WM Bang LLC v. Travelers Cas. Ins. Co. of Am.

559 F.Supp.3d 225

WM BANG LLC and JBang LLC d/b/a Bang, on behalf of themselves and all others similarly situated, Plaintiffs,

v.TRAVELERS CASUALTY INSURANCE COMPANY OF AMERICA, Defendant.

No. 20-CV-4540 (KMK)

United States District Court, S.D. New York.

Signed September 13, 2021

Greg F. Coleman, Esq., Alex R. Straus, Esq., Milberg Coleman Bryson Phillips Grossman, PLLC, Knoxville, TN, Beverly Hills, CA, Counsel for Plaintiffs.

Shannon J. Carson, Esq., Berger Montague PC, Philadelphia, PA, Counsel for Plaintiffs.

Wystan M. Ackerman, Esq., Robinson & Cole LLP, Hartford, CT, Counsel for Defendant.

OPINION & ORDER

KENNETH M. KARAS, District Judge:

WM Bang LLC and JBang LLC D/B/A Bang (collectively, "Plaintiffs") bring this Action on behalf of themselves and all others similarly situated, against Travelers Casualty Insurance Company of America ("Defendant") for breach of contract claims and declaratory judgment under the Business Income and Civil Authority provisions of an insurance policy issued by Defendant for losses related to the COVID-19 pandemic and government orders issued in connection with it. Before the Court is Defendant's Motion to Dismiss (the "Motion," Dkt. No. 34). For the reasons that follow, the Motion is granted.

I. Background

A. Factual Background

The following facts are taken from Plaintiffs’ Amended Complaint, (Am. Compl. (Dkt. No. 21)), and the accompanying documents attached to it, and are assumed true for purposes of deciding the Motion.

Plaintiffs own and operate a restaurant named Bang in a shopping mall in White Plains, New York (the "Restaurant"), which "was forced to significantly curtail its services due to Orders issued by the State of New York" (the "Orders") "in connection with the COVID-19 pandemic ...." (Am. Compl. ¶ 1.) Plaintiffs purchased an "all risk" Businessowners Property Coverage policy from Defendant (the "Policy"). (Def.’s Ex. A (the "Policy") (Dkt. No. 35-1.))¹ Among other coverages, the Policy specifically includes coverage for Business Income for twelve (12) months of actual loss sustained and coverage for action of Civil Authority for three weeks. (Am. Compl. ¶ 3.) The Policy dictates that Defendant will pay "for direct physical loss of or damage to [the Restaurant] ... caused by or resulting from a Covered Cause of Loss." (Policy at 20–21.) A Covered Cause of Loss is defined as "RISKS OF DIRECT PHYSICAL LOSS," except those that are expressly listed in the Limitations or Exclusions sections of the Policy. (Policy at 21–22.) As part of the coverage, Defendant agreed to pay for Plaintiffs’ actual loss of Business Income due to the suspension of Plaintiffs’ operations caused by direct physical loss of or damage to the Restaurant. (Am. Compl. ¶ 15.) The Policy also includes Civil Authority coverage, under which Defendant agreed to pay for the actual loss of Business Income sustained when access to the insured premises is prohibited by actions of a civil authority "due to direct physical loss of or damage to property at locations, other than described premises, that are within 100 miles of the described premises, caused by or resulting from a Covered Cause of Loss." (Policy at 33.)

During the COVID-19 pandemic, the Orders issued by Governor Andrew M. Cuomo "prohibited Plaintiff[s’] business from being open and prohibited access to [the Restaurant.]" (Am. Compl. ¶¶ 22–25.) The Orders intended "to slow down the deadly and dangerous spread of the COVID-19 [virus]." (Id. ¶ 22.) For example, Governor Cuomo's March 7, 2020 order was issued because "travel-related cases and community transmission of COVID-19 have been documented in New York State and more [were] expected to continue." (Id. ¶ 24(a)). Plaintiffs were "forced to significantly curtail [their] services," and while "take-out or delivery for off-premise consumption" was permitted, for some period of time the Orders "prohibited [the Restaurant] from being open and prohibited access to [it]." (Id. ¶¶ 1, 24(c), 25.) Plaintiffs "have suffered direct physical loss of Business Income due to the necessary suspension of operations." (Id. ¶ 26.) The COVID-19 pandemic and the related Orders denied Plaintiffs access to the Restaurant. (Id. ¶ 29.)

Having suffered a loss of property and a suspension of operations, Plaintiffs submitted a claim to Defendant pursuant to the Policy's Business Income and Civil Authority coverage provisions, but Defendant denied Plaintiffs’ claim. (Id. ¶ 30.) Defendant explained that "[t]he presence or possible presence of the COVID-19 virus [did] not constitute ‘direct physical loss of or damage to property,’ " thus, "the limitations on [Plaintiffs’] business operations were the result of the [Orders] as opposed to ‘direct physical loss or damage to property at the described premises.’ " (Id. ¶ 30(a).) The denial further explained that "Covered Causes of Loss are ‘RISKS OF DIRECT PHYSICAL LOSS’ that are not otherwise limited or excluded, [and the Policy includes] an exclusion for ‘loss or damage caused by or resulting from any virus’—such as the COVID-19 virus—‘that induces or is capable of inducing physical distress, illness or disease.’ " (Id. ¶ 30(b).)

B. Procedural History

Plaintiffs filed the Complaint on June 12, 2020. (Dkt. No. 1.) On June 16, 2020, Plaintiffs filed a letter to request leave to file a corrected complaint to revise the second Plaintiff's name, which the Court granted. (Dkt. Nos. 5–6.) On June 18, 2020, Plaintiffs filed the corrected complaint. (Dkt. No 7.) On July 22, 2020, Defendant filed a letter regarding its anticipated motion to dismiss. (Dkt. No. 15.) In response, Plaintiffs requested the opportunity to amend the complaint, which the Court granted. (Dkt. Nos. 19–20.) On September 3, 2020, Plaintiffs filed the Amended Complaint. (Dkt. No. 21.) On November 24, 2020, the Court held a pre-motion conference and adopted a briefing schedule for Defendant's motion to dismiss. (See Dkt. (minute entry for Nov. 24, 2020).) On December 15, 2020, Defendant filed the Motion and accompanying papers. (Def.’s Not. of Mot. (Dkt. No. 34); Def.’s Mem. of Law in Supp. of Mot. To Dismiss. ("Def.’s Mem.") (Dkt. No. 35).) On January 5, 2021, Plaintiffs filed their Opposition. (Pls.’ Opp. to Def.’s Mot. To Dismiss ("Pls.’ Mem.") (Dkt. No. 36).) On January 19, 2021, Defendant filed its Reply. (Def.’s Reply Mem. of Law in Supp. of Mot. To Dismiss ("Def.’s. Reply") (Dkt. No. 37).)

Since filing the Motion and the supporting papers, the Parties have submitted numerous letters alerting the Court to new authority addressing the legal questions in this case. (See Dkt. Nos. 38–39, 41.)

II. Discussion

A. Standard of Review

The Supreme Court has held that although a complaint "does not need detailed factual allegations" to survive a motion to dismiss, "a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (alteration and quotation marks omitted). Indeed, Rule 8 of the Federal Rules of Civil Procedure "demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation." Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). "Nor does a complaint suffice if it tenders naked assertions devoid of further factual enhancement." Id. (alteration and quotation marks omitted). Instead, a complaint's "[f]actual allegations must be enough to raise a right to relief above the speculative level." Twombly , 550 U.S. at 555, 127 S.Ct. 1955. Although "once a claim has been stated adequately, it may be supported by showing any set of facts consistent with the allegations in the complaint," id. at 563, 127 S.Ct. 1955, and a plaintiff must allege "only enough facts to state a claim to relief that is plausible on its face," id. at 570, 127 S.Ct. 1955, if a plaintiff has not "nudged [his or her] claims across the line from conceivable to plausible, the[ ] complaint must be dismissed," id. ; see also Iqbal , 556 U.S. at 679, 129 S.Ct. 1937 ("Determining whether a complaint states a plausible claim for relief will ... be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense. But where 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.’ " (citation omitted) (alteration in original) (quoting Fed. R. Civ. P. 8(a)(2) )); id. at 678–79, 129 S.Ct. 1937 (" Rule 8 marks a notable and generous departure from the hypertechnical, code-pleading regime of a prior era, but it does not unlock the doors of discovery for a plaintiff armed with nothing more than conclusions.").

"[W]hen ruling on a defendant's motion to dismiss, a judge must accept as true all of the factual allegations contained in the complaint," Erickson v. Pardus , 551 U.S. 89, 94, 127 S.Ct. 2197, 167 L.Ed.2d 1081 (2007), and "draw[ ] all reasonable inferences in favor of the plaintiff," Daniel v. T & M Prot. Res., Inc. , 992 F. Supp. 2d 302, 304 n.1 (S.D.N.Y. 2014) (citing Koch v. Christie's Int'l PLC , 699 F.3d 141, 145 (2d Cir. 2012) ). Additionally, "[i]n adjudicating a Rule 12(b)(6) motion, a district court must confine its consideration to facts stated on the face of the complaint, in documents appended to the complaint or incorporated in the complaint by reference, and to matters of which judicial notice may be taken." Leonard F. v. Isr. Disc. Bank of N.Y. , 199 F.3d 99, 107 (2d Cir. 1999) (quotation marks omitted); see also Wang v. Palmisano , 157 F. Supp. 3d 306, 317 (S.D.N.Y. 2016) (same).

B. Analysis

1. Business Income Coverage

"Under New York law, insurance policies are interpreted according to general rules of contract interpretation." Olin Corp. v. Am. Home Assurance Co. , 704 F.3d 89, 98 (2d Cir. 2012) (footnote...