Downs Ford, Inc. v. Zurich Am. Ins. Co.

DOWNS FORD, INC., Plaintiff, v. ZURICH AMERICAN INSURANCE COMPANY, ABC CORPS. 1-5(fictitious Names whose identities are currently unknown) Defendants.

Case No. 3:20-cv-08595-BRM-ZNQ

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY

March 25, 2021

NOT FOR PUBLICATION

OPINION

MARTINOTTI, DISTRICT JUDGE

Before this Court is a Motion to Dismiss filed by Defendant Zurich American Insurance Company ("Zurich") seeking to dismiss Plaintiff Downs Ford, Inc.'s ("Downs Ford") Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). (ECF No. 4.) Downs Ford opposed the Motion. (ECF No. 10.) Zurich filed a Reply. (ECF No. 13.) Zurich filed Notices of Supplemental Authorities. (ECF Nos. 14, 15.) Downs Ford responded to Zurich's Notices of Supplemental Authorities. (ECF No. 16.) Zurich filed Notices of Supplemental Authorities. (ECF Nos. 17, 18.) Having reviewed the submissions filed in connection with the motion and having declined to hold oral argument pursuant to Federal Rule of Civil Procedure 78(b), for the reasons set forth below and for good cause appearing, Zurich's Motion to Dismiss is GRANTED.

I. BACKGROUND

This is one of a series of decisions involving an insurance company declining coverage for an insured's claim that stems from the government shutdown orders issued in response to the COVID-19 pandemic. The insured claims business losses as a result of the shutdown orders, and the insurance carrier invokes certain exclusion provisions in the insurance policy to decline coverage for such losses.

For the purposes of this Motion to Dismiss, the Court accepts the factual allegations in the Complaint as true and draws all inferences in the light most favorable to the Plaintiff. See Phillips v. Cty. of Allegheny, 515 F.3d 224, 228 (3d Cir. 2008). Furthermore, the Court also considers any "document integral to or explicitly relied upon in the complaint." In re Burlington Coat Factory Secs. Litig., 114 F.3d 1410, 1426 (3d Cir. 1997) (citing Shaw v. Dig. Equip. Corp., 82 F.3d 1194, 1220 (1st Cir. 1996)).

Downs Ford owns an automobile dealership located on State Highway 37 in Toms River, New Jersey, which sells new, pre-owned and demo vehicles to the general public. (ECF No. 4-2 ¶¶ 1-2.) Zurich is an insurance company with a principal place of business located at 1299 Zurich Way, Schaumburg, Illinois, and owns subsidiaries that issue commercial business property insurance. (Id. ¶¶ 3-4.) Zurich issued Policy No. ADM 4447432-01 (the "Policy") to Downs Ford, which provides coverage for losses, including business income losses, at Downs Ford's dealership for the period of September 1, 2019 to September 1, 2020. (Id. ¶¶ 14-15.)

The Policy provides the following: "We will pay for 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." (ECF No. 4-3 at 63, § A.) The property covered under the Policy includes Downs Ford's dealership buildings, showrooms and premises located at 360 Highway 37 East, Toms River, New Jersey (the "Insured Premises"). (ECF No. 4-2 ¶ 19.) "Covered Causes of Loss means direct physical loss unless excluded or limited in this policy." (ECF No. 4-3 at 91, § A.) In particular, the Policy provides for "Civil Authority" coverage:

When a Covered Cause of Loss causes damage to property other than property at the described premises, we will pay for the actual loss of Business Income you 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. at 80, § 5.a.) Also, the Policy contains an Exclusion of Loss Due to Virus or Bacteria Endorsement (the "Virus Exclusion"):

A. The exclusion set forth in Paragraph B. applies to all coverage under all forms and endorsements that comprise this Coverage Part or Policy, including but not limited to forms or endorsements that cover property damage to buildings or personal property and forms or endorsements that cover business income, extra expense or action of civil authority.

B. We will not pay for loss or damage caused by or resulting from any virus, bacterium or other microorganism that induces or is capable of inducing physical distress, illness or disease. However, this exclusion does not apply to loss or damage caused by or resulting from "fungus", wet rot or dry rot. Such loss or damage is addressed in a separate exclusion in this Coverage Part or Policy.

(Id. at 90.)

On January 30, 2020, the World Health Organization ("WHO") declared the COVID-19 outbreak constituted a public health emergency of international concern. (ECF No. 4-2 ¶¶ 6-7.) Without any available vaccine to protect against COVID-19 or known cure, governmental authorities throughout the world attempted an effective means of controlling the COVID-19 pandemic by relying on measures designed to reduce human to human contact and also limit human exposure to contaminated objects or surfaces. (Id. ¶ 8.) To that end, on March 9, 2020, NewJersey Governor Phil Murphy declared a state of emergency and a public health emergency, and issued Executive Order No. 103 (2020) "to further protect the health, safety, and welfare of New Jersey residents by, among other things, reducing the rate of community spread of COVID-19." (Id. ¶ 10.) On March 21, 2020, Governor Murphy issued Executive Order No. 107 (2020), which required the brick-and-mortar premises of non-essential retail businesses, including Downs Ford, to close to the public. (Id. ¶ 11.) Since the issuance of the Executive Order Nos. 103 and 107 (the "Executive Orders"), Downs Ford has been unable to operate its dealership in the normal course of business. (Id. ¶ 12.) As a result, Downs Ford suffered business income interruption losses, due to the loss of customers, patrons, vendors, suppliers, supplies and other essential physical materials necessary to operate its business. (Id. ¶ 26.) Downs Ford submitted a claim under the Policy for such losses, which was assigned Claim No. 5630051395 (the "Subject Claim") by Zurich. (Id.) On May 26, 2020, Zurich denied the Subject Claim, citing the Virus Exclusion. (Id. ¶ 27.)

On May 27, 2020, Downs Ford filed a Complaint against Zurich in the Superior Court of New Jersey, Law Division. (ECF No. 4-2.) On July 10, 2020, Zurich removed the case to the United States District Court for the District of New Jersey. (ECF No. 1.) Downs Ford seeks: a declaration that the business income loss suffered by Downs Ford as a result of the Executive Orders is covered under the Civil Authority coverage (Count One), a declaration that Virus Exclusion is against the public policy of the State of New Jersey and not otherwise applicable to any of the business income interruption loss suffered by Downs Ford as a result of the COVID-19 pandemic (Count Two), an award for Downs Ford of all costs and reasonable attorney's fees (Count Three), and other equitable relief as the Court deems just and proper (Count Four). (Id. ¶ 40.) On July 17, 2020, Zurich filed a Motion to Dismiss Downs Ford's Complaint. (ECF No. 4.) On August 25, 2020, Downs Ford filed an Opposition to the Motion to Dismiss. (ECF No. 10.) OnSeptember 1, 2020, Zurich filed a Reply to the Opposition to the Motion to Dismiss. (ECF No. 13.) On October 2, 2020, Zurich filed a Notice of Supplemental Authorities. (ECF No. 14.) On November 11, 2020, Zurich filed another Notice of Supplemental Authorities. (ECF No. 15.) On November 13, 2020, Downs Ford responded to Zurich's Notices of Supplemental Authorities. (ECF No. 16.) In January and February 2021, Zurich filed Notices of Supplemental Authorities, which the Court has considered. (ECF Nos. 17, 18.)

II. LEGAL STANDARD

In deciding a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), a district court is "required to accept as true all factual allegations in the complaint and draw all inferences in the facts alleged in the light most favorable to the [plaintiff]." Phillips v. Cty. of Allegheny, 515 F.3d 224, 228 (3d Cir. 2008). "[A] complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (citations omitted). However, the plaintiff's "obligation to provide the 'grounds' of his 'entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action." Id. (citing Papasan v. Allain, 478 U.S. 265, 286 (1986)). A court is "not bound to accept as true a legal conclusion couched as a factual allegation." Papasan, 478 U.S. at 286. Instead, assuming the factual allegations in the complaint are true, those "[f]actual allegations must be enough to raise a right to relief above the speculative level." Twombly, 550 U.S. at 555.

"To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim for relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 570). "A claim has facial plausibility when the pleaded factual content allows the court to draw the reasonable inference that the defendant isliable for misconduct alleged." Id. This "plausibility standard" requires the complaint allege "more than a sheer possibility that a defendant has acted unlawfully," but it "is not akin to a probability requirement." Id. (quoting Twombly, 550 U.S. at 556)....