Greenwood Racing Inc. v. Am. Guarantee & Liab. Ins. Co.

1

GREENWOOD RACING INC., GREENWOOD GAMING AND ENTERTAINMENT, INC., RACETRACK OP CO., CITY TURF CLUB OP CO., TURF CLUB OP CO., and ACRA TURF CLUB, LLC, Plaintiff, v. AMERICAN GUARANTEE AND LIABILITY INSURANCE COMPANY Defendants.

Civil Action No. 21-1682

United States District Court, E.D. Pennsylvania

September 12, 2022

MEMORANDUM

GERALD J. PAPPERT, J.

Greenwood Racing Inc. and its subsidiaries (collectively “Greenwood”) sued American Guarantee and Liability Insurance Company and Steadfast Insurance Company seeking a declaration that the Defendants are required to insure losses sustained by Greenwood as a result of the Coronavirus pandemic and resulting government actions. The Court previously granted Steadfast's motion to dismiss Greenwood's claims against it pursuant to Federal Rule of Civil Procedure 12(b)(6). (ECF 29.) American Guarantee now moves for judgment on the pleadings pursuant to Federal Rule of Civil Procedure 12(c). The Court grants the motion consistent with similar decisions in this and other Circuits.^[1]

I

Greenwood owns and operates a casino, racetrack and other gambling facilities in Pennsylvania and New Jersey, including Parx Casino, Parx Racing, South Philadelphia Race &amp Sportsbook, Oaks Race & Sportsbook, and Favorites at Egg Harbor Township. (Compl. ¶¶ 1, 22-27, ECF 1-3.) In mid-March of 2020, the COVID-19 pandemic and subsequent government actions brought these businesses to a sudden halt. (Id. ¶¶ 161-64, 170.) Two of Greenwood's facilities, Parx Racing and Oaks Race &amp Sports Book, closed on March 13. (Id. ¶¶ 33, 35.) Its two other Pennsylvania locations, Parx Casino and South Philadelphia Race & Sportsbook, closed on March 15. (Id. ¶¶ 32-34.) These locations remained closed for several months. (Id. ¶¶ 32-36.)

Oaks Race & Sportsbook never reopened. (Id. ¶ 35.) Greenwood suffered financial losses as a result of these closures, as well as from the additional costs of sanitizing and reorganizing its facilities to make them safer for its patrons and employees. (Id. ¶¶ 167-168.)

During this time, Greenwood's properties were insured under two Zurich EDGE All-Risk Policies American issued to Greenwood. (Id. ¶¶ 38, 40, 43-44.) The Policies' periods ranged from April 1, 2019, to April 1, 2020, and then from April 1, 2020, to April 1, 2021. (Id.) Except for an increase in the coverage limits, the Policies are identical for all relevant purposes. (Id. ¶ 42.) The Policies each state: “This Policy Insures against direct physical loss of or damage caused by a Covered Cause of Loss^[2]to Covered Property, at an Insured Location . . . subject to the terms conditions and exclusions stated in this Policy.” (Zurich EDGE Policy § 1.01, ECF 1-4 at 75.)^[3] The Policies define “Covered Cause of Loss” as “[a]ll risks of direct physical loss of or damage from any cause unless excluded.” (Id. § 7.11, at 120.) Additionally, the Policies contain “Time Element Coverages” (business interruption), and “special coverages” such as “Civil or Military Authority” and “Ingress/Egress” coverage which, as Greenwood agrees, all require direct physical loss of or damage to a covered property to trigger coverage. See (Pls.' Mem. Opp'n Def.'s Mot. J. Pleadings at 3, ECF 38; Zurich EDGE Policy § 4.01.01, at 86, § 5.02.03, at 92, § 5.02.15, at 97).

The Policies contain numerous exclusions, including a Contamination Exclusion, which excludes from coverage: “Contamination, and any cost due to Contamination including the inability to use or occupy property or any cost of making property safe or suitable for use or occupancy ....” See (Zurich EDGE Policy § 3.03.01.01, at 83.) Contamination is defined as “[a]ny condition of property due to the actual presence of any foreign substance, impurity, pollutant, hazardous material, poison, toxin, pathogen or pathogenic organism, bacteria, virus, [or] disease causing or illness causing agent ....” (Id. § 7.09, at 120) (emphasis added).

Greenwood contends its economic losses fall within the scope of the Policies' coverage and that the Contamination Exclusion does not apply. (Compl. ¶¶ 222, 273.) American argues there is no direct physical loss of or damage to any covered property that would trigger any additional coverage beyond that provided for “Notifiable Diseases,” and the Contamination Exclusion applies to Greenwood's losses.^[4] (Def.'s Mot. J. Pleadings at 8, 16-17, ECF 37-1.)

II

A party may move for judgment on the pleadings “[a]fter the pleadings are closed-but early enough not to delay trial.” Fed.R.Civ.P. 12(c). The pleadings are closed after an answer is filed and after a reply is filed to any additional claims asserted in the answer. Austin Powder Co. v. Knorr Contracting, Inc., No. 08-1428, 2009 WL 773695, at *1 (M.D. Pa. Mar. 20, 2009). Under Rule 12(c), a judgment on the pleadings will be granted “only if, viewing all the facts in the light most favorable to the nonmoving party, no material issue of fact remains and the moving party is entitled to judgment as a matter of law.” Knepper v. Rite Aid Corp., 675 F.3d 249, 257 (3d Cir. 2012); see also Sikirica v. Nationwide Ins. Co., 416 F.3d 214, 220 (3d Cir. 2005).

A district court applies the same standard to a judgment on the pleadings as it does to a motion to dismiss pursuant to Rule 12(b)(6). See Turbe v. Gov't of Virgin Islands, 938 F.2d 427, 428 (3d Cir. 1991) (“Rule 12(h)(2) provides that a defense of failure to state a claim upon which relief can be granted may also be made by a motion for judgment on the pleadings. In this situation, we apply the same standards as under Rule 12(b)(6).”). To survive dismissal under Rule 12(b)(6), the 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 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is facially plausible when the facts pled “allow[ ] the court to draw the reasonable inference that [a] defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678. “[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged-but it has not ‘show[n]'-‘that the pleader is entitled to relief.'” Id. at 679 (quoting Fed.R.Civ.P. 8(a)(2)).

When the complaint includes well-pleaded factual allegations, the Court “should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief.” Connelly v. Lane Const. Corp., 809 F.3d 780, 787 (3d Cir. 2016) (quoting Iqbal, 556 U.S. at 679). However, this “presumption of truth attaches only to those allegations for which there is sufficient factual matter to render them plausible on their face.” Schuchardt v. President of the U.S., 839 F.3d 336, 347 (3d Cir. 2016) (internal quotation marks and citation omitted). “Conclusory assertions of fact and legal conclusions are not entitled to the same presumption.” Id.

III

Under Pennsylvania law, insurance policies are contracts between insurer and policy holder. Kurach v. Truck Ins. Exch., 235 A.3d 1106, 1116 (Pa. 2020). Their proper interpretation is a question of law for the court to decide. Sikirica v. Nationwide Ins. Co., 416 F.3d 214, 220 (3d Cir. 2005). In doing so, courts must “effectuate the intent of the contracting parties as reflected by the written language of the insurance policies.” Kurach, 235 A.3d at 1116. Where the terms of the policy are unambiguous, courts will give them their plain and ordinary meaning, unless doing so would violate clearly established public policy. Id. Where they are ambiguous, they must be construed in favor of the policyholder. Id.

Language in a policy is ambiguous if it is susceptible to more than one reasonable interpretation. Id. A word is not ambiguous, however, simply because it is undefined. Gemini Ins. Co. v. Meyer Jabara Hotels LLC, 231 A.3d 839, 849 (Pa. Super. Ct. 2020). Instead, “words of common usage in an insurance policy are to be construed in their natural, plain, and ordinary sense.” Madison Const. Co. v. Harleysville Mut. Ins. Co., 735 A.2d 100, 108 (Pa. 1999). In addition, individual terms and provisions cannot be read in isolation; the policy must be considered as a whole. Pennsylvania Nat. Mut. Cas. Ins. Co. v. St. John, 106 A.3d 1, 14 (Pa. 2014). Finally, the insured bears the initial burden of showing that its claims are “within the policy's affirmative grant of coverage.” Sciolla v. W. Bend Mut. Ins. Co., 987 F.Supp.2d 594, 599 (E.D. Pa. 2013) (quoting Koppers Co. v. Aetna Cas. & Sur. Co., 98 F.3d 1440, 1446 (3d Cir. 1996)). Exclusions, meanwhile, are strictly construed against the insurer. Selko v. Home Ins. Co., 139 F.3d 146, 152 n.3 (3d Cir. 1998).

IV

For the Court to find coverage under any of the Policies' provisions at issue, Greenwood must plausibly allege “direct physical loss of or damage caused by a Covered Cause of Loss to a Covered Property” as outlined in the Policies. (Zurich EDGE Policy § 1.01, ECF 1-4 at 75.) Greenwood argues that the “inability of the Properties to function as intended was the ‘direct physical loss of' the Properties” and that “[t]his alone satisfies the standard adopted by the Third Circuit to trigger coverage for invisible hazards under Pennsylvania law.” (Pls.' Mem. Opp'n Def.'s Mot. J. Pleadings at 9, ECF 38.) Greenwood also states that the phrase “direct physical loss of or damage” is not defined in the policy. (Compl. ¶ 61). First of all, that alone does not make these terms ambiguous. See Gemini Ins. Co. v. Meyer Jabara Hotels LLC, 231 A.3d 839, 848 (Pa. Super. Ct. 2020) (The “lack of a definition for an operative term . . . does not necessarily render the policy ambiguous.”). Second, Greenwood mischaracterizes the Third Circuit's...