Seven LLC v. ACE Property and Casualty Insurance Company

UNITED STATES DISTRICT COURT FOR THE 7 WESTERN DISTRICT OF WASHINGTON AT SEATTLE ) SEVEN, LLC, d/b/a SEVEN, individually ) CASE NO. 2:21-cv-00432-BJR and on behalf of all others similarly situated, ) 10 ) ORDER GRANTING DEFENDANT’S Plaintiff, ) MOTION TO DISMISS PURSUANT TO 11 ) FED. R. CIV. P. 12(b)(6) v. ) 12 ) ACE PROPERTY AND CASUALTY ) INSURANCE COMPANY, ) ) 14 Defendant. ) ____________________________________) Before the Court is Defendant’s Motion to Dismiss Plaintiff’s claims. Def.’s Mot. to Dismiss Pursuant to Fed. R. Civ. P. 12(b)(6), Dkt. No. 12 (“Mot.”).1 Having reviewed the Motion, the oppositions thereto, the record of the case, and the relevant legal authorities, the Court will grant Defendant’s Motion.

23 1 Both Defendant and Plaintiff have requested oral argument. See Mot., Dkt. No. 12; Pl.’s Resp. in Opp’n to Def.’s Mot. to Dismiss Pursuant to Fed. R. Civ. P. 12(b)(6), Dkt. No. 23 at 1 (“Resp.”). The Court determines that oral argument is unnecessary to resolve the motion and will, therefore, deny the requests. See Local Rules W.D. Wash. LCR 7(b)(4) (“Unless otherwise ordered by the court, all motions will be decided by the court without oral argument.”).

This is one amongst a multitude of cases across the United States in which a business seeks coverage from their insurance company for income lost due to the COVID-19 pandemic.

3 See Compl., Dkt. No. 1. This District has chosen to assign all such cases to the undersigned who consolidated the earliest of these actions into ten cases. See, e.g., Chorak v. Hartford Cas. Ins.

5 Co., 20-cv-00627. This Court recently published an Order in those cases holding there was no coverage for losses due to COVID-19. See Nguyen, et al. v. Travelers Cas. Ins. Co., et al., No. 20-cv-00597, 2021 WL 2184878 (W.D. Wash. May 28, 2021). The Court held that in all of the relevant policies “direct physical loss of or damage to” covered property was required to trigger coverage and COVID-19 did not cause physical loss or damage. Id. at *9–*13. Additionally, the Court held that extension provisions, such as Extra Expense or Civil Authority, failed to provide independent grounds for coverage where coverage was not triggered in the first instance. Id. at *13–*14. Finally, the Court held that, as to those policies that contained Virus exclusion provisions, those exclusions provided an additional basis for denial of coverage. Id. at *15–*16.

This case was filed after consolidation in those matters, and thus was not included in that Order. Plaintiff’s Complaint points to several provisions in Plaintiff’s insurance policy as grounds for coverage. See Compl., Dkt. No. 1 ¶ 15 (mentioning Business Income and Extra Expense, Extended Business Income, and Civil Authority coverages); see also id. ¶ 86 (defining proposed classes according to Business Income, Extra Expense, Extended Business Income, and Civil Authority provisions).

These provisions, however, all require coverage to be triggered by direct physical loss or damage to covered property (or nearby property) in the first instance. See Decl. of William F.

Knowles, Ex. A, Dkt. No. 13 (Insurance Policy of Seven LLC, hereinafter “Policy”) at 15 (Business Income);2 17 (Extra Expense);3 16 (Extended Business Income);4 18 (Civil Authority);5 see also id. at 11.6 Therefore, given the Court’s conclusion that COVID-19 does not cause physical loss or damage, these provisions fail to provide coverage.

2 Stating (1) Business Income (a) We will pay for the actual loss of Business Income you sustain due to the necessary suspension of your “operations” during the “period of restoration”. The suspension must be caused by direct physical loss of or damage to property at the described premises. The loss or damage must be caused by or result 9 from a Covered Cause of Loss. With respect to loss of or damage to personal property in the open or personal property in a vehicle, the described premises include the area within 100 feet of such 10 premises.

3 Stating g. Extra Expense 12 (1) We will pay necessary Extra Expense you incur during the “period of restoration”that you would not have incurred if there had been no direct physical loss or damage to property at the described premises.

13 The loss or damage must be caused by or result from a Covered Cause of Loss. With respect to loss of or damage to personal property in the open or personal property in a vehicle, the described premises 14 include the area within 100 feet of such premises.

4 Stating (2) Extended Business Income 16 (a) If the necessary suspension of your “operations” produces a Business Income loss payable under this policy, we will pay for the actual loss of Business Income you incur during the period that: . . .

However, Extended Business Income does not apply to loss of Business Income incurred as a result of unfavorable business conditions caused by the impact of the Covered Cause of Loss in the area where the described premises are located. (b) Loss of Business Income must be caused by direct physical loss or damage at the described premises caused by or resulting from any Covered Cause of Loss.

19 5 Stating 20 i. Civil Authority When a Covered Cause of Loss causes damage to property other than property at the described premises, 21 we will pay for the actual loss of Business Income you sustain and necessary Extra Expense caused by action of civil authority that prohibits access to the described premises, provided that both of the following 22 apply: (1) Access to the area immediately surrounding the damaged property is prohibited by civil authority as a 23 result of the damage, and the described premises are within that area but are not more than one mile from the damaged property; and (2) The action of civil authority is taken in response to dangerous physical conditions resulting from the damage or continuation of the Covered Cause of Loss that caused the damage, or the action is taken to enable a civil authority to have unimpeded access to the damaged property.

25 6 Defining “Covered Causes of Loss” as “Direct physical loss unless the loss is excluded or limited” by the Policy.

Additionally, Defendant argues that a Virus exclusion clause found in Plaintiff's policy would bar coverage, even if Plaintiff could establish coverage in the first instance. See Mot. at || 13-15; see also Policy at 26, 29, 125 ’ Tn its previous Order, the Court found that such Virus || exclusions applied and rejected arguments identical to the ones advanced by Plaintiff. See Nguyen, }|2021 WL 2184878, at *15—*16; Resp. at 10-15. The Court adheres to its previous ruling.

6 Plaintiff advances claims for Declaratory Relief and Breach of Contract. See Compl. {J — 96-109. The conclusions supra determine that there is no coverage under Plaintiffs policy and that, therefore, Defendant did not act unreasonably when it denied coverage. The Court hereby GRANTS Defendant’s Motion and dismisses Plaintiffs claims with PREJUDICE.

11 SO ORDERED.

12 DATED this Ist day of July, 2021.

13 ky hard irain 14 ARBARA F ROTHSTEIN UNITED STATES DISTRICT JUDGE 22 Stating 23 B. Exclusions We will not pay for loss or damage caused directly or indirectly by any of the following.

24 ve j. Virus or Bacteria 25 (1) Any virus, bacterium or other microorganism that induces or is capable of inducing physical distress, illness or disease.