MASHANTUCKET PEQUOT TRIBAL NATION v. FACTORY MUTUAL INSURANCE COMPANY
(AC 45600)
Appellate Court of Connecticut
Argued October 10, 2023—officially released April 2, 2024
Bright, C. J., and Alvord and Pellegrino, Js.
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Syllabus
The plaintiff, a federally recognized Indian Tribe, owns and operates, inter alia, a casino and resort complex. The defendant insurance company issued the plaintiff an all risk insurance policy, which covered the plaintiff‘s listed properties against all risks of physical loss or damage and for business interruptions up to $1,655,000,000 per occurrence. These coverages were triggered by physical loss or damage to covered property; that threshold language was not defined in the policy. The policy also included coverage for certain specified events, including for a response to a communicable disease and communicable disease business interruption loss. The policy contained an exclusion to covered costs for contamination due to a virus. As a result of the COVID-19 pandemic, the plaintiff claimed that it suffered, inter alia, physical loss and damage to its locations and properties in excess of $76 million. Upon the defendant‘s denial of the plaintiff‘s claim, the plaintiff sought, inter alia, a declaratory judgment that the defendant was required to provide coverage for the losses that the plaintiff sustained as a result of its suspension of business operations during the COVID-19 pandemic. The plaintiff claimed that the presence of COVID-19 fell within several of the provisions within the policy and that the policy‘s exclusion for contamination by a virus did not apply. The plaintiff maintained that the virus could be spread in many ways, could remain viable for many days on objects, surfaces, and materials, and that physical alterations of its property as a result of the presence of COVID-19 rendered the property nonfunctional, unsafe, and unusable. In addition, the plaintiff alleged that it suffered business interruption losses due to the presence of COVID-19, as the plaintiff‘s businesses were required to shut down or limit their operations pursuant to orders from tribal and state governments and to mitigate its losses. The defendant filed a motion to strike the plaintiff‘s operative complaint, asserting that the relief the plaintiff sought was unavailable under the clear and unambiguous language of the policy and that the exclusion for contamination by a virus barred the plaintiff‘s claims. The trial court granted in part the defendant‘s motion to strike, concluding that, although the plaintiff purchased an all risk policy, the unambiguous language of the policy provided exclusions and limits for various specified damages. The trial court determined that COVID-19 was a virus, the virus was considered contamination, and, accordingly, contamination by a virus was not covered by the policy. The trial court found, however, that claims for costs under the provisions for communicable disease response and communicable disease business interruption losses were covered, although coverage was capped at $1 million under each of those provisions, and denied the motion to strike as to these claims. The trial court also declined to address whether alleged damage from COVID-19 constituted physical damage to, or loss of, property. On appeal to this court, the plaintiff claimed that it had sufficiently and specifically pleaded that COVID-19 physically altered its property, that the trial court improperly concluded that the exclusion for contamination by a virus applied to its claims for coverage, and that the policy expressly recognized the presence of a communicable disease as a physical loss or damage. Held that the trial court properly granted in part the defendant‘s motion to strike, that court having properly concluded that the contamination exclusion applied and defeated the plaintiff‘s claims for coverage under the property damage and business interruption loss provisions: the plaintiff‘s allegations in its operative complaint did not establish that COVID-19 caused physical loss or damage to its properties, and, therefore, the allegations were insufficient to trigger coverage under the policy for property damage or business interruption losses, as the plaintiff failed to allege facts showing the manner in which COVID-19 caused a physical, tangible alteration to or resulted in the deprivation of property that rendered it physically unusable or inaccessible, and, instead, offered conclusory allegations that COVID-19 caused a risk of physical loss or damage and that the presence of COVID-19 constituted a risk of physical loss or damage; moreover, the trial court properly concluded that the unambiguous language of the contamination exclusion specifically excluded coverage for any cost resulting from the presence of COVID-19 from the physical loss or damage and business loss interruption provisions; furthermore, the plaintiff could not prevail on its claim that the actual presence of a communicable disease such as COVID-19 constituted physical loss or damage under the policy‘s communicable disease response provision, as that provision did not require physical loss or damage, was triggered only if a location has the actual, not suspected, presence of a communicable disease and access was limited by an officer of the plaintiff or a government agency regulating the disease‘s presence, and this coverage provided only for the reasonable and necessary costs for cleanup, removal, and disposal of the disease from the property; additionally, the plaintiff could not prevail on its claim that the issue of whether COVID-19 physically altered property could not be determined at the motion to strike phase of the litigation, as our Supreme Court and other courts have already determined, even at the pleading stage, that properties were not altered as a result of the COVID-19 pandemic, and the plaintiff in the present matter pleaded only conclusory allegations that COVID-19 caused physical, tangible alteration to property, but did not provide any specifics as to how the property purportedly was altered.
Action, inter alia, seeking a declaratory judgment determining the applicability of certain coverage provisions under an insurance policy issued by the defendant to the plaintiff, and for other relief, brought to the Superior Court in the judicial district of New London, where the matter was transferred to the judicial district of Hartford, Complex Litigation Docket; thereafter, the court, Moukawsher, J., granted in part the defendant‘s motion to strike; subsequently, the parties filed a joint stipulation in which the plaintiff withdrew with prejudice its remaining claims; thereafter, the court, Noble, J., granted the plaintiff‘s motion for judgment and rendered judgment thereon, from which the plaintiff appealed to this court. Affirmed.
Michael C. D‘Agostino, with whom, on the brief, was Sergio F. Oehninger, pro hac vice, for the appellant (plaintiff).
Bryce L. Friedman, pro hac vice, with whom were Matthew C. Penny, pro hac vice, and Andraya Pulaski Brunau, for the appellee (defendant).
Opinion
PELLEGRINO, J. The issue at the core of this appeal is, in the context of a dispute regarding insurance coverage for business losses suffered as a result of the COVID-19 pandemic, whether the operative complaint contained sufficient allegations to withstand a motion to strike pursuant to
The following facts, as alleged in the first amended complaint (operative complaint), and procedural history are relevant to our resolution of this appeal. The plaintiff, a federally recognized Indian Tribe headquartered at a reservation located within the geographic boundaries of Connecticut, operates and has an interest in a number of businesses, including the Mashantucket Pequot Gaming Enterprise, doing business as Foxwoods Resort Casino, a resort and casino complex that includes multiple casinos, hotels, theaters and restaurants. The defendant, a Rhode Island insurance company licensed to write commercial property insurance in Connecticut, sold an “all risk” insurance policy (policy) to the plaintiff, which covers “[the plaintiff] and any subsidiary, and [the plaintiff‘s] interest in any partnership or joint venture in which [the plaintiff] has management control or ownership as now constituted or hereafter is acquired . . . .”1 The term of this policy is from July 1, 2019, through July 1, 2020, and covers the plaintiff‘s listed property against all risks of (1) physical
The plaintiff claimed that it suffered direct physical loss and damage to locations and properties insured under the policy, as well as time element loss, and other types of covered losses in excess of $76 million as a result of the “deadly and highly contagious” COVID-19 disease, which the World Health Organization declared to be a pandemic on March 11, 2020.4 The plaintiff contended that “COVID-19 causes a physical, tangible alteration to property, and the presence of COVID-19 amounts to physical loss and damage to property.” Specifically, the plaintiff maintained that COVID-19 can be spread in several ways, including from person-to-person via respiratory droplets, through airborne transmission, and by contact with objects or surfaces. The plaintiff also asserted that COVID-19 can remain viable for many days on objects, surfaces, or materials, including those used in the ordinary course of business by the plaintiff. The plaintiff claimed that physical alterations of its property as a result of the presence of COVID-19 rendered it nonfunctional, unsafe, or unusable.5
The all risk insurance policy that the plaintiff purchased from the defendant provided various types of coverages, including for the aforementioned physical loss or damage and time element loss, as well as additional coverages for certain specified events, such as the response to a communicable disease such as COVID-19. In other words, the policy included numerous coverage provisions, the majority of which are not mutually exclusive. The plaintiff alleged that the presence of COVID-19 fell within several of the coverages contained in the policy. The plaintiff also claimed that the policy‘s exclusion for contamination due to a virus did not apply. The plaintiff submitted a claim under the policy, which the defendant denied.6
In its operative complaint, the plaintiff sought a declaratory judgment7 and also alleged claims for breach of contract,8 common-law bad faith,9 and violations
On May 4, 2021, the defendant filed a motion to strike the operative complaint pursuant to
Next, the defendant argued that the court should strike counts one and two of the operative complaint because the policy excluded contamination by a virus, and COVID-19 is caused by the Severe Acute Respiratory Syndrome Coronavirus 2, known as the SARS-CoV-2 virus. The defendant contended that the policy did not provide coverage for property damage or time element losses resulting from a virus, as stated in the contamination exclusion. Additionally, the defendant asserted that, because COVID-19 did not cause physical loss or damage to property, most of the coverages in the insurance policy did not apply. With respect to the additional coverage for the actual presence of a communicable disease, which did not require physical loss or damage to property, the defendant asserted that the plaintiff had
On June 16, 2021, the plaintiff filed a memorandum of law in opposition to the defendant‘s motion to strike. At the outset, it stated that, unlike other insurance companies, the defendant “issued a unique policy form to the [plaintiff] that expressly covers communicable disease as insured physical loss or damage.” (Emphasis in original; internal quotation marks omitted.) Additionally, it explained that COVID-19 is not a virus but rather a communicable disease caused by SARS-CoV-2. Next, the plaintiff contended that it had pleaded the actual presence of COVID-19 at its business locations. The plaintiff then argued that the contamination exclusion contained in the policy did not exclude coverage for loss caused by a communicable disease. Finally, the plaintiff countered that it sufficiently had alleged claims for common-law bad faith and violations of CUTPA in counts three and four of the operative complaint.
On July 14, 2021, the defendant filed a reply memorandum of law in support of its motion to strike. Therein, the defendant repeated that (1) the contamination exclusion barred the plaintiff‘s claims for losses caused by COVID-19, (2) the plaintiff failed to plead sufficient facts establishing that COVID-19 tangibly altered the property as required by case law to meet the policy‘s threshold requirement of physical loss or damage for the property damage and time element loss coverages, (3) the plaintiff failed to allege the actual presence of COVID-19 and, therefore, the claim under the communi-cable disease coverage provision failed, and (4) counts three and four of the operative complaint alleging common-law bad faith and CUTPA violations should be stricken because the complaint failed to establish that the plaintiff was entitled to coverage under the policy. Additionally, it emphasized that the operative complaint had referred to SARS-CoV-2, a virus, and COVID-19, a communicable disease, collectively as COVID-19.
On August 18, 2021, the court, Moukawsher, J., issued a memorandum of decision granting, in part, the defendant‘s motion to strike. At the outset, the court explained that, although the plaintiff purchased an all risk insurance policy with approximately $1.6 billion in coverage, the language of the policy provided exclusions and limits for various specified damages. It also concluded that the policy language was unambiguous, and, therefore, the court would interpret the policy coverage as a matter of law. The court then stated: “After reading [the policy], any reasonable person would have to conclude that a virus is a contamination and contamination isn‘t covered. It means that . . . the policy assumes, unless otherwise provided for, that no costs due to a virus are covered—costs like those incurred when the Pequot casino was shuttered by government edict, lost business, and had to be cleaned up and recalibrated.” The policy, however, contained two types of “extra” coverages; namely, for communicable disease response costs and communicable disease business interruption loss (communicable disease provisions).13 These provisions were capped in the aggregate at $1 million
The court concluded that all four counts of the operative complaint survived the partial granting of the defendant‘s motion to strike, but that certain arguments had been resolved. “To the extent that counts one and two claim no limit bars or exclude the [plaintiff‘s] claims for coverage beyond the communicable disease provisions and their liability limits, the court strikes those allegations because they fail as a matter of law. To the extent that [it seeks] covered costs under the policy provisions for communicable disease response and [communicable disease business interruption loss], the motion to strike is denied. . . . Counts three and four of the complaint are for bad faith and unfair trade practices. [The defendant] moves to strike them because they are dependent on there being coverage, and [the defendant] says there isn‘t any coverage. Because the court has held [that] there is some coverage, [the defendant‘s] motion to strike these claims is granted and denied to the same extent it is granted and denied as to counts one and two. . . . In short, what is left of the [plaintiff‘s] claim under the policy is for covered costs under the provisions granting coverage for communicable disease response and [communicable disease business interruption loss]. [The defendant‘s] liability under the policy is limited to: (1) $1 million in the aggregate during any policy year for communicable disease response, and (2) $1 million in the aggregate during any policy year for interruption by communicable disease.” (Footnote omitted.)
On September 3, 2021, the plaintiff filed a motion seeking the entry of judgment consistent with the court‘s memorandum of decision granting, in part, the defendant‘s motion to strike, and a written determination to allow an immediate appeal pursuant to
The plaintiff filed the present appeal on June 22, 2022. Approximately one month later, this court, sua sponte, stayed the appeal pending the final disposition by our Supreme Court of two pending appeals, Connecticut Dermatology Group, PC v. Twin City Fire Ins. Co., supra, 346 Conn. 33, and Hartford Fire Ins. Co. v. Moda, LLC, supra, 346 Conn. 64. On January 27, 2023, our Supreme Court issued its decisions in those appeals.
We begin by setting forth our standard of review and the legal principles regarding the granting of a motion to strike. “The purpose of a motion to strike is to contest . . . the legal sufficiency of the allegations of any complaint . . . to state a claim upon which relief can be granted. . . . A motion to strike challenges the legal sufficiency of a pleading, and, consequently, requires no factual findings by the trial court. . . . [The court takes] the facts to be those alleged in the complaint . . . and [construes] the complaint in the manner most favorable to sustaining its legal sufficiency. . . . Thus, [i]f facts provable in the complaint would support a cause of action, the motion to strike must be denied. . . . Moreover . . . [w]hat is necessarily implied [in an allegation] need not be expressly alleged. . . . It is fundamental that in determining the sufficiency of a complaint challenged by a defendant‘s motion to strike, all well-pleaded facts and those facts necessarily implied from the allegations are taken as admitted.” (Citation omitted; internal quotation marks omitted.) Plainville v. Almost Home Animal Rescue & Shelter, Inc., 182 Conn. App. 55, 63, 187 A.3d 1174 (2018); see also Greenwald v. Van Handel, 311 Conn. 370, 374–75, 88 A.3d 467 (2014); Himmelstein v. Windsor, 304 Conn. 298, 307, 39 A.3d 1065 (2012); see generally
Next, we set forth the principles relevant to the interpretation of an insurance policy. “When construing an insurance policy, we look at the [policy] as a whole, consider all relevant portions together and, if possible, give operative effect to every provision in order to reach a reasonable overall result. . . . Insurance policies are interpreted based on the same rules that govern the interpretation of
The specific language of the insurance policy between the parties in this case provided in relevant part: “This [p]olicy covers property, as described in this [p]olicy, against ALL RISKS OF PHYSICAL LOSS OR DAMAGE, except as hereinafter excluded, while located as described in this [p]olicy.” The time element coverage provided: “This policy insures TIME ELEMENT loss, as provided in the TIME ELEMENT COVERAGES, directly resulting from physical loss or damage of the type insured: 1) to property described elsewhere in this [p]olicy and not otherwise excluded by this [p]olicy or otherwise limited in the TIME ELEMENT COVERAGES below . . . .” For these two primary coverages, the maximum limit of liability for an occurrence was $1,655,000,000, subject to certain provisions.
Additionally, the policy included the following contamination exclusion: “This [p]olicy excludes the following unless directly resulting from other physical damage not excluded by this [p]olicy: 1) contamination, and any cost due to contamination including the inability to use or occupy property or any cost of making property safe or suitable for use or occupancy. If contamination due only to the actual and not suspected presence of contaminant(s) directly results from other physical damage not excluded by this [p]olicy, then only physical damage caused by such contamination may be insured.” (Emphasis omitted.) The policy set forth the following definitions. The term “contaminant” was defined as “anything that causes contamination” which, in turn, was defined as “any condition of property due to the actual or suspected presence of any foreign substance, impurity, pollutant, hazardous material, poison, toxin, pathogen or pathogenic organism, bacteria, virus, disease causing or illness causing agent, fungus, mold or mildew [or legionellosis].” (Emphasis added.)
It follows that, as the trial court explained, the policy the plaintiff purchased, like many insurance policies, begins with a broad promise to cover all risks, but then subjects and limits coverage with various exclusions. The policy also contains exceptions to the policy exclusions as well as additional coverage for certain specified situations, subject to financial limitations.20 Guided by this approach, we will commence our analysis by determining whether the plaintiff‘s claims (1) fall within the grant of coverage for
As previously noted, the policy covers the property described therein against all risks of physical loss or damage.22 The policy, however, does not define the phrase “physical loss or damage.” Our Supreme Court interpreted this language in the context of commercial insurance policies in Capstone Building Corp. v. American Motorists Ins. Co., 308 Conn. 760, 67 A.3d 961 (2013) (Capstone). That case involved the construction of the Hilltop student housing complex (Hilltop project) at the University of Connecticut (UConn). Id., 763. The plaintiffs in that case served as the general contractor and project developer for the Hilltop project, while the defendant was the successor in interest to the insurer that issued a commercial general liability policy that insured the plaintiffs and their work on this project. Id., 763-64. Our Supreme Court concluded, inter alia, that defective work, standing alone, or repairs to that defective work, do not constitute property damage and was not, therefore, covered under the insurance policy. Id., 764.
In Capstone, UConn notified the plaintiffs of the alleged defects after discovering elevated levels of carbon monoxide in various areas three years after the completion of the Hilltop project. Id., 767-68. One of the plaintiffs notified the defendant and demanded that the defendant defend against UConn‘s claims. Id., 768. The defendant determined that UConn‘s claims were not covered under the policy: “As the liability at issue arises out of [one of the plaintiffs‘] own work, including its role as general contractor and heating and plumbing installation, there can be no coverage for this matter . . . under the policy.” (Internal quotation marks omitted.) Id. Eventually, the plaintiffs and UConn reached a settlement. Id., 770. The plaintiffs filed separate actions against the defendant alleging breach of contract and bad faith; these actions were removed to federal court, which subsequently certified questions to our Supreme Court. Id., 770–71.
First, the court concluded that defective workmanship can give rise to an occurrence under a commercial general liability
Our Supreme Court subsequently applied the Capstone reasoning in the context of COVID-19 in both Connecticut Dermatology Group, PC v. Twin City Fire Ins. Co., supra, 346 Conn. 33, and Hartford Fire Ins. Co. v. Moda, LLC, supra, 346 Conn. 64. In the former, the court identified the dispositive issue as “whether a property insurance policy providing coverage for direct physical loss of or physical damage to covered property provides coverage for business income losses arising from the suspension of business operations during the COVID-19 pandemic.” (Internal quotation marks omitted.) Connecticut Dermatology Group, PC v. Twin City Fire Ins. Co., supra, 36. In that case, three plaintiffs that owned and operated health care facilities at various locations in Connecticut suspended their business operations during the COVID-19 pandemic and suffered lost business income and additional expenses; id.; including daily sanitation and the erection of physical barriers for the protection of patients and staff. Id., 38-39. The plaintiffs filed claims against their respective insurance companies. Id., 36. The defendant insurance companies denied the claims on the basis that the coronavirus did not cause property damage. Id., 39. The plaintiffs filed actions seeking, inter alia, a declaratory judgment that the defendants were obligated to provide coverage. Id. In their answer, the defendants denied the substantive allegations in the plaintiffs’ complaint and raised a special defense that the claims were excluded by a virus exclusion contained in the policy.24 Id., 39-40.
Both the plaintiffs and the defendants moved for summary judgment. Id., 40. The defendants argued that no genuine issue of material fact existed as to whether the insurance policies covered the claimed losses because there was no direct physical loss or physical damage to any covered property. Id. Furthermore, the defendants claimed that, even if a covered loss had occurred, it was subject to the virus exclusion contained in the policies. Id. The trial court rendered summary judgment in favor of the defendants on the basis of the virus exclusion. Id.
On appeal, the plaintiffs contended that the trial court improperly rendered summary judgment in favor of the defendants on the basis of the virus exclusion. Id. The defendants disagreed with the plaintiffs’ appellate claim; further, they argued “as
The court began its analysis with the relevant policy language of the insurance policies, stating: “Although this court has not previously construed this specific policy language, we considered the meaning of a similar policy provision in Capstone Building Corp. v. American Motorists Ins. Co., [supra, 308 Conn. 760]. . . . We rejected the plaintiffs’ claim in Capstone that this provision entitled them to coverage for the loss of the use of defectively installed chimneys, which resulted in the escape of carbon monoxide into the building, on the ground that the gas caused no physical, tangible alteration to any property, and, therefore, under the plain language of the policy provision, the loss of use of the defective chimneys, standing alone, did not constitute property damage . . . .”25 (Citation omitted; internal quotation marks omitted.) Connecticut Dermatology Group, PC v. Twin City Fire Ins. Co., supra, 346 Conn. 43–44.
Next, our Supreme Court considered a decision from the United States Court of Appeals for the Second Circuit, Farmington Village Dental Associates, LLC v. Cincinnati Ins. Co., Docket No. 21-2080-cv, 2022 WL 2062280, *1 (2d Cir. June 8, 2022), which extrapolated the reasoning from Capstone and “concluded that, under Connecticut law, a policy covering accidental physical loss or accidental physical damage to property did not cover a loss incurred as a result of the suspension of business operations during the COVID-19 pandemic because the loss was not physical, and the virus did not tangibly alter the property.” (Internal quotation marks omitted.) Connecticut Dermatology Group, PC v. Twin City Fire Ins. Co., supra, 346 Conn. 44. The court then emphasized that “[t]he overwhelming majority of federal and state courts construing language similar or identical to the language contained in the policies at issue in the present case have reached the same conclusion.”26 Id., 44-45.
The court also considered other language in the policy, specifically, the provision regarding the “period of restoration,” which provided that the loss of business income was covered when the property was repaired, rebuilt, or replaced. Id.,
Ultimately, our Supreme Court concluded “that the plain meaning of the term direct physical loss of . . . [p]roperty does not include the suspension of business operations on a physically unaltered property in order to prevent the transmission of the coronavirus. Rather, in ordinary usage, the phrase direct physical loss of . . . [p]roperty clearly and unambiguously means that there must be some physical, tangible alteration to or deprivation of the property that renders it physically unusable or inaccessible.” (Emphasis added; internal quotation marks omitted.) Id., 51.
Finally, the court addressed the arguments the plaintiffs presented. Significantly, it concluded that there was nothing in the record to indicate that the plaintiffs’ property had undergone a “physical transformation” as a result of the COVID-19 pandemic that transformed “ordinary business properties into potential viral incubators that were imminently dangerous to human beings.” (Internal quotation marks omitted.) Id., 52. Our Supreme Court observed that, as a result of the COVID-19 pandemic, there was a change to governmental and societal expectations and behaviors that negatively impacted the plaintiffs’ businesses. Id. Additionally, our Supreme Court explained that a loss of use of property was not the same as the loss of property. Id., 53-54. Additionally, the court rejected the plaintiffs’ contention that the construction of physical barriers and the purchase of additional personal protective equipment were repairs to the property. Id., 55. “We conclude that, just as the properties were not physically altered in any way by the COVID-19 pandemic, the plaintiffs’ activities designed to prevent the transmission of the coronavirus on the properties were not ‘repairs’ in any ordinary sense of the word.” Id.
Furthermore, the court was not persuaded by the plaintiffs’ reliance on cases that have held that contamination of property by harmful substances or bacteria constitutes a direct physical loss. Id., 58. First, the court noted that the plaintiffs had not claimed an actual coronavirus contamination or that their business had been closed due to the actual presence of the virus. Id., 58–59. Second, “[i]n any event, even if the plaintiffs had claimed that their properties were actually contaminated by the coronavirus, we find persuasive the cases that have held that the virus is not the type of physical contaminant that creates the risk of a direct physical loss because, once a contaminated surface is cleaned or simply left alone for a few days, it no longer poses any physical threat to occupants.”27 Id., 59. On the basis of this reasoning, our Supreme Court affirmed the summary judgment rendered in favor of the defendants. Id., 64.
Our Supreme Court similarly affirmed the summary judgment rendered in favor of the insurance company in Hartford Fire Ins. Co. v. Moda, LLC, supra, 346 Conn. 67, in which it also considered whether business losses suffered during the COVID-19 pandemic were covered by insurance for direct physical loss of or direct physical damage to property. In that case, the defendants purchased two insurance policies from the plaintiff: a package policy, which covered direct physical loss of or direct physical damage to covered property, namely, a spring line of shoes sold to department stores and other retailers; and a marine policy that covered the shoes from direct physical loss or direct physical damage from any external cause, subject to certain exclusions, while they were in transit and storage. Id., 68-69. The plaintiff insurer moved for summary judgment, arguing that, under either policy, the defendants had not suffered a direct physical loss of or direct physical damage to property and that the virus exclusion applied with respect to the package policy. Id., 70. The trial court granted the plaintiff‘s motion for summary judgment, determining that the virus exclusion applied, and, in the case of the marine policy, coverage was limited to physical damage to the property itself under New York law. Id., 70–71.
On appeal, the court relied on the holding from Connecticut Dermatology Group, PC v. Twin City Fire Ins. Co., supra, 346 Conn. 36–37, that, under nearly identical policy language, there must be some physical, tangible alteration to, or deprivation of property, rendering it physically unusable or inaccessible; mere loss of use or access was insufficient, and, therefore, the defendants’ claims of loss were without merit. Hartford Fire Ins. Co. v. Moda, LLC, supra, 346 Conn. 72–73. “That claim fails as a matter of law because the losses suffered did not result from any tangible physical alteration to [the] stock or real property. Rather, those losses resulted from a transformation in governmental and societal expectations and behavior that had a seriously negative impact on [the] businesses. . . . The plain language of the package policy does not provide coverage for such losses.” (Citation omitted; internal quotation marks omitted.) Id., 73. The court further explained that “[c]ontamination with the SARS-CoV-2 virus, even if it could be proved, is not sufficient to establish that the shoes were physically lost or damaged within the meaning of the package policy.” (Emphasis added.) Id., 74.
With respect to the marine policy, our Supreme Court applied the law of New York to conclude that “such language does not describe business income losses incurred as a result of COVID-19 related closures [when] the insured property itself was not alleged or shown to have suffered direct physical loss or physical damage.” (Internal quotation marks omitted.) Id., 76. Ultimately, our Supreme Court determined that the defendants’ losses were not covered by either insurance policy, and, therefore, the trial court properly rendered summary judgment in favor of the plaintiff. Id., 79.
Having reviewed the precedent from our Supreme Court regarding property insurance policies and claims of business income loss arising from the suspension of business operations due to COVID-19, we return to the specific policy language in the present case. As we previously have noted, the policy sold to the plaintiff by the defendant covered property from all risks of physical loss or damage, and time element losses, but the requisite predicate for this coverage was physical loss or damage to covered property. We acknowledge that this policy‘s language is
In the operative complaint in the present case, the plaintiff alleged in a conclusory fashion that COVID-19 caused a physical, tangible alteration to property. The plaintiff, however, failed to allege facts showing the manner in which this alteration occurred. We note that, although the facts alleged in a complaint are deemed admitted for the purposes of ruling on a motion to strike, legal conclusions are not. Seramonte Associates, LLC v. Hamden, 202 Conn. App. 467, 481, 246 A.3d 513 (2021), aff‘d, 345 Conn. 76, 282 A.3d 1253 (2022). Stated differently, “[a] motion to strike is properly granted if the complaint alleges mere conclusions of law that are unsupported by the facts alleged.” (Internal quotation marks omitted.) Id.; see Bridgeport Harbour Place I, LLC v. Ganim, 303 Conn. 205, 213, 32 A.3d 296 (2011); Sempey v. Stamford Hospital, 194 Conn. App. 505, 513, 221 A.3d 839 (2019); see also Perez v. Carlevaro, 158 Conn. App. 716, 726, 120 A.3d 1265 (2015) (legal conclusion pleaded in complaint disregarded if inconsistent with or unsupported by facts alleged). It is, therefore, insufficient for the plaintiff merely to assert in its complaint that a physical, tangible alteration to its property has occurred due to COVID-19.
The plaintiff further alleged that COVID-19 can remain viable on objects or surfaces for up to twentyeight days. It claimed that the prospect of COVID-19 being present on the property “is a risk of direct physical loss or damage, and it causes physical loss or damage to property” and then reasserted that the presence of COVID-19 caused a physical, tangible alteration to the property. In several more instances, the plaintiff offered the conclusory allegation that COVID-19 caused a risk of physical loss or damage to property, or the presence of COVID-19 was a risk of physical loss or damage. Furthermore, the operative complaint baldly stated that COVID-19 caused the plaintiff to sustain time element loss as a direct result of physical loss and damage.28
In addition to the binding precedent from our Supreme Court,29 we note that a substantial number of decisions from state and federal courts have concluded
Cases from other jurisdictions also have reached the same conclusion with respect to this issue. For example, the United States Court of Appeals for the First Circuit recently addressed the issue of whether, under Massachusetts law, the plaintiff had failed to state a claim that the SARS-CoV-2 virus caused direct physical loss of or damage to property in Lawrence General Hospital v. Continental Casualty Co., 90 F.4th 593 (1st Cir. 2024). The insurance policy in that case provided “broad coverage for direct physical loss of or damage to property.” (Internal quotation marks omitted.) Id., 595-96. The plaintiff hospital alleged that it suffered physical loss of and damage to its property due to the continuous reintroduction of SARS-CoV-2 particles, which chemically bonded to surfaces, making them hard to detach. Id., 596.
The First Circuit considered a trilogy of cases32 decided under Massachusetts state law to determine whether the hospital‘s allegations would survive a motion to dismiss for failure to state a claim under the
We disagree with the plaintiff‘s attempt to classify the actual presence of a communicable disease as a physical loss or damage under the policy language. The communicable disease response coverage extension does not require physical loss or damage. That specific section of the policy is triggered if a location owned, leased or rented by the plaintiff has the actual, not
Next, the plaintiff argues that the issue of whether COVID-19 physically alters property cannot be determined at the motion to strike phase of the litigation. We disagree. First, in Connecticut Dermatology Group, PC v. Twin City Fire Ins. Co., supra, 346 Conn. 52, our Supreme Court, albeit in the context of a motion for summary judgment,36 determined that the properties in that case were not altered as a result of the COVID-19 pandemic. Specifically, it explained that this pandemic caused a transformation in governmental and societal expectations and behaviors that negatively impacted business in a substantial manner; in other words, the “property did not change . . . [t]he world around it did.” (Internal quotation marks omitted.) Id. Additionally, our Supreme Court explained that, “in any event, even if the plaintiffs had claimed that their properties were actually contaminated by the coronavirus, we find persuasive the cases that have held that the virus is not the type of physical contamination that creates the risk of a direct physical loss because, once a contaminated surface is cleaned or simply left alone for a few days, it no longer poses any physical threat to occupants.” (Emphasis added.) Id., 59. Similarly, in Hartford Fire Ins. Co. v. Moda, LLC, supra, 346 Conn. 74, the court wrote: “Contamination with the SARS-CoV-2 virus, even if it could be proved, is not sufficient to establish that the shoes were physically lost or damaged within the meaning of the package policy.” (Emphasis added.) Given this language, we conclude that the holdings and reasoning set forth in these cases apply to the present appeal, despite the different procedural contexts.
Second, courts, even at the pleading stage have con-cluded that COVID-19 does not physically alter property. See Dr. Jeffrey Milton, DDS, Inc. v. Hartford Casualty Ins. Co., 588 F. Supp. 3d 266, 277 (D. Conn. 2022); Connecticut Children‘s Medical Center v. Continental Casualty Co., 581 F. Supp. 3d 385, 391-93 (D. Conn. 2022), aff‘d, United States Court of Appeals, Docket No. 22-322 (2d Cir. April 17, 2023); Cosmetic Laser, Inc. v. Twin City Fire Ins. Co., 554 F. Supp. 3d 389, 407 (D. Conn. 2021).
Third, we note that in its complaint the plaintiff pleaded only conclusory allegations that COVID-19 causes a physical, tangible alteration to property and listed several types of property thereby affected but did not provide any specifics as to how the property purportedly was altered. See, e.g., Wynn Resorts, Ltd. v. Factory Mutual Ins. Co., United States District Court, Docket No. 2:21-cv-01230 (CDS-EJY) 2023 WL 5319772, *3 (D. Nev. August 10, 2023) (complaint failed to specifically identify what physical loss or damage was caused by respiratory droplets or how virus caused physical alteration of property). This type of legal conclusion is insufficient to state a claim under our law. “A [motion to strike] . . . does not admit legal conclusions.” (Internal quotation marks omitted.) Desmond v. Yale-New Haven Hospital, Inc., 212 Conn. App. 274, 284, 275 A.3d 735, cert. denied, 343 Conn. 931, 276 A.3d 433 (2022). We conclude, therefore, that the plaintiff‘s efforts to distinguish Connecticut Dermatology Group, PC v. Twin City Fire Ins. Co., supra, 346 Conn. 33, and Hartford Fire Ins. Co. v. Moda, LLC, supra, 346 Conn. 66, are unavailing and that, pursuant to the reasoning set forth in those cases, it was proper for the court to strike the counts in the plaintiff‘s operative complaint.
Additionally, we agree with the reasoning set forth in the trial court‘s memorandum of decision regarding the applicability of the contamination exclusion. As the court observed, “[c]osts caused by a virus are the very thing the policy does not cover by virtue of the contamination exclusion. Any argument that simply brings you back to costs caused by the virus brings you back to the costs that are expressly excluded. By definition, damage from the virus cannot be directly resulting from other physical damage not excluded by this policy.” (Emphasis omitted; internal quotation marks omitted.) The trial court‘s ultimate determination to grant, in part, the defendant‘s motion to strike rested on this reasoning regarding the contamination exclusion.
The relevant language of the policy provides: “This [p]olicy excludes the following unless directly resulting from other physical damage not excluded by this [p]olicy: 1) contamination, and any cost due to contamination, including the inability to use or occupy property or any cost of making property safe or suitable for use or occupancy. If contamination due only to the actual not suspected presence of contaminant(s) directly results from other physical damage not excluded by this [p]olicy, then only physical damage caused by such contamination may be insured.” (Emphasis omitted.) The policy defines contamination as “any condition of property due to the actual or suspected presence of any foreign substance, impurity, pollutant, hazardous material, poison, toxin, pathogen or pathogenic organism, bacteria, virus, disease causing or illness causing agent, fungus, mold or mildew.” On the basis of this plain language, therefore, it is clear that the policy specifically excludes coverage for any cost for the condition of property due to the actual or suspected presence of a virus such as SARS-CoV-2, unless it directly resulted from other physical damage not excluded.
We are mindful that, “[i]n an insurance policy, an exclusion is a provision which eliminates coverage where, were it
The policy in the present case contains clear and unambiguous language that excludes costs resulting from the SARS-CoV-2 virus from the physical loss or damage and time element coverages. Numerous federal and state cases have relied upon the similar policy language to reach this conclusion.37 As noted by Judge Dooley in One40 Beauty Lounge, LLC v. Sentinel Ins. Co., Docket No. 3:20-CV-00643 (KAD), 2021 WL 5206387, *2 (D. Conn. November 9, 2021), appeal withdrawn, United States Court of Appeals, Docket No. 21-3007 (2d Cir. April 25, 2022), “[t]he [c]ourt does not write on a blank slate. Indeed, numerous courts have examined identical policy provisions and determined the [v]irus [e]xclusion is unambiguous and applies to claims arising out of losses caused by the COVID-19 virus.”38
The plaintiff, however, argues that the contamination exclusion does not apply to
First, the plaintiff‘s attempts to draw a bright-line distinction between the virus SARS-CoV-2 and the communicable disease COVID-19 are betrayed by the allegations in the operative complaint in which the plaintiff inextricably intertwined the two.39 Specifically, the plaintiff alleged that “SARS-CoV-2 causes COVID-19, a disease that attacks the respiratory system and causes other harm to humans. SARS-CoV-2 and COVID-19 are collectively referred to in this complaint as COVID-19.” (Emphasis added.) Second, we already have rejected the plaintiff‘s claim that a communicable disease such as COVID-19, under the language of this policy, constitutes a physical loss or damage to covered property. The plaintiff‘s reliance on the language that the contamination exclusion does not apply if the contamination directly results from other physical damage not excluded is, therefore, unfounded. Third, in considering the policy language as a whole, it is clear that the definition of communicable disease is to determine the applicability of the communicable disease provisions, and their corresponding sublimit of $1 million, while the contamination exclusion, and the definition of contaminant, is used to determine whether a claim is generally excluded from the property damage and time element coverages.40 For these reasons, we conclude that the court properly concluded that the contamination exclusion in the present case applied and defeated the plaintiff‘s claims for coverage under the property damage and time element
The judgment is affirmed.
In this opinion the other judges concurred.
PELLEGRINO, J.
Notes
“a. In the restaurants: cooking equipment and appliances, storage equipment, signs, menus, ovens, microwaves, refrigerators, freezers, ice machines, napkins, utensils, measuring cups and spoons, utensils, plates, cups, saucers, scales, thermometers, timers, aprons, soda dispensers, bar, glasses, bottles of alcohol, and containers, among other items.
“b. In the retail outlets: retail merchandise, signs, shelves, displays, counters, clothes hangers, boxes, packaging, and bags, among other items.
“c. In the casinos: tables, chairs, lights, displays, cards, chips, dice, cards, cups, containers, slot machines, games, screens, handles, and money, among other items.
“d. In the spas: tables, chairs, bottles, packaging, curtains, showers, tubs, cushions, blankets, pillows, towels, linens, cups, glasses, coolers, pitchers, and trays, among other items.
“e. In the hotels: beds, linens, key cards, remotes, handles, tables, desks, chairs, lamps, switches, curtains, blinds, cords, luggage racks, irons, ironing boards, shelves, toilet paper, paper towels, cups, soap boxes, shampoo bottles, conditioner bottles, lotion bottles, bells, desks, signs, pillows, pens, paper, cleaning supplies, elevators, bell carts, housekeeping carts, housekeeping supplies, mops, brooms, bottles, rags, and clothes, among other items.
“f. At all locations: lighting fixtures, cash registers, computers, tables, chairs, couches, stools, curtains, blinds, doors, door handles, carts, countertops, display cases, shelving, uniforms, floors, windows, fans, mirrors, decorative items, pictures, frames, sinks, faucets, faucet handles, soap dispensers, papers towels, paper towel holders, toilets, urinals, and trash cans, among other items.”
Furthermore, as the Louisiana Supreme Court noted in Cajun Conti, LLC v. Certain Underwriters at Lloyd‘s, London, 359 So. 3d 922 (La. 2023): “[N]umerous state supreme courts have reached a similar result when analyzing comparable policy language. E.g., [Neuro-Communication] [Services], Inc. v. Cincinnati Ins. Co., [171 Ohio St. 3d 606, 611, 219 N.E.2d 907 (2022)] (The definition of the term loss is clear: for coverage to be provided, there must be loss or damage to [c]overed [p]roperty that is physical in nature. Such loss or damage does not include a loss of the ability to use [c]overed [p]roperty for business purposes.); Sullivan [Management], LLC v. Fireman‘s Fund Ins. Co., [437 S.C. 587, 594-95, 879 S.E.2d 742] (2022) (Because neither the presence of the coronavirus nor the government order prohibiting indoor dining constitutes direct physical loss or damage, the policy‘s triggering language is not met.); Tapestry, Inc. v. Factory [Mutual] Ins. Co., [482 Md. 223, 252, 286 A.3d 1044] (2022) ([T]he presence of [c]oronavirus in the air and on surfaces at [the plaintiff‘s] properties did not cause physical loss or damage as that phrase is used in the [p]olicies.); Hill & Stout, PLLC v. [Mutual] of Enumclaw Ins. Co., 200 Wn. 2d 208, 212, 515 P.3d 525] (2022) (It is unreasonable to read direct physical loss of property in a property insurance policy to include constructive loss of intended use of property. Such a loss is not physical.); Colectivo Coffee Roasters, Inc. v. [Society] Ins., [401 Wis. 2d 660, 672, 974 N.W.2d 442] (2022) ([T]he presence of COVID-19 does not constitute a physical loss of or damage to property because it does not alter the appearance, shape, color, structure, or other material dimension of the property.); Verveine Corp. v. Strathmore Ins. Co., [489 Mass. 534, 541, 184 N.E.3d 1266] (2022) (We conclude that no reasonable interpretation of direct physical loss of or damage to property supports the plaintiffs’ claims.).” (Emphasis added; internal quotation marks omitted.) Cajun Conti, LLC v. Certain Underwriters at Lloyd‘s, London, supra, 928-29.
We acknowledge that this reasoning has not been adopted universally. See, e.g., Huntington Ingalls Industries, Inc. v. Ace American Ins. Co., 287 A.3d 515, 533-34 (Vt. 2022) (Vermont has extremely liberal noticepleading standards and threshold plaintiff must cross to meet standard is exceedingly low and based on such standards; statement in complaint adequately alleged virus physically altered properly when it adhered to surface); see also Marina Pacific Hotel and Suites, LLC v. Fireman‘s Fund Ins. Co., 81 Cal. App. 5th 96, 109, 296 Cal. Rptr. 3d 777 (2022) (determining plaintiff “unquestionably pleaded direct physical loss or damage to covered property” and recognizing this conclusion “is at odds with almost all (but not all) decisions” considering issue). We find these decisions unpersuasive because Connecticut is a fact pleading state. See Bridgeport Harbour Place I, LLC v. Ganim, supra, 303 Conn. 213 n.7; Godbout v. Attanasio, 199 Conn. App. 88, 111-12, 234 A.3d 1031 (2020).
Additionally, the Southern District Court of New York subsequently granted the defendant insurer‘s partial motion for summary judgment, concluding “as a matter of law, the presence of the COVID-19 virus does not qualify as damage to property, and [the plaintiff] has failed to satisfy the conditions for recovery under the [c]ommunicable [d]isease [p]rovisions.” Thor Equities, LLC v. Factory Mutual Ins. Co., Docket No. 20 Civ. 3380 (AT), 2023 WL 7928097, *3 (S.D.N.Y. November 16, 2023), appeal filed (2d Cir. December 21, 2023) (No. 23-8063).