Opinion
Case No. 20-cv-04816-JST
2021-08-16
The TYPEWRITORIUM COMPANY dba A2Z Business Systems, Plaintiff, v. TRAVELERS PROPERTY CASUALTY COMPANY OF AMERICA, Defendant.
Mark Cotton Molumphy, Julia Q. Peng, Cotchett, Pitre & McCarthy LLP, Burlingame, CA, Jerry K. Cimmet, Chico, CA, John M. Kelson, Law Office of John M. Kelson, Oakland, CA, for Plaintiff. Andrew B. Downs, Linda Beth Oliver, Bullivant Houser Bailey PC, San Francisco, CA, Stephen Edward Goldman, Pro Hac Vice, Wystan M. Ackerman, Pro Hac Vice, Robinson and Cole LLP, Hartford, CT, for Defendant.
Mark Cotton Molumphy, Julia Q. Peng, Cotchett, Pitre & McCarthy LLP, Burlingame, CA, Jerry K. Cimmet, Chico, CA, John M. Kelson, Law Office of John M. Kelson, Oakland, CA, for Plaintiff.
Andrew B. Downs, Linda Beth Oliver, Bullivant Houser Bailey PC, San Francisco, CA, Stephen Edward Goldman, Pro Hac Vice, Wystan M. Ackerman, Pro Hac Vice, Robinson and Cole LLP, Hartford, CT, for Defendant.
ORDER GRANTING MOTION TO DISMISS
Re: ECF No. 31
JON S. TIGAR, United States District Judge
Plaintiff Typewritorium Company, a retailer and repair service provider for equipment copiers, printers, and fax machines, filed this lawsuit against Defendant Travelers Property Casualty Company of America bringing claims for breach of contract, breach of the covenant of good faith and fair dealing, unfair competition, and declaratory judgment. First Amended Complaint ("FAC"), ECF No. 26. Plaintiff alleges that Defendant improperly denied his claim for loss of income filed under its Businessowners Property Coverage in its Travelers Insurance Policy on account of losses stemming from state and county "stay-at-home" orders related to the COVID-19 pandemic. Id. ¶¶ 4-7, 25, 34; see also Insurance Policy ("Policy"), ECF No. 23-2. Plaintiff asserts that the Policy provides coverage for its lost income "based entirely on the action of civil authorities that caused the partial cessation of Plaintiff's business operations." FAC ¶ 33.
Both parties cite to the Policy, ECF No. 23-2, submitted as an exhibit to Defendant's prior motion to dismiss, ECF No. 23. The policy is incorporated by reference. United States v. Ritchie , 342 F.3d 903, 908 (9th Cir. 2003) ("Even if a document is not attached to a complaint, it may be incorporated by reference into a complaint if the plaintiff refers extensively to the document or the document forms the basis of the plaintiff's claim."). The Court also grants Plaintiff's request to take judicial notice of several news articles and government reports about COVID-19 conditions in and around the San Francisco Bay Area. ECF No. 33-3. Defendant has not objected. Finally, at the request of both parties, ECF No. 23-3; ECF No. 33 at 9 n.2, the Court will take judicial notice of the relevant state and county "stay-at-home" orders, ECF Nos. 23-5, 23-6.
"To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (citation and internal quotation marks omitted). "[T]he tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions." Id. "Dismissal under Rule 12(b)(6) is appropriate only where the complaint lacks a cognizable legal theory or sufficient facts to support a cognizable legal theory." Mendiondo v. Centinela Hosp. Med. Ctr. , 521 F.3d 1097, 1104 (9th Cir. 2008) (citation omitted).
In a California insurance case, the interpretation of an insurance policy is question of law in which the court must "look first to the language of the contract in order to ascertain its plain meaning or the meaning a layperson would ordinarily attach to it." Waller v. Truck Ins. Exch., Inc. , 11 Cal. 4th 1, 18, 44 Cal.Rptr.2d 370, 900 P.2d 619 (1995). "While insurance contracts have special features, they are still contracts to which the ordinary rules of contractual interpretation apply." Bank of the W. v. Superior Court , 2 Cal. 4th 1254, 1264, 10 Cal.Rptr.2d 538, 833 P.2d 545 (1992). "If contractual language is clear and explicit, it governs." Id.
This is not the first time the Court has been called upon to address the question of coverage for lost profits or business interruption costs occasioned by state and county COVID-related stay-at-home orders. See Fink v. Hanover Ins. Grp., Inc. , No. 20-cv-03907-JST, 2021 WL 647374 (N.D. Cal. Jan. 25, 2021) ; Mudpie, Inc. v. Travelers Cas. Ins. Co. of Am. , 487 F. Supp. 3d 834 (N.D. Cal. 2020). As the Court has noted previously, "[a] necessary predicate to each of [the] claims is a determination that [the plaintiff] is entitled to insurance coverage under [the] policy." Fink v. Hanover Ins. Grp., Inc. , No. 20-cv-03907-JST, 2021 WL 647374, at *1 (N.D. Cal. Jan. 25, 2021) (citing Cassio Place, Inc. v. Great Am. Ins. Co. , No. C-95-3254 SI, 1996 WL 231034, at *2 (N.D. Cal. Apr. 30, 1996) ). Although this analysis requires an individualized evaluation of the specific policy at issue, id. , the policy language here is nearly identical to that at issue in Mudpie , and the Court therefore leans heavily on that prior decision, which dismissed largely the same claims brought under the same theories for coverage. See Mudpie, Inc. v. Travelers Cas. Ins. Co. of Am. , 487 F. Supp. 3d 834 (N.D. Cal. Sept. 14, 2020). As in that case, the Court here finds that Plaintiff is not entitled to insurance coverage for its claims.
First, although Plaintiff contends that coverage is due under the Policy's "Business Income and Extra Expense Coverage" provision, ECF No. 33 at 9, it makes no meaningful effort to distinguish Mudpie or otherwise address these claims in opposition to Defendant's motion. See id. at 16 n.8. Finding that the policy language for this provision is identical to that in Mudpie, see Policy §§ A.3(a)(2), A.3(b)(1), A.4, ECF No. 23-2 at 156-58, the Court concludes, for the reasons stated there, that Plaintiff's policy does not provide for business income coverage. See Mudpie , 487 F. Supp. 3d at 838-43.
Instead, Plaintiff roots its assertion of coverage on the Policy's "Civil Authority Coverage" provision. ECF No. 33 at 11. That provision states:
When the Declarations show that you have coverage for Business Income and Extra Expense, you may extend that insurance to apply to the actual loss of Business Income you sustain and reasonable and necessary Extra Expense you incur caused by action of civil authority that prohibits access to the described premises. The civil authority action must be 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 § A.7(g)(1), ECF No. 23-2 at 169. Plaintiff bases its allegations of "direct physical loss of or damage to property" at locations "within the 100 mile radius of the described premises" on "the presence of COVID-19 at specific locations" within that radius. ECF No. 33 at 14-15; FAC ¶¶ 8-12; ECF No. 33-2. As in Mudpie , however, plaintiff fails plausibly to allege the necessary element of causation. Mudpie , 487 F. Supp. 3d at 843 ("Mudpie is not entitled to Civil Authority coverage because Mudpie cannot establish that the civil authority action – the closure orders in this case – were issued ‘due to direct physical loss of or damage to’ any property.").
This provision is also identical to the civil authority coverage provision in Mudpie, 487 F. Supp. 3d at 843.
The Court also questions whether an "outbreak" of COVID-19 at a facility within 100 miles of Plaintiff's premises necessarily demonstrates "that the presence of the COVID-19 virus inside their establishments made them unusable." See Mudpie , 487 F. Supp. 3d at 842 (distinguishing Studio 417, Inc. v. Cincinnati Ins. Co. , 478 F. Supp. 3d 794 (W.D. Mo. 2020), in which the court held that the plaintiffs had a plausible claim for coverage where they alleged that COVID-19 attached to and deprived them of their property). Because the Court finds that Plaintiff has not satisfied the causation element, it declines to determine whether the allegations of COVID-19 outbreaks demonstrate a "direct physical loss of or damage to property" at a location within 100 miles of Plaintiff's premises.
As the Court there explained, the Civil Authority Coverage provision requires the insured to "establish the ‘requisite causal link between damage to adjacent property and denial of access’ to its store." Id. (quoting Syufy Enters. v. Home Ins. Co. of Ind. , No. 94-0756 FMS, 1995 WL 129229, at *2 (N.D. Cal. Mar. 21, 1995) ). To satisfy that showing here, Plaintiff relies on the orders themselves, arguing that they "make it clear by their terms that they were issued at least in part because of the presence of the coronavirus." ECF No. 33 at 13. The Court cannot give the state and county orders the gloss that Plaintiff urges.
First, Plaintiff states that California Executive Order N-33-20 "uses language that can only be read to mean that the order was issued, at least in part, because of the presence of the coronavirus." ECF No. 33 at 13 (citing the State Order's recital that "WHEREAS in a short period of time, COVID-19 has rapidly spread throughout California, necessitating updated and more stringent guidance from federal, state, and local public health officials"). When examined in the context of other language in the State Order, it is clear that the order was preventative in nature. ECF No. 34 at 8 (quoting the State Order as being issued "for the preservation of public health and safety" and "to ensure the healthcare delivery system is capable of serving all, and prioritizing those at the highest risk and vulnerability"); see also Mudpie , 487 F. Supp. 3d at 843 (pointing out that "California's Safer at Home Order was issued "to control the spread of COVID-19" and finding that the order was, therefore, "preventative").
Plaintiff likewise points to the San Mateo County Health Officer Order, but that document also fails to establish the necessary causal link. ECF No. 33 at 13-14. For example, Plaintiff cites the County Order's statements that "[t]his Order issued based on evidence of increasing occurrence of COVID-19 within the County and throughout the Bay Area"; "[d]ue to the outbreak of the COVID-19 disease in the general public ... there is a public health emergency throughout the County"; and that "[t]his Order is also issued in light of the existence, as of March 29, 2020, of 309 cases of COVID-19 in the County, as well as at least 2,092 confirmed cases ... and at least 51 deaths ... in the seven Bay Area jurisdictions jointly issuing this Order ...." Id. at 13 (quoting ECF No. 23-6 at 3-4). Once again, however, other language in the Order undermines Plaintiff's causation theory. See ECF No. 23-6 at 2 ("The intent of this Order is to ensure that the maximum number of people shelter in their places of residence to the maximum extent feasible to slow the spread of COVID-19 and mitigate the impact on delivery of critical healthcare services to those in need. All provision of this Order must be interpreted to effectuate this intent."). The County Order, like the State Order, was issued to prevent the spread of the virus between and among people; the Order "did not prohibit access to [Plaintiff's covered premises] because of damage to adjacent property." See Syufy Enters. , 1995 WL 129229, at *2. The Court continues to conclude that the stay-at-home orders issued in response to the COVID-19 pandemic were preventative and not caused by prior property damage. See Mudpie , 487 F. Supp. 3d at 844.
Nor does the Court find persuasive Plaintiff's suggestion that it is sufficient to allege that its proposed causal explanation was a factor that "lead to the issuance of the orders." ECF No. 33 at 14. Plaintiff cites to no authority that the Policy language – that "civil authority action must be due to direct physical loss of or damage to [nearby] property – can be satisfied by a showing that a civil authority action was taken "in part" by loss or damage to a nearby property.
Because the Court finds that Plaintiff's policy does not provide coverage for the reasons set forth above, the Court declines to consider Defendant's remaining arguments. Each of Plaintiff's claims requires a finding that it is entitled to coverage under the Policy. See id. at 844-45 ; see also ECF No. 33 at 25-26. Because the Court has determined that Plaintiff is not so entitled, these claims are dismissed.
The Court also finds it unnecessary to address the debate between the parties as to the placement of the Policy's "cover page." See ECF No 34 at 15; ECF No. 36.
CONCLUSION
The motion to dismiss is granted. Plaintiff may file an amended complaint solely to correct the deficiencies identified in this order. An amended complaint is due 21 days from the date of this order. If no amended complaint is filed, the Court will dismiss the case with prejudice.