OTG Mgmt. PHL LLC v. Emp'rs Ins. Co. of Wausau

557 F.Supp.3d 556

OTG MANAGEMENT PHL LLC, et al., Plaintiff,

v.EMPLOYERS INSURANCE COMPANY OF WAUSAU, Defendant.

Civil Action No. 2:21-cv-01240-WJM-MF

United States District Court, D. New Jersey.

Signed August 26, 2021

Harvey Bartle, IV, Morgan Lewis & Bockius LLP, Princeton, NJ, Kevin Vincent Small, Hunton Andrews Kurth, New York, NY, for Plaintiff.

Christopher S. Finazzo, Finazzo Cossolini O'Leary Meola & Hager, L.L.C., Morristown, NJ, for Defendant.

William J. Martini, U.S.D.J.:

This matter arises out of Defendant Employers Insurance Company of Wausau's ("Defendant") alleged breach of an insurance contract and denial of insurance coverage to Plaintiff OTG Management LLC and certain of its subsidiaries (collectively, "Plaintiffs") related to losses caused by the ongoing COVID-19 pandemic. Before the Court is Defendant's motion (the "Motion") to dismiss the Complaint for failure to state a claim upon which relief can be granted pursuant to Federal Rule of Civil Procedure ("FRCP") 12(b)(6), ECF No. 14. For the reasons set forth below, Defendant's Motion is GRANTED .

I. BACKGROUND¹

A. Plaintiff's Insurance Claim and COVID-19 Losses

Plaintiff OTG Management LLC is a Delaware limited liability company and ultimate parent of each of the other Plaintiffs in this action.² Together, Plaintiffs operate and manage a variety of airport concessions, including restaurants, bars, markets providing food and beverage services, and other airport retail concessions, in airports across the United States. Compl. ¶ 4. Defendant is an insurance company organized under the laws of Wisconsin with its principal place of business in Massachusetts. Id. at ¶ 20. Defendant issued a commercial property insurance policy to Plaintiff OTG Management LLC as named insured (the "Policy") covering the period from June 1, 2019 through June 1, 2020. Id. at ¶¶ 24, 26; Compl., Ex. A. The Policy also provides coverage to each of the other Plaintiffs as subsidiaries of OTG Management LLC. Id. at ¶ 25; Compl., Ex. A., § I.A.

Unfortunately, Plaintiffs’ business was among the many that sustained losses throughout 2020 as a result of the COVID-19 pandemic. Specifically, Plaintiffs allege that, because their retail operations are located inside of airports, they were particularly hard hit by the damage caused by COVID-19 itself as well as the preventative measures taken by governments and the public to limit non-essential travel and other activities. See Compl. ¶¶ 57-69, 76-77.

Plaintiffs submitted a business interruption claim for their losses due to the COVID-19 pandemic under the Policy to Defendant on March 16, 2020. Id. at ¶ 107. Shortly thereafter, Defendant responded to Plaintiffs’ claim by asking several questions about the nature of Plaintiffs’ losses, and, on April 15, 2020, issued a reservation of rights letter. Id. at ¶¶ 108-11. On June 26, 2020, Plaintiffs responded to Defendant's inquiries about the nature of their losses. Id. at ¶ 114. On September 16, 2020, Defendant denied coverage under the Policy, stating, among other things, that neither COVID-19 nor government orders related thereto was a risk of physical loss or damage and that Plaintiffs’ claim fell under certain applicable coverage exclusions in the Policy.

B. The Policy

The Policy is an all-risk commercial property insurance policy that provides coverage against "all risks of direct physical loss or damage" to Plaintiffs’ insured property except as otherwise limited or excluded therein. Compl., Ex. A., § I.C. The Policy is comprised of two types of insurance coverage: (1) "Property Damage"; and (2) "Time Element." See generally id. at §§ II-III. The former provides coverage for direct physical loss or damage to certain specified types of real or personal property, except for loss or damage caused by certain excludable events or circumstances. Id. at §§ II.A, C. Among these exclusions, and of particular importance here, are (a) "loss or damage from enforcement of any law or ordinance ... [r]egulating the construction, repair, replacement, use or removal, including debris removal, of any property" (the "Law or Ordinance Exclusion"), id. at § I.C.1(f)(1); and "unless directly resulting from a covered loss,³ " (b) "[c]ontamination, 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, except as provided elsewhere in th[e] Policy" (the "Contamination Exclusion"), id. at § I.C.4(a). The Policy defines "contamination" broadly as "[a]ny condition of property that results from a contaminant." Id. at § VII.4. In turn, the Policy further defines "contaminant" as "[a]ny foreign substance, impurity, pollutant, hazardous material, poison, toxin, pathogen or pathogenic organism, bacteria, virus , disease causing or illness causing agent, fungus, mold or mildew." Id. at § VII.(3) (emphasis added).

"Time Element" coverage, meanwhile, covers certain losses and expenses incurred as a result of a necessary interruption in business operations directly resulting from physical loss or damage to Plaintiffs’ insured property. Id. at § III.A. In addition, the Policy extends such Time Element coverage to a variety of circumstances in which Plaintiffs’ business operations may be interrupted even though Plaintiffs’ insured property may not have suffered any direct physical loss or damage, including (1) physical loss or damage to a nearby "attraction property" Plaintiffs depend on to attract customers ("Attraction Property Coverage"), id. at § III.E.1; (2) orders of civil or military authorities caused by physical loss or damage to Plaintiffs’ insured property or similar nearby property prohibiting access to Plaintiffs’ insured property ("Civil Authority Coverage"), id. at § III.E.2; (3) physical loss or damage to locations of certain of Plaintiffs’ direct or indirect customers, suppliers, contract manufacturers or contract service providers ("Contingent Time Element Coverage"), id. at § III.E.4; and (4) physical loss or damage to certain property which directly prevents ingress or egress to Plaintiffs’ insured premises, ("Ingress/Egress Coverage"), id. at § III.E.8. In a section titled "Time Element Exclusions," the Policy identifies several specific exclusions to Time Element coverage, none of which are themselves applicable to the present dispute. Before going on to identify these specific losses excluded from Time Element coverage, however, the section's introductory clause provides that "[i]n addition to the exclusions elsewhere in this Policy, the following exclusions apply to TIME ELEMENT loss ...." Id. at § III.D.

C. Procedural History

On January 27, 2021, Plaintiffs filed their four-count Complaint asserting claims arising out of Defendant's denial of their claim for business interruption insurance coverage. Broadly speaking, Plaintiffs allege that they suffered financial losses due to the necessary closure of their businesses in light of the physical loss or damage caused by the presence of COVID-19 on their premises and by various government shut-down orders issued to try and mitigate the spread thereof, and that Defendant wrongfully denied insurance coverage for such losses. The Complaint seeks both a declaration stating that Plaintiffs’ losses are insured under the Policy as well as money damages for Defendant's alleged breach of the insurance contract. In addition, the Complaint sets forth claims for bad faith denial of insurance coverage and for violations of the New Jersey Consumer Fraud Act (the "NJCFA"), N.J.S.A. 56:8-2.

II. LEGAL STANDARD

FRCP 12(b)(6) provides for the dismissal of a complaint if the plaintiff fails to state a claim upon which relief can be granted. The movant bears the burden of showing that no claim has been stated. Hedges v. United States , 404 F.3d 744, 750 (3d Cir. 2005). In deciding a motion to dismiss under FRCP 12(b)(6), "all allegations in the complaint must be accepted as true, and the plaintiff must be given the benefit of every favorable inference to be drawn therefrom." Malleus v. George , 641 F.3d 560, 563 (3d Cir. 2011). The Court need not accept as true "legal conclusions," and "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). In ruling on a 12(b)(6) motion, the Court is ordinarily limited to the facts as alleged in the complaint, the exhibits attached thereto, and matters of public record. Pension Benefit Guar. Corp. v. White Consol. Indus. , 998 F.2d 1192, 1196 (3d Cir. 1993). The Court may, however, look outside the pleadings and also consider "document[s] integral to or explicitly relied upon in the complaint" or any "undisputedly authentic document that a defendant attaches as an exhibit to a motion to dismiss if the plaintiff's claims are based on the document." In re Asbestos Prod. Liability Litig. (No. VI) , 822 F.3d 125, 134 n.7 (3d Cir. 2016).

To survive a 12(b)(6) motion, "a complaint must contain sufficient factual matter ... to ‘state a claim to relief that is plausible on its face.’ " Id. (quoting Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 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." Id. "The plausibility standard is not akin to a ‘probability requirement,’ but it asks for more than a sheer possibility that a defendant has acted unlawfully." Id.

III. DISCUSSION

Plaintiffs allege that Defendant's denial of coverage under the Policy for losses suffered as a result of the COVID-19 pandemic constituted a breach of the insurance contract, and that Defendant's denial of such coverage and its investigation with respect thereto were made in bad faith and violated the NJCFA. The Court disagrees and addresses each claim in turn.

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