Opinion
No. 651396/2022 Index No. 651396/2022 Motion Seq. No. 003 004 005 006 007
10-05-2023
WESTPORT INSURANCE CORPORATION, Plaintiff, v. AUBERGE RESORTS LLC, CALISTOGA RANCH OWNER LLC, SOLAGE OWNERS LLC, ICONIC PROPERTIES - JEROME, L.L.C., TELLURIDE RESORT PARTNERS LLC, VANDERBILT HOTEL, LLC, US HOTELS NEW ENGLAND LLC, ALLIANZ GLOBAL RISKS U.S. INSURANCE COMPANY, EVEREST INDEMNITY INSURANCE COMPANY, GREAT LAKES INSURANCE SE, HOMELAND INSURANCE COMPANY OF NEW YORK, INTERSTATE FIRE & CASUALTY COMPANY, LANDMARK AMERICAN INSURANCE COMPANY, NATIONAL FIRE AND MARINE INSURANCE COMPANY Defendants.
Unpublished Opinion
MOTION DATE 12/16/2022, 12/16/2022, 12/16/2022, 12/16/2022, 12/16/2022
DECISION+ ORDER ON MOTION
HON. JOEL M. COHEN, JUDGE
The following e-filed documents, listed by NYSCEF document number (Motion 003) 125,126,127,128, 129, 130, 131, 132, 133, 134, 135, 136, 137, 162, 175, 191, 192, 193, 194, 195, 196, 197, 198, 199, 200,201,257,258,259,260,261,262,263,264, 265,266, 282, 289, 292 were read on this motion to DISMISS
The following e-filed documents, listed by NYSCEF document number (Motion 004) 138,139,140,141, 142, 163, 176, 202, 203, 204, 205, 206, 207, 208, 209, 210, 211, 212, 246, 247, 248, 249, 250, 251, 283,291 were read on this motion to DISMISS
The following e-filed documents, listed by NYSCEF document number (Motion 005) 143,144,145,146, 147, 148, 149, 160, 164, 177, 213, 214, 215, 216, 217, 218, 219, 220, 221, 222, 223, 272, 273, 274, 275,276,277,278,279,280,281,284,288 were read on this motion to DISMISS
The following e-filed documents, listed by NYSCEF document number (Motion 006) 150,151,152,153, 154, 165, 178, 224, 225, 226, 227, 228, 229, 230, 231,232, 233, 234, 252, 253, 254, 255, 256, 285, 290 were read on this motion to DISMISS
The following e-filed documents, listed by NYSCEF document number (Motion 007) 155,156,157,158, 159, 166, 179, 235, 236, 237, 238, 239, 240, 241, 242, 243, 244, 245, 267, 268, 269, 270, 271,286, 287 were read on this motion to DISMISS Upon the foregoing documents, and for the reasons stated on the record following oral argument on September 11, 2023, the Insurers' motions to dismiss Auberge Defendants Counterclaims, Crossclaims and Defenses with prejudice are granted. This is a COVID-19 insurance coverage dispute. The policies issued by the Insurers provide or incorporate the following language:
The "Insurers" are Plaintiff Westport Insurance Corporation ("Westport") and Defendants Allianz Global Risks U.S. Insurance Company ("AGRUS"), Everest Indemnity Insurance Company ("Everest"), Great Lakes Insurance SE ("Great Lakes"), Homeland Insurance Company of New York ("Homeland"), Interstate Fire & Casualty Company ("Interstate"), Landmark American Insurance Company ("Landmark"), and National Fire and Marine Insurance Company ("National Fire")
The "Auberge Defendants" are Auberge Resorts LLC, Calistoga Ranch Owner LLC, Solage Owners LLC, Iconic Properties - Jerome, L.L.C., Telluride Resort Partners LLC, Vanderbilt Hotel, LLC, and U.S. Hotels New England LLC.
1. PERILS INSURED AGAINST
This Policy insures against all risk of direct physical loss, damage or destruction to property described herein occurring during the term of insurance, except as hereinafter excluded. (NYSCEF 129 [Westport Policy], NYSCEF 141 [ARGUS Policy], NYSCEF 142 [Interstate Policy]), NYSCEF 146 [Everest Policy], NYSCEF 147 [Landmark Policy], NYSCEF 148 [National Fire Policy], NYSCEF 158 [Homeland Policy], NYSCEF 254 [Great Lakes Policy]). The Insurers submitted a Joint Memorandum of Law (NYSCEF 126) arguing that dismissal is required based on the Appellate Division, First Department's decision in Consolidated Rest. Operations, Inc. v. Westport Ins. Corp., 205 A.D.3d 76 [1st Dept 2022] Iv to appeal granted in part, dismissed in part, 39 N.Y.3d 943 [2022], The Insurers also submitted supplemental memoranda seeking dismissal based on specific exclusions in their various policies.
Consolidated Restaurant was a CO VID-19 insurance case involving a policy that provided coverage for "direct physical loss or damage" (205 A.D.3d at 78-79). The First Department held that for such coverage to apply "[t]he property must be changed, damaged or affected in some tangible way, making it different from what it was before the claimed event occurred. If the proffered facts do not identify any physical (tangible) difference in the property, then the complaint fails to state a cause of action. Were we to accept that an economic loss, for purposes of the all-risk policy plaintiff purchased from defendant, without any attendant physical, tangible damage to the property is sufficient, it would render the term 'physical' in the policy meaningless" (205 A.D.3d at 82). The court dismissed the policyholder's complaint because it "fail[ed] to allege any tangible, ascertainable damage, change or alteration to the property so as to plausibly state a claim the damage was 'physical'" (id. at 86-87). The court further found that the policyholder's proposed amendment of its complaint to allege the existence of "fomites" on the surfaces of its restaurants and the COVID-19 vims' "infiltration" of its premises was unavailing (id).
As the Second Circuit recently observed, every New York court to apply the term "direct physical loss" in the context of COVID-19 disputes has upheld denial of coverage (147 First Realty LLC v Aspen Am. Ins. Co., 22-2220, 2023 WL 3014780, at *2 [2d Cir Apr. 20, 2023] [citing Consolidated Rest.] [other citations omitted]).
The same result obtains here, with factually indistinguishable policyholder COVID-19 claims based on a policy covering "direct physical loss, damage or destruction to property." Additionally, as stated on the record, the Court finds that the Biological Agents Exclusion contained in the Westport policy independently warrants dismissal of the Auberge Defendants' Counterclaims and Defenses to the extent they are based on purported Cancellation of Bookings coverage under that policy.
Given the conclusion that no coverage applies as a matter of law, the Court does not reach the issue of whether any of the other exclusions raised in the Insurers' supplemental memoranda apply (ConsolidatedRest., 205 A.D.3d at 87). Accordingly, it is
ORDERED that Westport's motion to dismiss Auberge Defendants' Counterclaims and Defenses with prejudice (Mot. Seq. No. 3) is GRANTED; it is further
ORDERED that ARGUS and Interstates motion to dismiss Auberge Defendants' Crossclaims and Defenses with prejudice (Mot. Seq. No. 4) is GRANTED; it is further
ORDERED that Everest and Landmark's motion to dismiss Auberge Defendants' Crossclaims and Defenses with prejudice (Mot. Seq. No. 5) is GRANTED; it is further
ORDERED that Great Lakes motion to dismiss Auberge Defendants' Counterclaims and Crossclaims with prejudice (Mot. Seq. No. 6) is GRANTED; it is further ORDERED that Homeland's motion to dismiss Auberge Defendants' Crossclaims and Defenses (Mot. Seq. No. 7) is GRANTED; it is further
ORDERED that counsel for movants file the September 11, 2023 transcript on NYSCEF upon receipt; and it is further
ORDERED that the parties file a joint letter within ten (10) days of this decision and order with respect to proposed next steps in the litigation. This constitutes the decision and order of the Court.
This constitutes the decision and order of the Court.