Vita Coffee LLC v. Fireman's Fund Insurance Company

VITA COFFEE LLC, et al, Plaintiffs, v. FIREMAN'S FUND INSURANCE COMPANY, et al., Defendants.

No. 2:20-cv-01079-BJR

United States District Court, W.D. Washington, Seattle

July 21, 2021

ORDER DENYING MOTION FOR RECONSIDERATION

I. INTRODUCTION

Before the Court is Plaintiffs ES Restaurant Group, 13 Coins Management, LLC, and Canlis, Inc.'s Motion for Reconsideration. Mot. for Recons., Dkt. No. 69 (“Mot.”). Other Plaintiffs in this consolidated action joined the Motion after its submission.^[1]Having reviewed the Motion, the oppositions thereto, the record of the case and the relevant legal authorities, the Court will deny Plaintiffs' Motion.

II. BACKGROUND

This matter is one amongst a multitude of cases across the United States in which businesses are seeking coverage from their insurance companies for income lost due to the COVID-19 pandemic. This District chose to assign all such matters to the undersigned who consolidated the earliest of these actions into ten cases based on insurance group. See Order on Consolidation, Dkt. No. 36. The Court recently published an Order addressing all ten consolidated cases, holding there was no coverage for losses due to COVID-19. See Order Granting Mots. to Dismiss, Dkt. No. 66 (“Order on Consolidated Cases”).^[2]

In that Order, the Court held that all of the relevant policies required “direct physical loss of or damage to” covered property to trigger coverage and COVID-19 did not cause such loss or damage. Id. at 15-25. Additionally, the Court held that extension provisions, such as Extra Expense or Civil Authority, failed to provide independent grounds for coverage where coverage was not triggered in the first instance. Id. at 25-28. The Court addressed the specific claims of the Plaintiffs currently before the Court, who all purchased insurance from Defendant Fireman's Fund or an affiliate. Id. at 51-58. In addition to reaffirming its general findings that coverage was not available based on the lack of physical loss or damage, the Court rejected arguments that certain Plaintiffs were entitled to coverage under unique Crisis Event Business Income, Communicable Disease Coverage, Dependent Property Coverage, and Business Access Coverage provisions. Id. at 54-57.

On June 11, 2021, ES Restaurant, 13 Coins, and Canlis submitted the now-pending Motion for Reconsideration. Mot., Dkt. No. 69. They claim the Court committed manifest error in three areas: (1) in relying on the wrong dictionary definition of “loss”; (2) in failing to properly consider Washington state precedent; and (3) in misapplying the Federal Rule of Civil Procedure 12(b)(6) standard. Mot. at 3-8.

III. LEGAL STANDARD

“Motions for reconsideration are disfavored” and “[t]he court will ordinarily deny such motions in the absence of a showing of manifest error in the prior ruling or a showing of new facts or legal authority which could not have been brought to its attention earlier with reasonable diligence.” Local Rules W.D. Wash. LCR 7(h)(1); see also Standing Order for All Civil Cases, Dkt. No. 26 at 4 (stating that Motions for Reconsideration are “discouraged” and that “Motions which reassert prior arguments or raise new arguments that could have been made earlier will be summarily denied”).

IV. DISCUSSION

A. Direct Physical Loss or Damage

All of the relevant policies require “direct physical loss or damage” or “direct physical loss of or damage to” covered property to trigger coverage. Order on Consolidated Cases at 53-54 (quoting Decl. of Anthony Todaro, Ex. A, Dkt. No. 11-1 at 30 (Policy of Vita Coffee, hereinafter “Vita Coffee Policy”)). In determining the meaning of “loss” in this undefined policy term, the Court turned to the dictionary to decipher its common meaning, finding helpful the definitions “the act or fact of being unable to keep or maintain something” or “the act of losing possession” of something. Order on Consolidated Cases at 18 (quoting Loss, Merriam-Webster.com, https://www.merriam-webster.com/dictionary/loss (last visited May 28, 2021)). Based on its analysis, the Court determined that the relevant policies did not cover intangible loss of use, functionality, or, as the Court's Order termed, “purely economic losses.” Id. at 19.

Plaintiffs' Motion for Reconsideration faults the Court for relying on these definitions, rather than adopting a more favorable one that would have included the loss of use or functionality, as in another definition provided by Webster's Dictionary. Mot. at 3-4 (including the definition “the partial or complete deterioration of or absence of physical capability or function” (quoting Loss, Merriam-Webster Dictionary, https://www.merriam-webster.com/dictionary/loss (last visited June 7, 2021))).

As the Court outlined in its previous Order, the Court gives undefined terms in an insurance policy their “plain, ordinary, and popular meaning.” Order on Consolidated Cases at 13 (quoting Xia v. ProBuilders Specialty Ins. Co., 400 P.3d 1234, 1240 (Wash. 2017)). This meaning is determined according to the “expectations of the average insurance purchaser” as, when “constru[ing] the language of an insurance policy, [the Court] give[s] it the same construction that an average person purchasing insurance would give the contract.” McLaughlin v. Travelers Com. Ins. Co., 476 P.3d 1032, 1037 (Wash. 2020) (quoting Woo v. Fireman's Fund Ins. Co., 164 P.3d 454, 459 (Wash. 2007)). In determining ordinary meaning, the Court may make “reference to dictionary definitions.” Kut Suen Lui v. Essex Ins. Co., 375 P.3d 596, 601 (Wash. 2016) (citing Queen City Farms, Inc. v. Cent. Nat'l Ins. Co. of Omaha, 882 P.2d 703, 718 (Wash. 1994)). If, after such an examination, the Court determines that the undefined term is ambiguous-or “‘susceptible to more than one reasonable interpretation'”-the Court only then “adopt[s] the definition that most favors the insured.” McLaughlin, 476 P.3d at 1037 (emphasis added) (quoting Holden v. Farmers Ins. Co. of Wash, 239 P.3d 344, 347 (Wash. 2010)).

Plaintiffs' argument fails because their preferred definition incorporating loss of intangible functionality is unreasonable given the context of the term. Washington law-as just outlined-provides no rule prioritizing or ranking dictionary definitions. Instead, the dictionary is a tool courts may use in determining the common meaning of an undefined term; its definitions are not “controlling.” Jack v. Standard Marine Ins. Co., of Liverpool, England, 205 P.2d 351, 354 (Wash. 1949).

Merely because a single word may have multiple dictionary definitions designed to help a reader understand its bounds, does not make the word ambiguous when used in a contract. If this were the case, ambiguity would abound as the English language is often a many, varied, and enigmatic thing. Instead, the Court uses context, meaning, and usage to determine the intent the parties ascribed when utilizing certain commonly understood language. See State Farm Fire & Cas. Co. v. Ham & Rye, LLC, 174 P.3d 1175, 1178 (Wash.Ct.App. 2007) (“Insurance policies are contracts, and courts seek to determine the contracting parties' intent by resorting to a fair, reasonable, and sensible construction of the contract's language, as the average insurance purchaser would understand it.” (citing Am. Nat. Fire Ins. Co. v. B & L Trucking & Constr. Co., 951 P.2d 250, 256 (Wash. 1998))). Singular words and terms cannot be understood in isolation, as policies must be construed holistically. See Certification from U.S. Dist. Ct. ex rel. W. Dist. of Wash. v. GEICO Ins. Co., 366 P.3d 1237, 1239 (Wash. 2016).

Here, “loss” is modified by the preceding “physical, ” appears in close proximity to “damage, ” and affects real property. See Vita Coffee Policy at 83 (defining “Property Insured” as “business real property, business personal property, or both”). This unique linguistic phrase appears throughout the relevant policies, promoting a consistent understanding of the term in context rather than one of “loss” in isolation. An understanding promoting an intangible “loss of use” cannot reasonably be squared with the use and construction of the phrase which requires a causal event to produce a physical effect similar to damage on real property, as the placement of “loss” in the phrase grammatically requires. This understanding fits with the purpose of property insurance as, after all, commercial property insurance is designed to insure, first and foremost, the business's physical property. See Vita Coffee Policy at 30 (beginning with Property Coverage, requiring “direct physical loss or damage to Property Insured, ” and, only after, providing Business Income and Extra Expense Coverage covering lost earnings “arising from direct physical loss or damage to property”).

The Court went into greater depths in its previous Order, and will not do so again here. See Order on Consolidated Cases at 15-21. Suffice it to say, the Court finds no manifest error in discounting a non-controlling dictionary definition that does not comport with the actual use of the defined word in the insurance policy.

B. Washington State Precedents

In construing the terms of an insurance policy, federal courts sitting in diversity, as this one does here, apply state substantive law, including the state substantive law regarding insurance policy construction. Order on Consolidated Cases at 13 (citing Indian Harbor Ins. Co v. City of Tacoma Dep't of Pub. Utils., 354 F.Supp.3d 1204, 1212 (W.D. Wash. 2018)). In its Order on Consolidated Cases, the Court surveyed the relevant state caselaw regarding commercial property insurance and determined that no Washington Supreme Court precedent controlled, leading the Court to predict how the Washington Supreme Court would hold. Id. at 22-25 (“Where the state's highest c...