Dye Salon, LLC v. Chubb Indem. Ins. Co.

518 F.Supp.3d 1004

DYE SALON, LLC, Plaintiff,

v.CHUBB INDEMNITY INS. CO., et al., Defendants.

Case No. 20-cv-11801

United States District Court, E.D. Michigan, Southern Division.

Signed February 10, 2021

Andrew Kochanowski, Sommers Schwartz, P.C., Southfield, MI, Kenneth F. Neuman, Stephen T. McKenney, Jennifer M. Grieco, Altior Law, P.C., Birmingham, MI, for Plaintiff.

Drew W. Broaddus, Robert B. Holt, Jr., Secrest, Wardle, Troy, MI, Henry Scott Emrich, Secrest Wardle, Grand Rapids, MI, Matthew S. Ponzi, Foran, Glennon, Chicago, IL, for Defendants.

OPINION AND ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS (ECF No. 15)

MATTHEW F. LEITMAN, UNITED STATES DISTRICT JUDGE

Plaintiff Dye Salon, LLC purchased what it calls an "all-risk" insurance policy from Defendant Ace Property and Casualty Insurance Company (the "Policy"). In 2020, Dye Salon made a claim for coverage under the Policy for losses it allegedly suffered after Michigan Governor Gretchen Whitmer issued an Executive Order that forced it to close for a period of time. Governor Whitmer issued the Executive Order to combat the COVID-19 pandemic. Ace denied Dye Salon's coverage claim for several reasons, including that the Policy precluded coverage for losses caused by viruses like COVID-19.

On July 2, 2020, Dye Salon brought this action against Ace and Ace's claims handlers (Chubb Indemnity Insurance Company and Chubb National Insurance Company). (See Compl., ECF No. 1.) Dye Salon alleges that Defendants wrongfully denied its claim for coverage under the Policy. (See id. ) Defendants have now moved to dismiss Dye Salon's Complaint. (See Mot. to Dismiss, ECF No. 15.) The Court concludes that Dye Salon lacks standing to sue the two Chubb entities and that the Policy exclusion for losses caused by viruses precludes coverage for Dye Salon's alleged losses. Therefore, for the reasons explained in more detail below, the Court GRANTS Defendants’ motion to dismiss and DISMISSES Dye Salon's Complaint.

I

A

Dye Salon owns and operates a hair salon in Ferndale, Michigan. (See Compl. at ¶11, ECF No. 1, PageID.5.) At some point before December of 2019, Dye Salon purchased the Policy from Ace "to protect [its] salon" from a variety of losses. (Id. ) Dye Salon renewed the Policy for a one-year term beginning on December 1, 2019. (See Policy, ECF No. 1, PageID.35-175.)

B

On March 24, 2020, Governor Whitmer issued Executive Order No. 2020-21 in an effort to slow the spread of the COVID-19 pandemic in the State of Michigan (the "Executive Order"). (See Executive Order, ECF No. 15-1.¹ ) Governor Whitmer noted that "[t]he novel coronavirus (COVID-19) is a respiratory disease that can result in serious illness or death." (Id. , PageID.245.) She explained that "there [was] an increased risk of rapid spread of COVID-19 among persons in close proximity to one another" and that there was, at that time, "no approved vaccine or antiviral treatment for the disease." (Id. ) Governor Whitmer then made clear that the purposes of the Executive Order were to "suppress the spread of COVID-19," "prevent the state's health care system from being overwhelmed" by the virus, and "avoid needless deaths" caused by the virus. (Id. )

In order to accomplish these goals, the Executive Order required, to the extent possible, "all individuals currently living within the State of Michigan ... to stay home or at their place of residence." (Id. , PageID.246.) In addition, subject to certain exceptions, the Executive Order provided that "[n]o person or entity shall operate a business or conduct operations that require workers to leave their homes or places of residence except to the extent that those workers are necessary to sustain or protect life or to conduct minimum business operations." (Id. )

C

Dye Salon says the Executive Order "barred [it] from operating [its] business" and thereby caused it to lose business income. (Compl. at ¶28, ECF No. 1, PageID.11.) The forced shutdown also caused Dye Salon to suffer damage to its "salon equipment, certain lease equipment, products with expiration dates, and other depreciating assets." (Id. at ¶31, PageID.11-12.) It says that "[e]ach of these [items] has suffered loss of use, loss of functionality, decay, loss of value, and other forms of damage and/or loss."² (Id. ) Dye Salon insists that the Executive Order was the "sole cause" of its losses and that the losses were not caused by COVID-19. (Id. at ¶36, PageID.13.) Indeed, it says that "there is no evidence at all that the [COVID-19] virus [ ] enter[ed its] property or that [its property] had to be de-contaminated" due to contamination from the virus. (Id. at ¶8, PageID.4.)

D

On March 19, 2020, Dye Salon "provided notice of its losses and expenses to Defendants" and sought insurance coverage for those losses under the "terms and procedures of the Policy." (Id. at ¶37, PageID.13.) Dye Salon says that it is entitled to coverage under four of those Policy "terms": the Business Income provision, the Extended Business Income provision, the Extra Expense provision,³ and the Civil Authority provision. (Id. at ¶10, PageID.4.) The Business Income and Extended Business Income provisions state that Ace will "pay for the actual loss of Business Income that [Dye Salon] sustain[ed] due to [a] necessary ‘suspension’ of [its] operations .... caused by ... a Covered Cause of Loss."⁴ (Policy, ECF No. 1, PageID.55-56.) The Extra Expense Provision says that if "loss or damage ... [is] caused by ... a Covered Cause of Loss," Ace will "pay the necessary Extra Expense [Dye Salon] incur[ed] ... that [it] would not have incurred if there had been no direct physical damage to property at the described premises." (Id. , PageID.57.) Finally, the "Civil Authority" provision says that if "a Covered Cause of Loss cause[d] damage to property other than" Dye Salon's property, and if a civil authority "prohibit[ed] access" to Dye Salon's premises as a result of that loss to the other property, Ace will "pay for the actual loss of Business Income [ ] sustain[ed] and necessary Extra Expense caused by [the] action of [the] civil authority." (Id. , PageID.58.)

Ace denied Dye Salon's claim for coverage in a letter written on Chubb letterhead. (See Compl. at ¶37, ECF No. 1, PageID.13.⁵ ) As mentioned above, Chubb Indemnity Insurance Company, and Chubb National Insurance Company provide claims handling for Ace. (See id. at ¶12, PageID.5.)

In the denial letter, Ace said that Dye Salon did not qualify for coverage under the Business Income, Extended Business Income, or Civil Authority provisions identified above. (See Denial Ltr., ECF No. 1, PageID.177-179.) Ace also said that the Policy's exclusion for loss or damage caused by viruses (the "Virus Exclusion") "preclude[d] coverage for [Dye Salon's] loss." (Id. , PageID.179.)

The Virus Exclusion provides that:

We will not pay for loss or damage caused directly or indirectly by any of the following. Such loss or damage is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss.

[....]

i. Virus or Bacteria

(1) Any virus, bacterium or other microorganism that induces or is capable of inducing physical distress, illness or disease. (2) However, the exclusion in paragraph (1) above, does not apply to loss or damage caused by or resulting from "fungi", wet rot or dry rot ... (3) With respect to any loss or damage subject to the exclusion in paragraph (1) above, such exclusion supersedes any exclusion relating to "pollutants." ...

(Policy, ECF No. 1, PageID.66, 69.)

II

After Ace denied Dye Salon's insurance claim, Dye Salon filed this action against Ace, Chubb Indemnity Insurance Company, and Chubb National Insurance Company. (See Compl., ECF No. 1.) Dye Salon seeks a declaratory judgment that it is entitled to coverage under the Business Income, Extended Business Income, Extra Expense, and Civil Authority provisions of the Policy. (See id. at Counts I, III, V, and VII.) Dye Salon also seeks damages for Defendants’ alleged breach of contract and wrongful denial of coverage. (See id. at Counts II, IV, VI, and VIII.)

Defendants have now moved to dismiss Dye Salon's Complaint. (See Mot. to Dismiss, ECF No. 15.) The Court held a video hearing on Defendants’ motion on January 27, 2021.

III

Chubb Indemnity Insurance Company and Chubb National Insurance Company have moved to dismiss for lack of standing pursuant to Federal Rule of Civil Procedure 12(b)(1). (See id. , PageID.217.) In the alternative, and together with Ace, the two Chubb entities move to dismiss Dye Salon's under Federal Rule of Civil Procedure 12(b)(6). (See id. , PageID.228-243.)

Where, as here, a party raises a "facial attack on subject matter jurisdiction" under Rule 12(b)(1), "a trial court takes the allegations in the complaint as true, which is a similar safeguard employed under 12(b)(6) motions to dismiss." Ohio Nat. Life Ins. Co. v. U.S. , 922 F.2d 320, 325 (6th Cir. 1990). See also DLX Inc. v. Kentucky , 381 F.3d 511, 516 (6th Cir. 2014) (explaining that where a Rule 12(b)(1) motion "attack[s] the claim of jurisdiction on its face," then "all allegations of the plaintiff must be considered as true"). The court then determines whether it has subject matter jurisdiction based on those allegations. See id.

"To survive a motion to dismiss" under Rule 12(b)(6) "a complaint must contain sufficient factual matter, 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 Atlantic Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). A claim is facially plausible when a plaintiff pleads factual content that permits a court to reasonably infer that the defendant is liable for the alleged misconduct. See id. When assessing the sufficiency of a plaintiff's claim, a district court must accept all of a complaint's factual allegations as true. See Ziegler v. IBP Hog Mkt., Inc. , 249 F.3d...