Henderson Rd. Rest. Sys., Inc. v. Zurich Am. Ins. Co.

513 F.Supp.3d 808

HENDERSON ROAD RESTAURANT SYSTEMS, INC., dba Hyde Park Grille, et al., Plaintiff,

v.ZURICH AMERICAN INS. CO., Defendant.

Case No: 1:20 CV 1239

United States District Court, N.D. Ohio, Eastern Division.

Filed January 19, 2021

Mark R. Koberna, Rick D. Sonkin, Sean T. Koran, Sonkin & Koberna, Cleveland, OH, for Plaintiff.

Jonathan Gross, Mound Cotton Wollan and Greengrass, Emeryville, CA, Kevin M. Young, Jennifer L. Mesko, Tucker Ellis - Cleveland, Cleveland, OH, for Defendant.

OPINION AND ORDER

Dan Aaron Polster, United States District Judge

Before the Court are the following motions:

1. Defendant Zurich American Insurance Company's ("Zurich") Motion for summary Judgment (ECF Doc. 14); and

2. Plaintiffs’ Motion for Summary Judgment on the Issue of Coverage under the Zurich Policy (ECF Doc. 15).

On December 4, 2020, Zurich and Plaintiffs filed opposition briefs (ECF Doc. 16 and ECF Doc. 17), and on December 18, 2020, both parties filed replies. ECF Doc. 18 and ECF Doc. 19. On December 23, 2020, Zurich filed a notice of supplemental authority (ECF Doc. 20), and on December 31, 2020, plaintiff filed a response to the supplemental authority. ECF Doc. 21.

For the reasons explained below, the Court GRANTS summary judgment in favor of Plaintiffs on the insurance coverage issues alleged in Counts I and III of their complaint and DENIES summary judgment on Count II. Conversely, the Court DENIES Zurich's motion for summary judgment on Counts I and III of Plaintiffs’ complaint and GRANTS summary judgment on Count II.

The Court's order is final and appealable on Counts II and III. The Court's order is not final or appealable on Count I because damages have not yet been determined. However, because the Court's opinion on Count I involves a question of law that will control the outcome of Plaintiffs’ breach of contract claim, the Court certifies its order on Count I for interlocutory appeal, pursuant to 28 U.S.C.S. § 1292(b). An interlocutory appeal of this dispositive issue will enable the parties to appeal the legal issue before spending additional time and money on the issue of damages.

I. Relevant Facts

Plaintiffs, Henderson Road Restaurant Systems, Inc. dba Hyde park Grille, Coventry Restaurant Systems, Inc., dba Hyde Park Chop House, Chagrin Restaurants, LLC dba Hyde Park Prime Steak House, JR Park LLC dba Hyde Park Prime Steak House, HP CAP LLC, dba Hyde Park Prime Steakhouse, NSHP, LLC dba Hyde Park Prime Steakhouse, HPD Restaurant Systems, Inc. dba Hyde Park Prime Steak House, 457 High Street Development, LLC, CAP Restaurant Development LLC, RJ Moreland Hills, LLC and Northville Development, LLC ("Plaintiffs") operated restaurants in Ohio, Pennsylvania, Michigan, Indiana and Florida. In the spring of 2020, state governments issued orders restricting the operations of restaurants in an effort to abate the spread of the coronavirus ("COVID-19"). In response to these orders, Plaintiffs closed all but four of their Ohio restaurants on March 15, 2020. Those four Ohio restaurants continued to provide only carry-out dining until March 17, 2020, and then they closed. ECF Doc. 12 at 6.

Prior to the government closings, Plaintiffs’ restaurants received very few take-out orders; their businesses were comprised almost exclusively of in-person dining. ECF Doc. 15-1 at 1 ("Saccone Decl.") ¶ 4. As a result of the closings, Plaintiffs were forced to lay off staff and suffered significant financial losses. Id. ¶ 2. They speculate that some of their restaurants may never re-open due to new seating capacity restrictions, and those that have reopened have reduced staffing and suffered financial loss.¹ Id. ¶ 3.

On March 24, 2020, Plaintiffs submitted a claim to Zurich under commercial insurance policy No. CPO 6220911-06 ("Policy")² for loss of business income caused by the state orders. ECF Doc. 12 at 7, ¶ 50. Zurich denied coverage on April 27, 2020. ECF Doc. 12 at 8, ¶ 53. The parties have identified the following portions of the Policy as relevant to their dispute:

Business Income Coverage Form

A. COVERAGE

We will pay for the actual loss of "business income" you sustain due to the necessary "suspension" of your "operations" during the "period of restoration" . The "suspension" must be caused by direct physical loss of or damage to property at a "premises" at which a Limit of Insurance is shown on the Declarations for Business Income. The loss or damage must be directly caused by a "Covered cause of loss". We will not pay more than the applicable Limit of Insurance shown on the Declarations for Business Income at that "premises."

B. ADDITIONAL COVERAGES

1. Civil Authority

We will pay for the actual loss of "business income" you sustain for up to the number of days shown on the Declarations for Civil Authority resulting from the necessary "suspension" or delay in the start of your "operations" if the "suspension" or delay is caused by order of civil authority that prohibits access to the "premises" or "reported unscheduled premises." That order must result from a civil authority's response to direct physical loss of or damage to property located within one mile from the "premises" or "reported unscheduled premises" which sustains a "business income" loss. The loss or damage must be directly caused by a "covered cause of loss".

ECF Doc. 12-1 at 168.

The Policy defines "Period of restoration" as the time that begins when:

a. The direct physical loss or damages that causes "suspension" of your "operations" occurs; or

b. The date "operations" would have begun if the start of "operations" is delayed because of loss of or damage to any of the following:

1) "Real property", whether complete or under construction;

2) Alterations or additions to "real property" ; or

3) "Personal property" :

a. Used in such construction, alterations, or additions;b. Incidental to the occupancy of the area intended for construction, alteration, or addition; or

c. Incidental to the alteration of the occupancy of an existing building or structure.

If you resume "operations" , with reasonable speed, the "period of restoration" ends on the earlier of:

a. The date when the location where the loss or damage occurred could have been physically capable of resuming the level of "operations" which existed prior to the loss or damage, if the location had been restored to the physical size, construction, configuration, location, and material specifications which would satisfy the minimum requirements necessary to obtain all required building permits, occupancy permits, operating licenses, or similar documents; or

b. The date when a new permanent location is physically capable of resuming the level of "operations" which existed prior to the loss or damage, if you resume "operations" at a new permanent location.

If you do not resume "operations" , or do not resume "operations" with reasonable speed (whether at your "premises" or "reported unscheduled premises" or elsewhere), the "period of restoration" will end on the date when the location where the loss or damage occurred could have been restored to the physical size, construction, configuration, location, and material specifications which existed at the time of loss or damage, with no consideration for any time:

a. Which would have been required to make changes in order to satisfy the minimum requirements necessary to obtain all required building permits, occupancy permits, operating licenses, or similar documents; and

b. Which would have been necessary to make the location physically capable of resuming the level of "operations" which existed prior to the loss or damage after the completion of repairs, replacement or rebuilding.

"Period of restoration" does not include any increased period required due to the enforcement of any ordinance or law that requires any insured or others to test for, monitor, clean up, remove, contain, treat, detoxify or neutralize or in any way respond to, or assess the effects of "pollutants " or "microorganisms. "

The expiration of this policy will not cut short the "period of restoration."

ECF Doc. 12-1 at 94.

The Policy defines "covered cause of loss" as "a fortuitous cause or event, not otherwise excluded, which actually occurs during this policy period." ECF Doc. 12-1 at 86. The Business Income Coverage Form states, in relevant part:

c. EXCLUSIONS

1. Real or Personal Property

The exclusions * * * below and the excluded causes of loss in the REAL AND PERSONAL PROPERTY COVERAGE FORM, except Off-Premises Service Interruption, apply to loss of "business income" caused by or resulting from loss of damage to any property * * *"

ECF Doc. 12-1 at 171.

The Real and Personal Property Coverage Form includes the following exclusions:

B. EXCLUDED CAUSES OF LOSS

11. Loss of Market or Delay We will not pay for loss or damage caused by or resulting from loss of market, loss of use, or delay. This exclusion applies even if one of these excluded causes of loss was caused by or resulted from a "mistake" or "malfunction."

12. Microorganisms

We will not pay for loss or damage consisting of, directly or indirectly caused by, contributed to, or aggravated by the presence, growth, proliferation, spread, or any activity of "microorganisms", unless resulting from fire or lightning. Such loss or damage is excluded regardless or any other cause or event, including a "mistake" or "malfunction," or weather condition, that contributes concurrently or in any sequence to the loss, even if such other cause or event would otherwise be covered.

But if a result of one of the excluded causes of loss is a "specified cause of loss" , other than fire or lightning, we will pay that portion of the loss or damage which was solely caused by that "specified cause of loss".

We will also not pay for loss, cost, or expense arising out of any request, demand, order, or statutory or regulatory requirement that requires any insured or others to test for, monitor, clean up, remove, treat, detoxify, or neutralize, or in any way respond to, or assess the effects of "micr

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