Demoura v. Cont'l Cas. Co.

523 F.Supp.3d 314

Alexandre B. DEMOURA, M.D., d/b/a New York Spine Institute, Inc., Plaintiff,

v.CONTINENTAL CASUALTY COMPANY, Defendant.

20-CV-2912 (NGG) (SIL)

United States District Court, E.D. New York.

Signed March 5, 2021

Daniel P. Buttafuoco, Daniel P. Buttafuoco & Associates, PLLC, Woodbury, NY, Kenneth J. Grunfeld, Pro Hac Vice, Golomb & Honik, PC, Philadelphia, PA, for Plaintiff.

H. Christopher Boehning, Jennifer Garrett, Yahonnes Sadiki Cleary, Paul Weiss Rifkind Wharton & Garrison LLP, New York, NY, for Defendant.

MEMORANDUM & ORDER

NICHOLAS G. GARAUFIS, United States District Judge.

Plaintiff Alexandre B. deMoura, M.D., d/b/a New York Spine Institute, Inc. ("DeMoura" or "Plaintiff") brings this insurance coverage lawsuit against Defendant Continental Casualty Company ("Continental" or "Defendant"). Plaintiff alleges that his property insurance policy ("the Policy") with Defendant provides coverage for business income losses and expenses incurred as a result of the COVID-19 pandemic and due to his compliance with various public health mandates issued by Governor Andrew Cuomo and the State of New York in response to the pandemic. Plaintiff seeks a declaratory judgment that his losses and expenses are covered by the Policy. Before the court is Defendant's Motion to Dismiss the Complaint under Federal Rule of Civil Procedure 12(b)(6) or, in the alternative, to strike certain allegations from the Complaint. (See Def.’s Mem. in Supp. of Mot. to Dismiss ("Def.’s Mot.") (Dkt. 20-1); Pl.’s Mem. in Opp. to Mot. to Dismiss ("Pl.’s Opp.") (Dkt. 20-4); Def.’s Reply (Dkt. 20-6).) For the reasons stated below, Defendant's motion to dismiss is GRANTED.¹

I. BACKGROUND

A. FACTS

The following facts are taken from the Complaint, which the court accepts as true at this procedural posture. See Harris v. Mills , 572 F.3d 66, 71 (2d Cir. 2009).²

Plaintiff is the owner and operator of New York Spine Institute, Inc. ("New York Spine"), which specializes in spine and orthopedic procedures, physical therapy, and pain management treatment. (Compl. (Dkt. 1) ¶¶ 9, 13.) On or about February 11, 2020, Plaintiff entered into the Policy with Defendant for coverage of New York Spine. (Id. ) Plaintiff asserts that the Policy is an "all-risk policy," meaning that it provides coverage for physical loss or damages unless specifically excluded by the Policy. (Id. ¶ 18.)

Plaintiff relies on three provisions which he alleges cover his losses: The Business Income provision, the Extra Expense provision, and the Civil Authority provision. (Id. ¶¶ 16-17.) The Business Income and Extra Expense provisions, together, cover losses and expenses incurred in certain situations where the business is suspended due to physical loss of or damage to the property, and the Civil Authority provision covers certain situations where the business is inaccessible due to a civil authority action resulting from physical loss of or damage to property other than the covered premises. (Id. ) Plaintiff asserts that he purchased the Policy and paid premiums to Defendant "with an expectation that it ... would provide coverage in the event of business interruption and extended expenses, such as that suffered by Plaintiff as a result of COVID-19," including those specifically caused by "business interruptions or closures by order of Civil Authority." (Id. ¶¶ 16, 27.)

Beginning in March 2020, the State of New York and Governor Cuomo issued various public health mandates related to the COVID-19 pandemic. These included orders declaring a state of emergency, restricting the size of in-person gatherings, requiring non-essential workers to stay at home, canceling elective surgery and procedures statewide, and requiring the use of face coverings in public (the "Orders"). (Id. ¶¶ 41-45.) On March 16, 2020, in compliance with the Orders, Plaintiff ceased performing non-emergency surgical procedures and operations. (Id. ¶¶ 50, 51, 55.) This resulted in the cessation of "[a]lmost all of the medical services Plaintiff provides." (Compl. ¶ 55.)

Plaintiff seeks a declaratory judgment that the Policy covers the losses and expenses that he incurred as a result of his compliance with the Orders. (Id. ¶¶ 32-35.) Plaintiff asserts that the Orders forced Plaintiff to cancel or suspend "[a]lmost all" medical services, including elective procedures; patient visits and post-operative care; and physical therapy and pain management appointments. (Id. ¶¶ 53, 55.) Plaintiff also asserts that his business is highly susceptible to rapid person-to-person transmission of the virus. (Id. ) Accordingly, Plaintiff asserts that he suffered more than approximately $150,000 in business losses, business interruption, and extended expenses of the nature covered by the Policy. (Id. ¶¶ 4, 57.)

B. Contractual Provisions

The parties dispute the coverage available to Plaintiff under three provisions of the Policy: The Business Income provision; the Extra Expense provision; and the Civil Authority Coverage provision. The parties also dispute whether the Policy specifically excludes the kind loss suffered by Plaintiff here.

The Business Income provision states, in relevant part:

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 the described premises. The loss or damage must be caused by or result from a Covered Cause of Loss. With respect to loss of or damage to personal property in the open or personal property in a vehicle, the described premises include the area within 1,000 feet of the site at which the described premises are located.

(Compl. Ex. A (Dkt. 1-1) at ECF p. 44.)

The Extra Expense provision states:

Extra Expense means reasonable and necessary expenses you incur during the "period of restoration" that you would not have incurred if there had been no direct physical loss of or damage to property caused by or resulting from a Covered Cause of Loss.

We will pay Extra Expense (other than the expense to repair or replace property) to:

(1) Avoid or minimize the "suspension" of business and to continue "operations" at the described premises or at replacement premises or temporary locations, including relocation expenses and costs to equip and operate the replacement premises or temporary locations; or

(2) Minimize the "suspension" of business if you cannot continue "operations."

We will also pay Extra Expense (including Expediting Expenses) to repair or replace the property, but only to the extent it reduces the amount of loss that otherwise would have been payable under [the Business Income provision].

(Id. at ECF p. 45.)

The Policy defines the terms quoted in the above provisions as follows:

"Suspension" means: (a) The partial or complete cessation of your business activities; or (b) That a part or all of the described premises is rendered untenantable.

...

"Operations" means the type of your business activities occurring at the described premises and the tenantability of the described premises.

...

"Period of restoration" means the period of time that: (a) Begins with the date of direct physical loss or damage caused by or resulting from any Covered Cause of Loss at the described premises; and (b) Ends on the earlier of (1) The date when the property at the described premises should be repaired, rebuilt or replaced with reasonable speed and similar quality; or (2) The date when business is resumed at a new permanent location.

(Id. at ECF pp. 39, 41.)

The Civil Authority Coverage provision states, in relevant part:

When the Declarations show that you have coverage for Business Income and Extra Expense, you may extend that insurance to apply to the actual loss of Business Income you sustain and reasonable and necessary Extra Expense you incur caused by action of civil authority that prohibits access to the described premises. The civil authority action must be due to direct physical loss of or damage to property at locations, other than described premises, caused by or resulting from a Covered Cause of Loss.

(Id. at ECF p. 68.)

II. LEGAL STANDARD

A. Choice of Law

Plaintiff has brought this diversity action pursuant to 28 U.S.C. § 1332. "Under the Erie doctrine, federal courts sitting in diversity apply state substantive law and federal procedural law." Gasperini v. Ctr. for Humanities, Inc. , 518 U.S. 415, 427, 116 S.Ct. 2211, 135 L.Ed.2d 659 (1996) (citing Erie R. Co. v. Tompkins , 304 U.S. 64, 78, 58 S.Ct. 817, 82 L.Ed. 1188 (1938) ).

In this contract litigation, New York is the state with the "most significant relationship" to the issues in the case, which the parties do not dispute. See Am. Centennial Ins. Co. v. Sinkler , 903 F. Supp. 408, 412 (E.D.N.Y. 1995). Therefore, New York substantive law applies.

B. Pleading Standard

"To survive a motion to dismiss, a complaint must contain sufficient factual material, accepted as true, to ‘state a claim to relief that is plausible on its face.’ " Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). In conducting its analysis, the court "accept[s] all factual allegations in the complaint and draw[s] all reasonable inferences in the plaintiff's favor." ATSI Commc'ns, Inc. v. Shaar Fund, Ltd. , 493 F.3d 87, 98 (2d Cir. 2007). "[M]ere ‘labels and conclusions’ or ‘formulaic recitation[s] of the elements of a cause of action will not do’; rather, the complaint's ‘[f]actual allegations must be enough to raise a right to relief above the speculative level.’ " Arista Records, LLC v. Doe 3 , 604 F.3d 110, 120 (2d Cir. 2010) (quoting Twombly , 550 U.S. at 555, 127 S.Ct. 1955 ). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal , 556 U.S. at 678, 129...