Jujamcyn Theaters LLC v. Fed. Ins. Co.

659 F.Supp.3d 372

JUJAMCYN THEATERS LLC, Plaintiff, v. FEDERAL INSURANCE COMPANY and Pacific Indemnity Company, Defendants.

20-CV-6781 (ALC)(JW)

United States District Court, S.D. New York

Signed March 6, 2023

Kirk A. Pasich, Pasich LLP, Los Angeles, CA, Stephen Wah, Jeffrey Louis Schulman, Pasich LLP, New York, NY, for Plaintiff.

Barbara Maria Almeida, Daren S. McNally, Clyde & Co. LLP, Morristown, NJ, Philip C. Silverberg, Mound Cotton Wollan & Greengrass, New York, NY, for Defendants.

OPINION AND ORDER

ANDREW L. CARTER, JR., United States District Judge:

Jujamcyn Theaters LLC ("Jujamcyn" or "Plaintiff") brings this action against Federal Insurance Company ("Federal") and Pacific Indemnity Company ("Pacific") (collectively "Defendants") alleging breach of contract, breach of the implied covenant of good faith and fair dealing, and declaratory judgment related to insurance coverage allegedly due under two policies issued by Federal and Pacific. (See generally Compl. ECF No. 8.) Both Plaintiff and Defendants move for judgment on the pleadings. For the reasons stated below, Plaintiff's motion is DENIED and Defendants' Motion is GRANTED IN PART and DENIED IN PART.

BACKGROUND

I. Factual Background

The following is taken from the Complaint, the parties' motion papers, and the documents relied upon therein, as well as matters of which the court can take judicial notice. See Roberts v. Babkiewicz, 582 F.3d 418, 419 (2d Cir. 2009).

Jujamcyn is one of the largest Broadway theater owners in New York and owns and operates five prominent theaters: the St. James Theatre; the Al Hirschfeld Theatre; the Walter Kerr Theatre; the Eugene O'Neill Theatre; and the August Wilson Theatre. (Compl., ECF No. 8 ¶¶ 1, 39.) Defendants Federal and Pacific are members of the Chubb insurance group and issued separate insurance policies to Jujamcyn. (Id. ¶ 7.)

A. The COVID-19 Pandemic and its Effect on Jujamcyn's Business

After the emergence of the COVID-19 virus in New York, former Governor Andrew Cuomo issued Executive Order 202 on March 7, 2020, declaring a state of emergency. (Id. ¶ 26.) On March 12, 2020 Governor Cuomo issued Executive Order 202.1, ordering that "any theater seating five hundred or more attendees for a live performance located in [the City of New York] shall not hold any further performances after 5 pm on March 12, 2020." (Id. ¶ 28.) In addition, on March 16, 2020, former New York City Mayor Bill De Blasio issued Emergency Executive Order No. 100, ordering that "all entertainment venues, including those with seating capacity below 500, are hereby closed effective Monday, March 16, 2020 at 8:00 PM." (Id. ¶ 30.) As part of this announcement De Blasio stated that "the virus physically is causing property loss and damage." (Id.) Finally, on March 22, 2020, all businesses in New York were subject to the "New York State on PAUSE" order which directed all non-essential businesses to close, including theaters. (Id. ¶ 31.)¹ As a result of these emergency ordinances, all five of Jujamcyn's theaters were forced to close and Plaintiff suffered substantial financial losses. (Id. ¶ 4.)

Plaintiff alleges that two individuals working at Broadway theaters located within 10 miles of Jujamcyn's theaters tested positive for COVID-19. (Id. ¶ 28.) The Complaint also describes how COVID-19 is spread and explains that "[t]he disease can spread from person to person through small droplets from the nose or mouth which are spread when a person with COVID-19 coughs or exhales. These droplets land on objects and surfaces around the person." (Id. ¶ 22.) The Complaint also alleges that "the operation of a Broadway theater involves a large gathering of people within an enclosed space for a prolonged period, increasing the likelihood that [COVID-19] would be in the airspace and on surfaces, and that such theater would be a potential source of exposure." (Id. ¶ 27.)

B. The Federal Policy

Federal sold Jujamcyn "Customarq Series Entertainment Insurance Program" for the period May 1, 2019 to May 1, 2020 (the "Federal Policy"). (Id. ¶ 37.) The Federal Policy is an "all-risk" property insurance policy that insures each of Jujamcyn's five theaters against property damage. (Id. ¶ 39.) The two provisions at issue here—the "Business Income and Extra Expense" and "Civil Authority" provisions—provide coverage for losses that "result from direct physical loss or damage" and that are "the direct result of direct physical loss or damage to property". (Compl., Ex. A, ECF No. 1-3 at 12, 14-15 (emphasis in the original).) The policy does not have an explicit carveout for losses that are the result of virus, communicable diseases or pandemics, as do other policies that have been challenged in the wake of the COVID-19 pandemic. (Compl., ECF No. 8 ¶ 44.)

Plaintiff alleges that "[b]ecause the [COVID-19] virus can adhere to surfaces of property for several days and can linger in the air in buildings for several hours, the presence of the [COVID-19] virus on or around property amounts to 'direct physical loss or damage' as that phrase is used in the Federal Policy." (Id. ¶ 52.) Plaintiff maintains that it reasonably expected the Federal Policy to cover its losses resulting from the COVID-19 closures but that Federal has refused to pay Jujamcyn for any losses pursuant to the policy. (Id. ¶¶ 46, 48, 55-57.)

C. The Pacific Policy

Pacific sold Jujamcyn "Performance Disruption" coverage for the period May 1, 2019 to May 1, 2020 (the "Pacific Policy"). (Compl., ECF No. 8 ¶ 65.) The Pacific Policy insures "business income loss" "due to the necessary cancellation, interruption or postponement of one or more of [ ] performances, including the inability to open a new production as scheduled" and any "extra expense" "due to the actual or potential cancellation, interruption, postponement or other impairment of one or more of your performances," provided that it is "caused by or results from a covered occurrence." (Id. ¶ 67; Compl., Ex. C, ECF No. 1-13 at 20 (emphasis in the original.)) A "covered occurrence" is defined as "any unexpected circumstances beyond your control, except as listed under Exclusions." (Id. at 24 (emphasis in the original).)

Any amount payable due under the Pacific Policy is capped by "the applicable Limit of Insurance for Performance Disruption". (Compl., Ex. C, ECF No. 1-12 at 7.) "Limits of Insurance" is defined as "[t]he most we will pay in any one occurrence is the amount of loss, not to exceed the applicable Limit of Insurance shown in the Declarations." (Compl., Ex. C, ECF No. 1-13 at 22.) In the declaration accompanying the policy, the "Limit of Liability (Each Loss)" is capped at $250,000. (Compl., Ex. C, ECF No. 1-12 at 7.).

Jujamcyn Theaters, LLC is the only listed insured on the Pacific Policy, but the policy does also list thirteen additional payees, which includes the LLCs for each of Jujamcyn's five theaters. (Compl., Ex. C, ECF No. 1-13 at 27.) Additionally, Jujamcyn alleges that Pacific specifically agreed to insure all five theaters, noting that "[i]n advance of issuing the Pacific Policy to Jujamcyn, Pacific engaged in, or had reasonable opportunities to engage in, extensive underwriting investigation, and became familiar with and knowledgeable regarding the nature and scope of Jujamcyn's business and the nature of the risks that Pacific was insuring against." (Compl., ECF No. 8 ¶ 66.)

Pacific tendered a single payment of $250,000 to Jujamcyn based on its interpretation of "limit of liability" due under the policy. (Id. ¶ 72.) Jujamcyn, on the other hand, maintains that the closure of its five theaters each represent a "loss" for which for which Jujamcyn is owed five payments of $250,000. (Id. ¶¶ 71-77.)

II. Procedural History

Plaintiff initiated this suit on August 24, 2020. (ECF No. 1.) The parties first filed cross-motions for judgment on the pleadings on November 17, 2020. (ECF Nos. 27, 28.) Subsequently, after the motions were fully briefed, the Court denied both motions without prejudice following the Second Circuit's decision in 10012 Holdings, Inc. v. Sentinel Ins. Co., Ltd., 21 F.4th 216 (2d Cir. 2021) ("10012 Holdings") and directed the parties to file a status report addressing the effect of the decision on the legal issues in this case. (ECF No. 35.) The parties filed a letter indicating that they intended to refile their cross motions for judgment on the pleadings. (ECF No. 38.) The Court granted leave for the parties to file their motions and set a briefing schedule. (ECF No. 40.)

Jujamcyn filed its motion for judgment on the pleadings on May 12, 2022. (ECF No. 43.) Jujamcyn argues that it is entitled to a judgment as a matter of law for its claims relating to the Pacific Policy and asks the Court to strike Pacific's affirmative defenses. (Id.) Pacific filed a response on May 25, 2022. (ECF No. 50.) Jujamcyn filed a reply on June 15, 2022. (ECF No. 54.)

Defendants also filed a cross motion for judgment on the pleadings on May 12, 2022, asking the Court to dismiss the entirety of Plaintiff's Complaint and entering judgment in Defendants' favor. (ECF No. 45.) Jujamcyn filed a response on May 25, 2022. (ECF No. 52.) Defendants filed a reply on July 15, 2022. (ECF No. 53.)

STANDARD OF REVIEW

A motion for judgment on the pleadings under Rule 12(c) of the Federal Rules of Civil Procedure is subject to the same standard of review as a motion to dismiss under Rule 12(b)(6). Bank of N.Y. v. First Millennium, Inc., 607 F.3d 905, 922 (2d Cir. 2010). Thus, the Court accepts the nonmovant's allegations as true and draws all reasonable inferences in the nonmovant's favor. Harris v. Mills, 572 F.3d 66, 71 (2d Cir. 2009). In essence, a grant of a motion pursuant to Rule 12(c) is proper if "from the pleadings, the moving party is entitled judgment as a matter of law." Burns Int'l Sec. Servs., Inc. v. Int'l Union, 47 F.3d 14, 16 (2d Cir. 1995) (per curiam). "On a 12(c) motion, the court considers the complaint, the answer, any written documents attached...