Case Information
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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:
100 ORCHARD STREET, LLC, :
:
Plaintiff, :
: 20-CV-8452 (JMF) -v- : : MEMORANDUM OPINION
THE TRAVELERS INDEMNITY INSURANCE : AND ORDER COMPANY OF AMERICA, :
:
Defendant. :
:
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JESSE M. FURMAN, United States District Judge:
This case is one of many insurance coverage disputes arising out of the COVID-19 pandemic. Plaintiff 100 Orchard Street, LLC (“Orchard Street”), which owns and operates the Blue Moon Hotel (the “Hotel”) in New York City, alleges that its business was severely damaged by the COVID-19 virus, which “was present at and within” the Hotel and “render[ed] the premises unsafe,” and by restrictions that the State and local governments imposed on travel, non-essential businesses, and gatherings in an effort to slow the spread of the virus. ECF No. 23 (“Am. Compl.”), ¶¶ 14, 28-29, 84, 93-99. Orchard Street filed a claim for its losses under a commercial insurance policy (the “Policy”) issued by the Travelers Indemnity Company of America (“Travelers”). ¶¶ 32, 35; see ECF No. 23-1 (“Policy”). On July 2, 2020, Travelers denied the claim, stating, as relevant here, that the Business Income, Extra Expense, and Civil Authority Clauses of the Policy — each of which covers loss of business income under certain circumstances — did not apply to Orchard Street’s claimed losses and that, even if they did, the losses were expressly excluded from coverage under the Policy’s Virus Exclusion Clause. Am. Compl. ¶ 35; ECF No. 23-2, at 1-4; see also Policy 44-45, 135. [2] This litigation — in which Orchard Street seeks a declaration that the Policy “includes coverage for losses caused by the Coronavirus” and by “the Civil Authority Orders” issued in response thereto, Am. Compl. ¶ 161 — followed. Travelers now moves, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, to dismiss the Amended Complaint. ECF No. 24. [3]
Travelers is entitled to dismissal because, even drawing all reasonable inferences in
Orchard Street’s favor, the Amended Complaint fails “to state a claim to relief that is plausible
on its face.”
Bell Atl. Corp. v. Twombly
,
Ultimately, however, the Court need not and does not decide that question — which
Travelers addresses only in a footnote,
see
Def.’s Mem. 7 n.5 — because the Policy contains a
Virus Exclusion Clause that independently and unambiguously bars coverage of Orchard Street’s
business losses at issue.
See
Def.’s Mem. 11-14. The Clause, which modifies all coverage under
gov/news/governor-cuomo-issues-guidance-essential-services-under-new-york-state-pause-
executive-order. Accordingly, access to the Hotel was not “prohibited.”
Jeffrey M. Dressel, D.D.S., P.C. v. Hartford Ins. Co. of the Midwest
, No. 20-
CV-2777 (KAM) (VMS),
the Commercial Property Coverage Part of the Policy, including the Business Income, Extra Expense, and Civil Authority Clauses, states as follows: “We will not pay for loss or damage caused by or resulting from any virus, bacterium or other microorganism that induces or is capable of inducing physical distress, illness or disease.” Policy 135; see id. at 5, 44-45. It is undisputed that COVID-19 is a viral disease, as Orchard Street acknowledges in its pleadings. , Am. Compl. ¶¶ 14, 59 (describing “the COVID-19 virus” and “[t]he virus that causes COVID-19”); id. ¶ 15 (alleging that infection with COVID-19 “may produce deadly results to human beings”). And Orchard Street attributes its alleged losses to “[t]he COVID-19 pandemic” generally; the “continuous presence of the coronavirus,” i.e., the virus that causes COVID-19, “on or around [the Hotel’s] premises”; and government orders that “were issued in direct response to both the spread and physical presence of COVID-19 on persons and property.” ¶¶ 51, 100-101, 152. It follows that Orchard Street’s business losses were plainly “caused by,” or at least “result[ed] from,” a “virus” that “is capable of inducing physical distress, illness or disease,” Policy 135, and are unambiguously excluded from coverage under the Policy.
Orchard Street’s arguments to the contrary are unpersuasive. First, Orchard Street argues
that the “legal proximate cause” of its losses was the government orders issued in response to the
pandemic, not the virus itself. Pl.’s Opp’n 7. Orchard Street further notes that the Policy —
unlike some other insurance contracts that courts have considered in the COVID-19 context —
does not contain “anti-concurrent causation language,” meaning language specifying that losses
caused by a virus are excluded from coverage regardless of any other causes that may have
contributed to the loss. at 8. Be that as it may, COVID-19 is the “efficient proximate cause”
of any business losses resulting from government restrictions imposed in an effort to contain the
virus. “The efficient proximate cause of a loss is the cause that originally sets other events in
motion,” although courts must not “trace events back to their metaphysical beginnings.”
Parks
Real Est. Purchasing Grp. v. St. Paul Fire & Marine Ins. Co.
,
Second, Orchard Street argues that the Virus Exclusion Clause does not explicitly apply
to losses caused by “a national state of disaster like the current pandemic.” Pl.’s Opp’n 7. But in
the context of a viral pandemic, “the word ‘pandemic’ describes a disease’s geographic
prevalence”; “it does not replace disease as the harm-causing agent.”
Boxed Foods Co. v. Cal.
Cap. Ins. Co.
,
Finally, Orchard Street cites
Urogynecology Specialist of Florida LLC v. Sentinel
Insurance Co.
,
For the foregoing reasons, Travelers’s motion to dismiss is GRANTED, and Orchard
Street’s Amended Complaint is dismissed in its entirety. Moreover, the Court declines to grant
Orchard Street leave to amend its Amended Complaint
sua sponte
. Although leave to amend a
complaint should be freely given “when justice so requires,” Fed. R. Civ. P. 15(a)(2), it is
“within the sound discretion of the district court to grant or deny leave to amend,”
Broidy Cap.
Mgmt. LLC v. Benomar
,
The Clerk of Court is directed to terminate ECF No. 24, to enter judgment for Defendant consistent with this Opinion and Order, and to close the case.
SO ORDERED. Dated: June 8, 2021 __________________________________
New York, New York JESSE M. FURMAN United States District Judge
Notes
[1] These facts — which are drawn from the Amended Complaint, documents incorporated
by reference therein, and materials of which the Court may take judicial notice — are assumed to
be true for purposes of this motion.
Kleinman v. Elan Corp.
,
[2] Citations to the Policy refer to the page numbers automatically generated by the Court’s ECF system.
[3] The parties agree that New York law governs interpretation of the Policy,
see
ECF No.
26 (“Def.’s Mem.”), at 9; ECF No. 28 (“Pl.’s Opp’n”), at 10, which “is sufficient to establish
choice of law,”
Alphonse Hotel Corp. v. Tran
,
[4] The Civil Authority Clause also requires that “[a]ccess” to the insured premises was
“prohibited by civil authority.” Policy 45. Orchard Street repeatedly alleges that the restrictions
imposed by the State and local governments “prohibited access” to the Hotel. Am. Compl. ¶¶ 20, 30, 50, 101, 128-29, 147-48, 150-51;
see also id.
¶ 102 (“As of March 22, 2020, Governor
Cuomo ordered all ‘non-essential businesses’ statewide to be closed.” (citing N.Y. Exec. Order
No. 202.6 (Mar. 18, 2020))). But official guidance interpreting Executive Order 202.6 — of
which the Court can take judicial notice,
see Reynolds v. City of Mount Vernon
, No. 14-CV-1481
(JMF),
[6] In the Amended Complaint, Orchard Street also quotes from a separate provision of the Policy covering Building and Personal Property. Am. Compl. ¶¶ 24, 110; see Policy 24 (covering “direct physical loss of or damage to Covered Property at the premises described in the Declarations caused by or resulting from a Covered Cause of Loss”). The Building and Personal Property Clause also falls within the Commercial Property Coverage Part of the Policy and is thus subject to the Virus Exclusion Clause. See Policy 5, 24.