Founder Inst. Inc. v. Hartford Fire Ins. Co.

497 F.Supp.3d 678

FOUNDER INSTITUTE INCORPORATED, Plaintiff,

v.HARTFORD FIRE INSURANCE COMPANY, et al., Defendants.

Case No. 20-cv-04466-VC

United States District Court, N.D. California.

Signed October 22, 2020

Sanjiv Nand Singh, Professional Law Corporation, San Francisco, CA, Michael Budi Indrajana, Indrajana Law Group, a Professional Law Corp., San Mateo, CA, for Plaintiff.

Melanie Atswei Ayerh, Steptoe & Johnson LLP, Los Angeles, CA, Sarah D. Gordon, Steptoe and Johnson LLP, Washington, DC, Anthony John Anscombe, Steptoe & Johnson LLP, San Francisco, CA, for Defendants.

ORDER GRANTING MOTIONS TO DISMISS

Re: Dkt. Nos. 25, 26

VINCE CHHABRIA, United States District Judge

Sentinel's motion to dismiss for failure to state a claim is granted. Assuming—for argument's sake only—that the claim for loss of business income due to the shelter-in-place orders would otherwise be covered by Founder's insurance policy, the claim clearly falls within the virus exclusion for the reasons explained by Judge Corley in Franklin EWC, Inc. v. Hartford Financial Services Group, Inc. , 488 F.Supp.3d 904, 906–07, (N.D. Cal. Sept. 22, 2020). See also Wilson v. Hartford Casualty Co. , 479 F.Supp.3d 353, 360–61, (E.D. Pa. Sept. 30, 2020) ; Diesel Barbershop, LLC v. State Farm Lloyds , 492 F.Supp.3d 417, 426–27, (W.D. Tex. Aug. 13, 2020).

Founder seeks to wriggle out of the exclusion by attaching a different label to its loss. Instead of characterizing it as a loss resulting from the risk of virus exposure at its building, Founder characterizes it as a loss resulting from respiratory droplets on surfaces at its building. Founder claims that "the droplets (not the virus itself) are the real focus of ordinances seeking to limit human to fomite to human transmission and should have been the real focus of damage or loss investigation by Defendants." The virus exclusion, according to Founder, does not exclude losses related to saliva or respiratory droplets. But even assuming the validity of this contorted characterization of the purpose behind the shelter-in-place orders, Founder has merely come up with a different way of describing the same thing: the ordinances sought to prevent COVID-19 from spreading, and thus the loss claimed by Founder was "caused directly or indirectly by ... the ... presence, growth, proliferation, spread or any activity of ... virus." Founder cites a recent ruling denying a motion to dismiss based on the same virus exclusion in Urogynecology Specialist of Florida LLC v. Sentinel Insurance Company , but the district court in that case did not cite anything—from the complaint or elsewhere—that would support a conclusion that a business shutdown due to a pandemic falls outside the scope of the virus exclusion. 489 F.Supp.3d 1297, 1302–03, (M.D. Fla. Sept. 24, 2020).

Because all Founder's claims against Sentinel depend on the existence of coverage, they are all dismissed. Although it seems unlikely that Founder will ever be able to state a claim (indeed, its theory of coverage appears frivolous), its request for leave to amend is granted in an abundance of caution.¹

HFIC's motion to dismiss for lack of standing is granted. It's clear from the allegations in the complaint and the judicially noticeable materials that HFIC is not a party to the contract and has no obligations under the contract. See Franklin EWC, Inc. , 488 F.Supp.3d at 909–10 ; see also Easter v. American Western Financial , 381 F.3d 948, 961 (9th Cir. 2004) ; Shin v. Esurance Insurance Co. , 2009 WL 688586, at *4-5 (W.D. Wash. Mar. 13, 2009) ; Vogel v. Travelers Casualty Insurance Co. of America , 2017 WL 5642302, at *3-4 (C.D. Cal. May 18, 2017). As discussed more fully at the hearing, it's not clear why courts dismiss...