GMC v. Sentry Ins. Grp.

541 F.Supp.3d 582

STAR BUICK GMC; Star Buick GMC Cadillac; and Star Pre-Owned of Bethlehem, Plaintiffs,

v.SENTRY INSURANCE GROUP, Defendant.

No. 5:20-cv-03023

United States District Court, E.D. Pennsylvania.

Filed May 26, 2021

Christopher M. Reid, Isaac A. Hof, Seidel Cohen Hof & Reid LLC, Bethlehem, PA, for Plaintiffs.

Bryan M. Shay, Madison G. Melinek, Steven J. Schildt, Post & Schell PC, Philadelphia, PA, Heidi L. Vogt, Janet E. Cain, Von Briesen & Roper, Milwaukee, WI, for Defendant.

OPINION

Motion to Dismiss, ECF No. 16 - GRANTED

Joseph F. Leeson, Jr., United States District Judge

I. INTRODUCTION

Plaintiffs Star Buick GMC, Star Buick GMC Cadillac, and Star Pre-Owned of Bethlehem (collectively "Star Buick") initiated this action against their insurer Defendant Sentry Insurance Group seeking declaratory judgment that Star Buick's insurance policy with Sentry provides coverage for loss of business income due to the suspension of business operations during the COVID-19 pandemic. Sentry has moved to dismiss the Amended Complaint, arguing that no coverage is provided under the unambiguous terms of the policy. For the reasons set forth below, the Motion to Dismiss is granted. The Amended Complaint is dismissed with prejudice.

II. BACKGROUND

According to the Amended Complaint, the factual allegations which are accepted as true for purposes of deciding the Motion to Dismiss, Star Buick owns and operates multiple automobile dealerships throughout Pennsylvania. See Am. Compl. ¶ 4, ECF No. 11. On March 20, 2020, Star Buick "shut their doors to customers." Id. ¶ 12. The closure occurred the day after the Governor of the Commonwealth of Pennsylvania issued an order prohibiting the operation of businesses that are not life-sustaining. See Ex. C, ECF No. 11-3 (Order dated March 19, 2020, and list of business industries). Star Buick's car dealerships were not one of the enumerated life-sustaining businesses that were permitted to continue physical operations. See id. and Am. Compl. ¶ 12. The forced suspension of operations of the "entire sales portion of those businesses, representing an overwhelming majority and significant source of revenue," has resulted in substantial losses to Star Buick. Am. Compl. ¶ 58. Star Buick claims that its business suspension and resulting losses were due to the COVID-19 Pandemic and to state orders.¹ See id. ¶ 15.

The March 19, 2020 order explained that the World Health Organization ("WHO") and Center for Disease Control ("CDC") had declared COVID-19 a public emergency of international concern and that the U.S. Department of Health and Human Services ("HHS") had declared that COVID-19 creates a public health emergency. Id. The order further explained that on March 6, 2020, the Governor had proclaimed the existence of a disaster emergency throughout the Commonwealth. Id. See also Ex. B, ECF No. 11-2 (Proclamation of Disaster Emergency). Between the issuance of the Proclamation of Disaster Emergency and the March 19, 2020 order, the World Health Organization ("WHO"), on March 11, 2020, "made the assessment that COVID-19 can be characterized as a pandemic." See https://www.who.int/director-general/speeches/detail/who-director-general-s-opening-remarks-at-the-media-briefing-on-covid-19---11-march-2020.²

At the time of its closure and throughout the suspension of operations,³ Star Buick had an all-risks business protection policy of insurance with Sentry, which was effective from March 1, 2020, to March 1, 2021 ("the Policy").⁴ Id. ¶¶ 18-19. Star Buick alleges that the Policy provides coverage for its business income losses during the suspension of operations. Id. ¶¶ 13-16. Star Buick seeks declaratory judgment on numerous issues related thereto. See id. ¶¶ 78-83 and Prayer for Relief.

Sentry has filed a Motion to Dismiss arguing that the Policy does not provide coverage for Star Buick's claimed losses because: (1) Star Buick did not sustain direct physical loss of or damage to property; (2) access to Star Buick's property was not prohibited by civil authority due to damage to other property; and (3) the claims are excluded by the Policy's virus exclusion. See Mot. and Mem., ECF No. 16. Star Buick opposes the Motion. See Opp. Mot., ECF No. 19; Resp., ECF No. 20. Star Buick contends that physical loss is not defined in the Policy and is not limited to structural damage, but includes lost operations or inability to access/use the property. See Resp. 5-22. It asserts there has also been damage to nearby properties and the orders prohibit access. See id. 22-25. Star Buick further argues that the virus exclusion is narrow and does not exclude coverage for lost income resulting from a global pandemic. Id. 26-29. Sentry filed a reply to these arguments. See Reply, ECF No. 22. The parties have each provided supplemental authority to the Court. See ECF Nos. 23-24.

III. STANDARDS OF REVIEW

A. Motions to Dismiss – Review of Applicable Law

Under Rule 12(b)(6), the court must "accept all factual allegations as true [and] construe the complaint in the light most favorable to the plaintiff." Phillips v. Cnty. of Allegheny , 515 F.3d 224, 233 (3d Cir. 2008) (quoting Pinker v. Roche Holdings Ltd. , 292 F.3d 361, 374 n.7 (3d Cir. 2002) ) (internal quotation marks omitted). Only if "the ‘[f]actual allegations ... raise a right to relief above the speculative level’ " has the plaintiff stated a plausible claim. Id. at 234 (quoting Bell Atl. Corp. v. Twombly , 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). "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." Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). However, "the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions." Id. (explaining that determining "whether a complaint states a plausible claim for relief ... [is] a context-specific task that requires the reviewing court to draw on its judicial experience and common sense"). "[C]ourts must consider the complaint in its entirety, as well as other sources courts ordinarily examine when ruling on Rule 12(b)(6) motions to dismiss, in particular, documents incorporated into the complaint by reference, and matters of which a court may take judicial notice." Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322, 127 S.Ct. 2499, 168 L.Ed.2d 179 (2007). See also Mayer v. Belichick , 605 F.3d 223, 230 (3d Cir. 2010) ("In deciding a Rule 12(b)(6) motion, a court must consider only the complaint, exhibits attached to the complaint, matters of public record, as well as undisputedly authentic documents if the complainant's claims are based upon these documents."); In re Burlington Coat Factory Sec. Litig. , 114 F.3d 1410, 1426 (3d Cir. 1997) (holding that "a document integral to or explicitly relied upon in the complaint may be considered" (internal quotations omitted)). The defendant bears the burden of demonstrating that a plaintiff has failed to state a claim upon which relief can be granted. See Hedges v. United States , 404 F.3d 744, 750 (3d Cir. 2005) (citing Kehr Packages, Inc. v. Fidelcor, Inc. , 926 F.2d 1406, 1409 (3d Cir. 1991) ).

B. Contracts of Insurance Interpretation – Review of Applicable Law

"Under Pennsylvania law, ‘the interpretation of a contract of insurance is a matter of law for the courts to decide.’ " Allstate Prop. & Cas. Ins. Co. v. Squires , 667 F.3d 388, 390-91 (3d Cir. 2012) (quoting Paylor v. Hartford Ins. Co. , 536 Pa. 583, 640 A.2d 1234, 1235 (1994) ). In interpreting an insurance contract, the court must ascertain the intent of the parties from the language of the policy. See id. When the terms in a policy are not defined, they should be construed in accordance with their natural, plain, and ordinary meanings. See Lititz Mut. Ins. Co. v. Steely , 567 Pa. 98, 785 A.2d 975, 978 (2001). "The court should not consider isolated individual terms but should instead consider the entire contractual provision to determine the parties’ intent." Robinson v. Allstate Prop. & Cas. Ins. Co. , 306 F. Supp. 3d 672, 675 (E.D. Pa. 2018). When the policy language is clear and unambiguous, the court will give effect to that language. See Squires , 667 F.3d at 390-91.

"Disagreement between the parties over the proper interpretation of a contract does not necessarily mean that a contract is ambiguous." 12th St. Gym v. Gen. Star Indem. Co. , 93 F.3d 1158, 1165 (3d Cir. 1996) (citing Vogel v. Berkley , 354 Pa.Super. 291, 511 A.2d 878, 881 (1986) ). "Ambiguity exists if the contract language is ‘reasonably susceptible of different constructions and capable of being understood in more than one sense.’ " Whitmore v. Liberty Mut. Fire Ins. Co. , No. 07-5162, 2008 WL 4425227 at *3, 2008 U.S. Dist. LEXIS 76049 at *9 (E.D. Pa. Sep. 30, 2008) (quoting Madison Constr. Co. v. Harleysville Mut. Ins. Co. , 557 Pa. 595, 735 A.2d 100, 106 (1999) ). "[T]he policy language must not be tortured to create ambiguities where none exist." Sikirica v. Nationwide Ins. Co. , 416 F.3d 214, 220 (3d Cir. 2005). When the policy language is ambiguous, it must " ‘be construed in favor of the insured and against the insurer, the drafter of the agreement.’ " Squires , 667 F.3d at 391 (quoting Dorohovich v. W. Am. Ins. Co. , 403 Pa.Super. 412, 589 A.2d 252, 256 (1991) ). See also Indep. Rest. Grp. v. Certain Underwriters at Lloyd's , No. 20-2365, 513 F.Supp.3d 525, 2021 U.S. Dist. LEXIS 7256 (E.D. Pa. Jan. 14, 2021) (explaining that when a policy is drafted by one party, any ambiguous language is construed against the drafter). As with ambiguities, "exclusions are strictly construed against the insurer." Selko v. Home Ins. Co. , 139 F.3d 146, 152 n.3 (3d Cir. 1998) (citing Standard Venetian Blind Co. v. American Empire Ins. Co. , 503 Pa. 300, 469 A.2d 563, 566 (1983) ). "[A]n insured bears the...