492 F.Supp.3d 417
E.D. Pa.2020Background
- Plaintiffs Rhonda Hill Wilson and her law firm (both Pennsylvania) sought business‑income and civil‑authority coverage under a Hartford commercial policy after COVID‑19 closure orders forced their office to close on March 19, 2020.
- The Policy includes Civil Authority, Business Income, and a Limited Fungi/Bacteria/Virus Additional Coverage (capped at $50,000), but also contains a broad virus exclusion that precludes coverage for loss “caused directly or indirectly by … virus,” with an anti‑concurrent causation clause.
- Plaintiffs alleged the coronavirus caused direct physical loss/damage to their premises and submitted a claim on April 12, 2020; Hartford denied coverage April 13, 2020.
- Hartford removed the case to federal court; Plaintiffs moved to remand and to dismiss for lack of jurisdiction; both defendants moved to dismiss for failure to state a claim.
- The Court held (1) amount‑in‑controversy is measured as of the complaint at removal (so remand denied), (2) Plaintiffs’ legal claims are jurisdictionally independent from the declaratory claim (jurisdiction retained), and (3) on the merits the virus exclusion unambiguously bars coverage so all Counts were dismissed with prejudice as to Hartford and USI (and USI was dismissed also because it was not a party to the policy).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Amount in controversy for removal | Amended complaint alleges < $75,000 so remand warranted | Amount in controversy is measured at time of removal based on the initial complaint, which sought > $50,000 on multiple claims | Denied remand; amount in controversy measured at removal and exceeded $75,000 |
| Whether declaratory claim requires remand | Declaratory claim plus legal claims warrants dismissal/remand | Legal claims are independent and invoke diversity jurisdiction; court should retain | Denied dismissal/remand; applied Rarick independent‑claim test and kept case |
| Whether policy covers COVID‑19 business losses or is barred by virus exclusion | COVID‑19 caused direct physical loss so coverage applies; limited virus endorsement may apply | Policy contains an unambiguous virus exclusion (with anti‑concurrent causation); limited endorsement is narrow and capped; no factual basis to invoke exemptions | Dismissed on merits: virus exclusion bars coverage; exemptions do not plausibly apply |
| Liability of broker‑agent (USI) | USI participated in procurement/handling and can be liable (agency/other theories) | USI is not a party to the policy and Plaintiffs plead no independent wrongdoing | Dismissed: Plaintiffs pled no independent allegations against USI and would fail on merits even under agency theory |
Key Cases Cited
- Rarick v. Federated Serv. Ins. Co., 852 F.3d 223 (3d Cir. 2017) (adopted the independent‑claim test for retaining federal jurisdiction when declaratory and legal claims coexist)
- Werwinski v. Ford Motor Co., 286 F.3d 661 (3d Cir. 2002) (amount in controversy is assessed as of the time of removal)
- Frederico v. Home Depot, 507 F.3d 188 (3d Cir. 2007) (challenger to removal must prove to a legal certainty that amount in controversy does not exceed threshold)
- Judon v. Travelers Prop. Cas. Co. of Am., 773 F.3d 495 (3d Cir. 2014) (clarified burden of proof standards for amount in controversy challenges)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (pleading must present plausible entitlement to relief beyond mere labels and conclusions)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (pleading must include factual content permitting plausible inference of liability)
- 401 Fourth St., Inc. v. Investors Ins. Group, 879 A.2d 166 (Pa. 2005) (when policy language is clear and unambiguous, courts must give effect to it)
- Colella v. State Farm Fire & Casualty Co., [citation="407 F. App'x 616"] (3d Cir. 2011) (anti‑concurrent causation clauses may negate application of concurrent causation rules under Pennsylvania law)