Atlantic Coast Athletic Clubs, Inc. v. Cincinnati Insurance Company, Inc.

CourtDistrict Court, W.D. Virginia
DecidedMarch 8, 2023
Docket3:20-cv-00049
StatusUnknown

This text of Atlantic Coast Athletic Clubs, Inc. v. Cincinnati Insurance Company, Inc. (Atlantic Coast Athletic Clubs, Inc. v. Cincinnati Insurance Company, Inc.) is published on Counsel Stack Legal Research, covering District Court, W.D. Virginia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Atlantic Coast Athletic Clubs, Inc. v. Cincinnati Insurance Company, Inc., (W.D. Va. 2023).

Opinion

UNITED STATES DISTRICT COURT WESTERN DISTRICT OF VIRGINIA CHARLOTTESVILLE DIVISION

ACAC DOWNTOWN, LLC, et al., CASE NO. 3:20-cv-00049 Plaintiffs,

v. MEMORANDUM OPINION

CINCINNATI INSURANCE CO. INC., et al., JUDGE NORMAN K. MOON

Defendants.

The plaintiffs in this case are companies that own or operate health clubs and trampoline parks. They have sued their insurer for their losses stemming from the COVID-19 pandemic and several state governments’ orders temporarily suspending certain business in an effort to combat COVID-19. Because the unambiguous language of the relevant insurance policy requires direct, physical damage to property to secure coverage, and because plaintiffs alleged no such damage to covered property, their claims are dismissed. In light of published Fourth Circuit precedent on the issue, this Court will decline plaintiffs’ request to certify a question concerning the relevant policy language to the Supreme Court of Virginia. Background Plaintiffs are businesses that own and/or operate health clubs and trampoline parks, with facilities located in Virginia, Maryland, and Pennsylvania. Dkt. 30 (“Am. Compl.”) ¶ 19. Plaintiffs purchased an insurance policy from Cincinnati Insurance Company (“CIC”), which includes business property insurance (the “Policy”). Id. ¶ 20. The relevant coverage for purposes of this case is the Building and Personal Property Coverage Form, and the Business Income (and Extra Expense) Coverage Form. Dkt. 30-1 at ECF 54, 163. The Building and Personal Property Coverage Form contains the following language: We will pay for the actual loss of “Business Income” and “Rental Value” you sustain due to the necessary “suspension” of your “operations” during the “period of restoration”. The “suspension” must be caused by direct “loss” to property at a “premises” caused by or resulting from any Covered Cause of Loss.

Dkt. 30-1 at ECF 71 (emphasis added).

The Business Income (and Extra Expense) Coverage Form contains the following language: 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 “loss” to property at “premises” which are described in the Declarations and for which a “Business Income” Limit of Insurance is shown in the Declarations. The “loss” must be caused by or result from a Covered Cause of Loss.

Dkt. 30-1 at ECF 163 (emphasis added). The Policy defines a “loss” as “accidental physical loss or accidental physical damage.” Dkt. 30-1 at ECF 91, 171 (emphases added). A “Covered Cause of Loss” means “direct ‘loss’ unless the ‘loss’ is excluded or limited in this Coverage Part.” Id. at ECF 58. In addition, Civil Authority coverage provides that “[w]hen a Covered Cause of Loss causes damage to property other than Covered Property at a ‘premises, we will pay for the actual loss of ‘Business Income’ and necessary Extra Expense you sustain caused by action of civil authority that prohibited access to the ‘premises’, provided that both of the following apply: (a) Access to the area immediately surrounding the damaged property is prohibited by civil authority as a result of the damage; and (b) 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 …

Id. at ECF 72. Plaintiffs allege that, “[a]s a result of the 2020 COVID-19 pandemic, Plaintiffs were ordered by the state governments in Virginia, Maryland, and Pennsylvania to close all of their facilities, resulting in lost business income.” Am. Compl. ¶ 22. COVID-19 has infected many millions of Americans and over a million Americans have died from the virus. Id. ¶ 23. Plaintiffs also allege that they incurred expenses cleaning their facilities in response to the COVID-19 pandemic. Id. ¶ 24. In March 2020, Plaintiffs gave notice to CIC of a claim related to the COVID-19 pandemic. Id. ¶ 25. Plaintiffs detailed alleged lost business income and fixed expenses of $6,974,388, extra expenses incurred in response to the COVID-19 pandemic of $8,232,520, and likely lost net income of $867,000, resulting in a total asserted loss of $16,073,908. Id. ¶ 32; see also Dkt. 30-6. In June 2020, CIC denied Plaintiffs’ claim. Am. Compl. ¶ 38. Plaintiff Atlantic Coast Athletic Clubs, Inc., subsequently filed suit against CIC and Brent Showalter, an employee of CIC, in the Circuit Court for the City of Charlottesville. Dkt. 1. That initial complaint raised claims of breach of contract and breach of the implied covenant of good faith and fair dealing, against CIC, negligence against Showalter, and fraud against CIC and Showalter. Subsequently, CIC removed the case to this Court asserting that this Court had diversity jurisdiction because Showalter was fraudulently joined as a defendant and his citizenship could be disregarded for purposes of the diversity jurisdiction. Dkt. 1. Plaintiff filed a motion to remand. Dkt. 6. This Court subsequently issued a memorandum opinion denying the motion to remand. Dkt. 21. In the decision, this Court concluded that, as Plaintiff “will not be able to establish its negligence or fraud claims as against Defendant Showalter, the Court can disregard Showalter’s citizenship for purposes of its jurisdictional analysis. Absent Showalter, there is complete diversity of the parties.” Id. at 8. Therefore, the Court held that Plaintiff’s motion to remand was denied. Id.

Plaintiffs then filed the operative First Amended Complaint. The original Plaintiff Atlantic Coast Athletic Clubs, Inc. was no longer listed as a named plaintiff, and in its stead, Plaintiffs included fifteen health and athletic clubs and trampoline parks. See Am. Compl. The Amended Complaint also continues to list Showalter as a defendant and includes the claims against him—recognizing that the Court held that those claims could not proceed, but Plaintiffs “note their objection” to that ruling, and state that they “includ[e] … Showalter in the First Amended Complaint out of an abundance of caution to preserve the issue for later review.” Id. at 2 n.2. In their amended complaint, Plaintiffs raise four causes of action. First, Plaintiffs raise a

breach of contract claim against CIC. Id. ¶¶ 69–81. Second, Plaintiffs bring a claim for breach of the implied covenant of good faith and fair dealing against CIC. Id. ¶¶ 82–86. Third, Plaintiffs raise a claim of negligence solely against Showalter. Id. ¶¶ 87–93. Fourth and finally, Plaintiffs include a claim of fraud against CIC and Showalter. Id. ¶¶ 94–102. CIC filed a motion to dismiss the Amended Complaint, which has been fully briefed. Dkts. 47, 48, 49, 51. Plaintiffs have filed a motion to certify question to the Supreme Court of Virginia, which is also fully briefed, and is opposed by CIC. Dkts. 50, 52. The Court heard oral argument on the motions, which are ripe for decision. Standard of Review “A motion to dismiss pursuant to Rule 12(b)(6) tests the sufficiency of the claims pled in a complaint.” ACA Fin. Guar. Corp. v. City of Buena Vista, 917 F.3d 206, 211 (4th Cir. 2019). It does not “resolve contests surrounding the facts, the merits of a claim, or the applicability of defenses.” King v. Rubenstein, 825 F.3d 206, 214 (4th Cir. 2016).

A complaint must contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a).

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Bell Atlantic Corp. v. Twombly
550 U.S. 544 (Supreme Court, 2007)
Ashcroft v. Iqbal
556 U.S. 662 (Supreme Court, 2009)
Simmons v. United Mortgage & Loan Investment, LLC
634 F.3d 754 (Fourth Circuit, 2011)
Richmond Metropolitan Authority v. McDevitt Street Bovis, Inc.
507 S.E.2d 344 (Supreme Court of Virginia, 1998)
Furrow v. State Farm Mutual Automobile Insurance
375 S.E.2d 738 (Supreme Court of Virginia, 1989)
Blue Cross and Blue Shield v. Keller
450 S.E.2d 136 (Supreme Court of Virginia, 1994)
Legard v. Eqt Production Co.
771 F. Supp. 2d 607 (W.D. Virginia, 2011)
State Farm Fire & Casualty Co. v. Nationwide Mutual Insurance
596 F. Supp. 2d 940 (E.D. Virginia, 2009)
Builders Mutual Insurance v. Dragas Management Corp.
709 F. Supp. 2d 441 (E.D. Virginia, 2010)
Adrian King, Jr. v. Jim Rubenstein
825 F.3d 206 (Fourth Circuit, 2016)
Nationwide Mut. Fire Ins. Co. v. Erie Ins. Exch.
798 S.E.2d 170 (Supreme Court of Virginia, 2017)
Erie Ins. Exchange v. EPC MD 15, LLC
822 S.E.2d 351 (Supreme Court of Virginia, 2019)
Selective Way Insurance v. Crawl Space Door System, Inc.
162 F. Supp. 3d 547 (E.D. Virginia, 2016)

Cite This Page — Counsel Stack

Bluebook (online)
Atlantic Coast Athletic Clubs, Inc. v. Cincinnati Insurance Company, Inc., Counsel Stack Legal Research, https://law.counselstack.com/opinion/atlantic-coast-athletic-clubs-inc-v-cincinnati-insurance-company-inc-vawd-2023.