556 F.Supp.3d 437
D.N.J.2021Background
- Beniak Enterprises operates a New Jersey restaurant and held an IINA commercial-property “all-risk” policy effective Aug. 1, 2019–Aug. 1, 2020 that included Business Income (and Extra Expense) and Civil Authority coverages.
- Business Income coverage required a suspension “caused by direct physical loss of or damage to property” and by a “Covered Cause of Loss.”
- The policy contained a virus exclusion barring coverage for “loss or damage caused by or resulting from any virus, bacterium or other microorganism.”
- In March 2020 New Jersey closure and stay-at-home orders limited restaurants to takeout; Beniak alleged these orders forced it to cease ordinary operations and alleged direct physical loss or damage.
- Beniak sued for declaratory relief and breach of contract (class action), asserting business income, extra expense, and civil authority claims; IINA moved for judgment on the pleadings arguing (inter alia) that the virus exclusion bars coverage.
- The court granted judgment for IINA, holding the virus exclusion bars Beniak’s claims because the closure orders were issued in response to COVID-19 (a viral cause excluded by the policy), so they could not trigger coverage.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Business Income / Extra Expense coverage was triggered by COVID-19 closures because of "direct physical loss or damage" | Beniak: inability to use premises for intended purpose = direct physical loss/damage | IINA: policy requires actual physical loss/damage and plaintiff alleges none | Not decided on the merits; disposition rests on virus exclusion (motion granted for IINA) |
| Whether Civil Authority coverage is triggered by government closure orders | Beniak: closure orders prohibited access and thus trigger civil authority coverage | IINA: orders were enacted in response to COVID-19 (an excluded virus) and civil authority coverage requires the orders to respond to a Covered Cause of Loss | Court held civil authority coverage cannot be triggered because the orders responded to an excluded peril (virus exclusion) |
| Whether the Appleman (efficient proximate cause) rule saves coverage despite the virus exclusion | Beniak: the proximate cause of loss was the closure orders (not the virus); absence of an anti-concurrent-cause clause means exclusion shouldn’t apply | IINA: the orders and losses are inextricably linked to COVID-19, which the policy excludes | Court rejected Plaintiff’s Appleman argument: because the closure orders were issued in response to COVID-19 (an excluded cause), the virus exclusion bars recovery even without an anti-concurrent clause |
Key Cases Cited
- Ramara, Inc. v. Westfield Ins. Co., 814 F.3d 660 (3d Cir. 2016) (insurance-policy interpretation is a question of law)
- Zacarias v. Allstate Ins. Co., 775 A.2d 1262 (N.J. 2001) (give policy language its plain, ordinary meaning)
- Flomerfelt v. Cardiello, 997 A.2d 991 (N.J. 2010) (policy exclusions are construed against insurer but courts enforce plain meaning)
- N.J. Transit Corp. v. Certain Underwriters at Lloyd’s London, 221 A.3d 1180 (N.J. Super. Ct. App. Div. 2019) (discussing the efficient proximate-cause / Appleman rule)
- Auto Lenders Acceptance Corp. v. Genteli Ford, Inc., 854 A.2d 378 (N.J. 2004) (recovery may be allowed when insured risk was last step in chain of causation)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility pleading standard)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (plausibility standard requires factual content to support reasonable inference of liability)