Curiae brief on February 5, 2021—more than six months after PIIC filed its Motion to Dismiss and more than five months after PIIC filed its Reply. (ECF No. 67.) As this Court recently stated, one of the factors relevant to the determination of amicus status is whether the proffered information is timely. (See ECF No. 49, 2 (citing U.S. v. City of Columbus , No. 2:99-CV-1097, 2000 WL 1745293, at *1 (S.D. Ohio Nov. 20, 2000) (Holschuh, J.).) Yet, APCIA and NAMIC moved to file an amicus brief long after the Motion to Dismiss was filed and after ...