The Band's Visit National Tour LLC v. Hartford Fire Insurance Company.

• Court: Superior Court of Delaware
• Decided: December 11, 2023
• Docket: N22C-03-048 PRW
• Status: Published

Opinion

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE

THE BAND’S VISIT NATIONAL ) TOUR LLC; BANDSTAND TOUR ) LLC; BMGNET TOURING LLC; ) BRONX TOURING LLC; CATS ON ) TOUR LLC; CHOCOLATE ) TOURING LLC; ESCAPE ON ) TOUR LLC; HOSANNA TOUR LLC; ) LMS TOURING LLC; MY FAIR ) LADY ON TOUR; OOTI TOURING ) LLC; SAI TOURING LLC; ) SBSP TOURING LLC; ) TCP TOURING LLC; and ) WAITRESS TOURING LLC, ) ) Plaintiffs, ) ) v. ) C.A. No. N22C-03-048 ) PRW CCLD ) HARTFORD FIRE INSURANCE ) COMPANY, ) ) Defendant. )

Submitted: October 15, 2023 Decided: November 29, 2023 Issued: December 11, 2023*

OPINION AND ORDER

Upon Defendant Hartford Fire Insurance Company’s Motion for Summary Judgment, GRANTED. David J. Baldwin, Esquire, Peter C. McGivney, Esquire, and Zachary J. Schnapp, Esquire, BERGER HARRIS LLP, Wilmington, Delaware; Peter A. Halprin, Esquire (argued), and Tae Andrews, Esquire, PASICH LLP, New York, New York; Kirk Pasich, Esquire, PASICH LLP, Los Angeles, California, Attorneys for Plaintiffs The Band’s Visit., et al.

Tracy A. Burleigh, Esquire, and Sarah B. Cole, Esquire, MARSHALL DENNEHEY WARNER COLEMAN & GOGGIN, P.C., Wilmington, Delaware; Sarah D. Gordon, Esquire (argued), Elizabeth A. Cassady, Esquire, Johanna Dennehy, Esquire, Elise Haverman, Esquire, and Ansley Seay, Esquire, STEPTOE & JOHNSON LLP, Washington, D.C., Attorneys for Defendant Hartford Fire Insurance Company.

WALLACE, J. When the COVID-19 pandemic first struck in March 2020, all types of

businesses abruptly shuttered. When they tried to recoup just some portion of their

mounting financial losses, many of those claims were denied by their insurance

carriers. Since then, some have sued their insurers looking for coverage they believe

is owed. This is one such lawsuit.

The Plaintiffs here are fifteen touring stage productions that were forced to

suspend their performances in March 2020 and remain dormant for a substantial time

thereafter. The Defendant is the insurance company from which those tours

purchased coverage. The tours filed insurance claims for COVID-19-related losses

that were denied, in whole or large part, by their insurer. So, the tours have brought

here a suit with seven separate causes of action contesting those denials; their insurer

now moves for full summary judgment thereon.

I. FACTUAL AND PROCEDURAL BACKGROUND

A. THE PARTIES

Plaintiffs (collectively, “the Tours”) are fifteen touring theater productions.1

Fourteen of them (the “Non-Hosanna tours”) purchased a one-year “all risk”

insurance policy from Defendant Hartford Fire Insurance Company.2 NETworks

* This decision is issued after providing the parties an opportunity to request redaction of certain confidential information—none were made—and with the Court’s own necessary corrections. 1 Complaint (“Compl.”) ¶¶ 10-24 (D.I. 1). 2 Compl. ¶ 2.

-1- Presentations LLC (the “NETworks tours” or “NETworks”), a company located in

Maryland, manages nine of those theater productions.3 Troika Entertainment (the

“Troika tours” or “Troika”), a company also located in Maryland, manages four

others.4 Bandstand Tour LLC (“Bandstand”) and Hosanna Tour LLC (“Hosanna”)

are the last two and are managed by Work Light Productions, a company located in

New Jersey.5

Hartford is an insurance company incorporated in Connecticut.6 All fifteen

of the Tours obtained insurance from Hartford for a one-year period.7 The

NETworks tours procured their policies through an insurance broker, Maury

Donnelly & Parr Inc. (“MDP”), and Robert Middleton, MDP’s Director of the Arts

Program.8 Mr. Middleton’s role as Director of the Arts Program at MDP was

primarily to provide proposals from different insurance carriers to potential

policyholders.9 By 2020, MDP had been working with Hartford for close to two

3 Id. ¶ 7; Defendant Hartford’s Opening Brief (“Hartford’s Open. Br.”) at 5, 5 n.1 (D.I. 106); The Tours’ Answering Brief (“Tours’ Ans. Br.”) at 1, 1 n.1 (D.I. 111). 4 Hartford’s Open. Br. at 5. 5 Compl. ¶¶ 11, 17; Hartford’s Open. Br. at 5 n.3. 6 Compl. ¶ 25. 7 E.g., Hartford’s Open. Br., Ex. 1 (“Standard Policy”); Hartford’s Open. Br., Ex. 15 (“Hosanna Policy”). 8 Hartford’s Open. Br., Ex. 16 (“Middleton Dep.”) 21, 61 (D.I. 107). 9 Middleton Dep. 21-22.

-2- decades under The Hartford Agency Agreement (the “Agency Agreement”).10

B. MDP AND THE HARTFORD AGENCY AGREEMENT

On March 1, 2001, Hartford and MDP entered into the Agency Agreement.11

The relevant provisions of that agreement are in the “Authority of Agent” and

“Compensation” sections.12

In the “Authority of Agent” section, Hartford authorizes MDP “on

[Hartford’s] behalf” to “[s]olicit, quote and bind insurance in your territory for those

lines of insurance and classes of business shown on the Declarations page,” to

“[d]eliver such policies as we may issue,” to “[c]ollect, receive and receipt for

premiums on such policies,” and to “[p]rovide all usual and customary services of

an insurance agent on all insurance policies you place with [Hartford].”13

The section also includes a limitations clause:

You have the authority and power to act as our agent only to the extent expressly granted in this Agreement and no further authority or power is implied. You are an independent contractor and not an employee of ours for any purpose . . . . Any authority granted hereunder to solicit, quote or bind insurance products on our behalf is non-exclusive, unless we agree otherwise in writing.14

10 Tours’ Ans. Br., Ex. 1 (“Agency Agreement”) (D.I. 112). 11 Id. 12 Id. §§ II, V. 13 Id. §§ II.1(a)-(d). 14 Id. § II.2.

-3- C. THE TOURS’ INSURANCE PROCUREMENT

The tale of this insurance dispute begins in spring 2018, when the NETworks

tours began working with MDP and Mr. Middleton to procure insurance for their

2019-2020 travelling productions.15 During the procurement, Mr. Middleton

approached the NETworks tours with a new coverage form for performance

disruption.16 This new coverage form did not include the standard requirement for

“direct physical loss or damage” to property in order such disruption to be covered.17

Mr. Middleton also informed Sheila Gladding, the Hartford underwriter responsible

for the NETworks tours, of Networks’ interest in this new form of coverage.18

That following winter, Mr. Middleton informed the NETworks tours that

Hartford’s plan was to add the “literally brand new” coverage form, once finished,

“automatically on renewals and new shows,” but only “by endorsement” on

“existing” shows.19 A couple months later, Mr. Middleton e-mailed Ms. Gladding:

We are getting ready to embark on the insurance coverage for new shows and the renewal of existing ones. I need to know if Hartford is going to be able to address this coverage in 2019. If

15 See Middleton Dep. 87-88; see also Tours’ Ans. Br., Ex. 3 (“Email from NETworks to Middleton 08/13/18”). All the Tours were insured by Hartford for the 2019-2020 touring season, but only NETworks tours’ story dates back to 2018. 16 See Tours’ Ans. Br., Ex. 10 (“Email from Middleton to NETworks Undated”). 17 See Tours’ Ans. Br., Ex. 5 (“Emails between Middleton and Gladding May 2018”); Tours’ Ans. Br., Ex. 6 (“Email from Middleton to Gladding 08/15/18”). 18 Email from Middleton to Gladding 08/15/18 (“Networks . . . is very interested in this enhanced coverage.”). 19 Tours’ Ans. Br., Ex 11 (“Email from Middleton to NETworks 01/14/19”).

-4- not, we are prepared to work with other carriers in pursuit of this coverage feature.20 Ms. Gladding informed Mr. Middleton on May 21, 2019, that Hartford was

working on finalizing the new coverage form, but that it would not be ready until

“3rd quarter 2019.”21

With the foregoing information in tow, the NETworks tours purchased

coverage from Hartford for their 2019-2020 touring productions.22 The nine shows

were all bound for a one-year period, with policies commencing between late June

and late October.23 The signed policies did not include the yet-to-be-finalized new

coverage form.24

Next, the NETworks tours, Mr. Middleton, and Hartford embarked on an

extended back-and-forth regarding a finalized version of the new coverage form. On

September 30, 2019, Ms. Gladding informed Mr. Middleton that Hartford would

“have [a] draft form . . . for your review within the next 2 weeks.”25 Mr. Middleton

then told the NETworks tours that the new coverage form was “approved by

20 Tours’ Ans. Br., Ex. 12 (“Email from Middleton to Gladding 03/1/19”). 21 Tours’ Ans. Br., Ex. 15 (“Email from Gladding to Middleton 05/21/19”). 22 See, e.g., Standard Policy; see also Hartford’s Open. Br. at 11. 23 E.g., Standard Policy. Although each individual tour purchased a separate policy, all Non- Hosanna tour policies are identical in all relevant parts. Thus, any reference to the Standard Policy purchased by the Non-Hosanna tours will cite to the policy at Hartford’s Open. Br., Ex. 1, and be discussed and interpreted as one single policy. 24 Id. 25 Tours’ Ans. Br., Ex. 19 (“Email from Gladding to Middleton 09/30/19”).

-5- Hartford” and that MDP would have the finalized version “within two weeks” along

with “the ability to provide coverage.”26 On October 8, 2019, Ms. Gladding

informed Mr. Middleton that Hartford would “be able to amend an existing account

via endorsement.”27 Mr. Middleton relayed to NETworks that the new coverage

form “will be available 11/1. We will have the actual form by the end of next

week.”28

On December 17, 2019, Ms. Gladding sent the finalized version of the new

coverage form to Mr. Middleton.29 Soon thereafter, Mr. Middleton forwarded the

finalized version to NETworks, along with the message:

I am very excited about this proposal for Chicago Touring LLC,30 as it incorporates our first policy with the enhanced Business Income coverage. To reiterate, this drops the requirement for property damage to trigger the coverage, just that you are unable to put on a performance due to something beyond your control.31

The NETworks tours responded, “[t]hanks Bob! How do we get that provision

26 Tours’ Ans. Br., Ex. 23 (“Email from Middleton to NETworks 10/01/19”) (“Finally, after two years, we have the broader business income policy approved by Hartford. This removes the requirement for Physical damage to be present for a claim to be paid. This would mean that a covered occurrence would be an event beyond an insured’s control, such as trucks stuck in the snow, or the Civil Authority cancelling performances . . . . We will have the form within two weeks and the ability to apply coverage.”). 27 Tours’ Ans. Br., Ex. 24 (“Email from Gladding to Middleton 10/08/19”). 28 Tours’ Ans. Br., Ex. 25 (“Email from Middleton to NETworks 10/8/19”). 29 See Hartford Open. Br., Ex. 28 (“Email from Gladding to Middleton 12/17/19”). 30 The template version of the Theatrical Extension that was sent to Middleton used Chicago Touring LLC, a non-NETworks tours production, as a placeholder. See Tours’ Ans. Br., Ex. 36 (“Emails between Middleton and NETworks December 2019”); Hartford Open. Br. at 12. 31 Emails between Middleton and NETworks December 2019.

-6- added to our other current tours? Or has it already been added?” 32 Mr. Middleton

replied, “[w]e are in the process of doing that. Should take a week.”33

Mr. Middleton, however, had not yet consulted Hartford.34 Mr. Middleton then

informed Ms. Gladding that the NETworks tours wanted to add the new coverage

form to in-force shows.35 Inexplicably, communications between all parties about

this potential change to the NETworks tours’ extant coverage then ceased until

2020.36

D. THE PANDEMIC STRIKES.

In early March 2020, the COVID-19 pandemic was unfolding and the parties’

talks about the additional coverage resumed in earnest.37 On March 2, 2020,

Mr. Middleton told NETworks that he “would be contacting Hartford right away to

get [the new coverage form] in place immediately.”38 Two days later, Mr. Middleton

informed Ms. Gladding that NETworks wanted to “move coverage . . . to the new

32 Id. 33 Hartford’s Open. Br., Ex. 30 (“Email from Middleton to NETworks 12/19/19”). 34 See id.; Tours’ Ans. Br., Ex. 37 (“Email from Middleton to Gladding 12/19/19”). 35 Email from Middleton to Gladding 12/19/19. “In-force” means shows that have already started touring and are already insured. 36 See Hartford’s Open. Br., Ex. 34 (“Emails between Middleton and Gladding March 2020”); Hartford’s Open. Br. at 15. 37 Emails between Middleton and Gladding March 2020. 38 Hartford’s Open. Br., Ex. 18 (“NETworks Exec. Dep.”) 127.

-7- form this quarter.”39 Ms. Gladding responded, “I will facilitate that for you. Please

go ahead and send me any information you have, and I will get started on this.”40

On March 6, MDP emailed Ms. Gladding requesting a quoted price for adding

the new coverage form to each of the NETworks tours’ policies, effective March 15,

2020.41 Soon thereafter, NETworks reached out to Mr. Middleton for clarification

as to whether the requested policy changes would be effective on March 15, 2020.42

Middleton responded, without consulting with or hearing back from Hartford,

“[y]es, by 3/15.”43

On March 12, 2020, Ms. Gladding rejected Mr. Middleton’s requests: “With

the continued uncertainty surrounding the impacts and effects related to the

coronavirus, we have been asked to hold off on broadening coverage by adding the

[new coverage form].”44 On March 20, Ms. Gladding confirmed to MDP that, “[f]or

in-force business, The Hartford does not intend to extend coverage for any potential

Coronavirus exposure” by adding the new coverage form.45

39 Emails between Middleton and Gladding March 2020. 40 Id. 41 Hartford’s Open. Br., Ex. 35 (“Emails from MDP to Gladding 03/06/20”). 42 Hartford’s Open. Br., Ex. 36 (“Emails between Middleton and NETworks March 2020”). 43 Emails between Middleton and NETworks March 2020. 44 Hartford’s Open. Br., Ex. 40 (“Email from Gladding to Middleton 03/12/20”). 45 Hartford’s Open. Br., Ex. 47 (“Email from Gladding to Middleton 03/20/20”).

-8- E. THE DIFFERENT POLICIES

There are two insurance policy types relevant to this summary judgment

motion: The Non-Hosanna tours’ Commercial Inland Marine Business Insurance

Policy (the “Standard Policy”), and Hosanna’s policy with the new Theatrical

Property Policy Extension (the “Theatrical Extension”) coverage form.46

In March 2020, the Non-Hosanna tours were insured under the Standard

Policy.47 The pertinent sections of the Standard Policy are the “Loss of Use” and

the “Dependent Property” coverage forms, as well as definitions from the

“Entertainment Equipment Choice” coverage form and accompanying Schedule.

The “Loss of Use” coverage form states that Hartford “will pay for the actual

loss of Business Income you sustain during the ‘period of restoration’ due to the

necessary ‘suspension’ of your operations. The ‘suspension’ must be caused by

direct physical loss to ‘Covered Property’ . . . by a Covered Cause of Loss . . .”48

The relevant sections of the “Dependent Property” coverage form are the

“Coverage” and “Civil Authority” sections.49 Per the “Coverage” section, Hartford

“will pay up to the Limit of Insurance described in the SCHEDULE for the actual

loss of Business Income you sustain . . . due to direct physical loss to Dependent

46 Standard Policy; Hosanna Policy. 47 Standard Policy. 48 Id. (Loss of Use Coverage) § A.1. 49 Id. (Dependent Property Coverage) §§ A.1, A.2.

-9- Property caused by or resulting from a Covered Cause of Loss.”50 The “Civil

Authority” section provides that Hartford “will pay for the actual loss of Business

Income you sustain caused by an action of a civil authority that prohibits access to a

Dependent property, due to a direct physical loss or damage to property in the

immediate area of the Dependent Property, caused by or resulting from a Covered

Cause of Loss.”51

“Dependent Property” is defined in the Standard Policy as “theaters, concert

halls, opera houses and other locations owned and operated by others at which you

perform your shows and productions."52 “Covered Cause of Loss” is defined as

“direct physical ‘loss’ to Covered Property from an external cause that occurs by

chance,” and “loss” is defined as “accidental loss or damage.”53

The Standard Policy also includes a “Changes” provision: “This policy’s

terms can be amended or waived only by endorsement issued by us and made a part

of this policy.”54

Hosanna’s policy differs from the rest of the Tours’, as it includes the

50 Id. § A.1. 51 Id. § A.2. 52 Id. § A.1.c. 53 Id. (Entertainment Equipment Coverage) §§ A.3, F.1. 54 Id. (Common Policy Provisions) § B.

-10- Theatrical Extension with no “direct physical loss or damage” requirement.55

Hosanna’s Theatrical Extension coverage was agreed upon in February 2020 and

effected in March 2020.56 The Theatrical Extension provides coverage for “the

actual loss of Business Income you sustain due to the necessary, interruption,

postponement or cancellation of a production due to a ‘covered occurrence’.”57 A

“covered occurrence” is defined as “any unexpected circumstances beyond your

control except as listed in the Exclusions.”58 Hosanna’s policy provides a $1.4

million Business Income coverage limit “per occurrence.”59

F. HARTFORD REFUSES THE NON-HOSANNA TOURS’ COVID-19 CLAIMS AND PAYS HOSANNA UNDER THE THEATRICAL EXTENSION.

All of the Tours suspended their travelling productions in March 2020 due to

the COVID-19 pandemic.60 Each Non-Hosanna tour each submitted a claim to

Hartford for coverage under its Standard Policy.61 Hartford’s claim handlers

solicited information from the Non-Hosanna tours about their losses through a

55 Hosanna Policy. 56 Hartford’s Open. Br., Ex. 32 (“Email from Gladding to Middleton 02/05/20”). 57 Hosanna Policy (Theatrical Extension) § B.1.a. 58 Id. § B.9.a. 59 Id. § Schedule. 60 See NETworks Exec. Dep. 191: see also Hartford’s Open. Br., Ex. 19 (“Troika Exec. Dep.”); Hartford’s Open. Br., Ex. 20 (“Hosanna Exec. Dep.”); Hartford’s Open. Br., Ex. 53 (“Band’s Visit Claim”); Hartford’s Open. Br., Ex. 54 (“Escape on Tour Claim”); Hartford’s Reply Brief in Support of its Motion for Summary Judgment (“Hartford’s Repl. Br.”) at 12 (D.I. 125); Tours’ Ans. Br. at 21. 61 E.g., Band’s Visit Claim.

-11- questionnaire, held follow-up calls with Mr. Middleton or the Non-Hosanna tours’

employees, and ultimately denied each of the Non-Hosanna tours’ claims.62

Hosanna, like the Non-Hosanna tours, also had to suspend its tour in March

2020 due to the COVID-19 pandemic and the resulting government-imposed

shutdown orders.63 Hosanna submitted a claim for lost business income to Hartford

under its Theatrical Extension coverage.64 In response, Hartford determined that

Hosanna’s losses arose because of cancelled performances due to a “covered

occurrence.”65 Hartford solicited information from Hosanna about its losses through

a questionnaire, held follow-up calls, and paid Hosanna $1.4 million on July 22,

2020, for Lost Business Income and Extra Expense.66 Two months later, Hosanna

submitted a second claim, contending that each cancelled engagement arose from a

separate occurrence.67 Hartford followed the same procedure as before and denied

that second claim in November 2020.68

62 E.g., id.; Escape on Tour Claim; see also Hartford Repl. Br. at 11-12. 63 Hartford’s Open. Br., Ex. 55 (“Hosanna Claim”). 64 Hosanna Policy. 65 Hosanna Claim. 66 Hartford’s Open. Br., Ex. 56 (“Hosanna Claim Payment”). 67 Hartford’s Open. Br., Ex. 51 (“Email from Middleton to Hosanna”); Hartford’s Open. Br., Ex. 57 (“Hosanna Second Claim”). 68 Hartford’s Open. Br., Ex. 52 (“Hosanna Second Claim Denial”).

-12- G. THE TOURS BRING SUIT SEEKING COVERAGE.

On March 4, 2022, the Tours initiated this action against Hartford. 69 The

Tours have asserted seven causes of action:

Breach of contract for the denial of the Non-Hosanna tours’ claims (Count I);70 Breach of the duty of implied faith and fair dealing for the denial of the Non-Hosanna tours’ claims (Count II);71 Declaratory relief confirming the Tours’ contentions in Counts I and II (Count III);72 Fraud by Hartford regarding the addition of the Theatrical Extension (Count IV);73 Declaratory relief regarding the addition of the Theatrical Extension to NETworks tours’ existing policies (Count V);74 Breach of contract for the denial of Hosanna’s second claim (Count VI),75 and; Breach of the implied duty of good faith and fair dealing for the denial of Hosanna’s second claim (Count VII).76

Hartford answered and discovery ensued.77 Hartford now moves for summary

judgment on all the Tours’ causes of action.78

69 See Compl. 70 Id. ¶¶ 151-159. 71 Id. ¶¶ 160-170. 72 Id. ¶¶ 171-178. 73 Id. ¶¶ 179-198. 74 Id. ¶¶ 199-205. 75 Id. ¶¶ 206-209. 76 Id. ¶¶ 210-220. 77 Hartford’s Answer (D.I. 9); see Hartford’s Open. Br. at 22. 78 See generally Hartford’s Open. Br.

-13- II. PARTIES’ CONTENTIONS

Hartford insists that it is entitled to summary judgment on all seven counts of

the Tours’ complaint.79 As a threshold matter, Hartford contends that Maryland law

should apply to all claims by NETworks and Troika because of their contacts with

Maryland, and that New Jersey law should apply to Bandstand and Hosanna’s claims

due to their New Jersey contacts.80

A. NON-HOSANNA TOURS’ CLAIMS OF BREACH OF CONTRACT AND IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING Hartford first moves for summary judgment on the breach-of-contract claims

found in Counts I and III.81 At bottom, Hartford argues that the Non-Hosanna tours

are not entitled to coverage under the Standard Policy for their losses due to the

COVID-19 pandemic and its effects.82

Hartford relies heavily on the recent decision of the Supreme Court of

Maryland’s in Tapestry, Inc. v. Factory Mutual Ins. Co., contending that under

Maryland law the language “direct physical loss” in an insurance policy means there

must be “tangible, concrete, and material harm” to trigger coverage.83 When

applying New Jersey law, Hartford cites to multiple New Jersey cases that have

79 See id. 80 Id. at 24-33. 81 Id. at 33-39. 82 Id. 83 243 A.3d 1044, 1056 (Md. 2022); Hartford’s Open. Br. at 33-36.

-14- interpreted “direct physical loss” as requiring “demonstrable damage” to the

physical structure of subject property.84

Hartford further contends that any impact of COVID-19 cannot constitute

“direct physical loss” as it is used in the policies because “direct physical loss”

requires actual physical damage under either Maryland or New Jersey law.85

Hartford also notes that none of the Non-Hosanna tours provided evidence that any

tours were suspended due to the actual presence of the virus, arguing instead that the

suspensions were in response to the pandemic as a whole.86 Even if it we proven

that COVID-19 was present at any of the venues, Hartford maintains that the

presence of virus on surfaces and in the air does not involve the requisite physicality

that Maryland or New Jersey courts have required.87 As such, Hartford contends

that the Non-Hosanna tours’ claims for cancellation coverage under the Standard

Policy—and the correlated claims for declaratory relief—can now be conclusively

rejected.88

The Non-Hosanna tours oppose Hartford’s motion on Counts I and III.89 Both

84 Id. at 36-39. 85 Id. 86 Id. at 35. 87 Id. at 35-36, 38-39. 88 Id. at 36, 38-39. 89 Tours’ Ans. Br. at 54-58.

-15- the Maryland- and New Jersey-based Non-Hosanna tours contend that there remains

a genuine issue for trial as to whether COVID-19 itself counts as “direct physical

loss or damage” under either state’s laws.90 Specifically, these tours argue that “[a]

direct physical loss often involves some physical alteration to the covered property,”

and that “several courts have ruled that alterations at the ‘microscopic’ or

‘molecular’ level may constitute physical loss under a property insurance policy.”91

Further, the Non-Hosanna tours maintain that discovery has revealed scientific

evidence that COVID-19 is a “physical substance,” pointing to expert depositions

and planned testimony about how the virus spreads through “fomite transmission”

and via airspaces.92 The Maryland- and New Jersey-based tours also argue that there

is a substantial statistical likelihood that COVID-19 was present at the venues where

the Tours would perform, but primarily attribute their income losses to the general

presence of the virus in the atmosphere and in the world.93

Hartford contends that, as to Count II, it is entitled to summary judgment on

the Non-Hosanna tours’ claims of breach of the implied covenant of good faith and

fair dealing.94 Hartford says there can be no bad faith in the absence of coverage in

90 Id. at 58-62. 91 Id. at 54-55. 92 Id. at 58-59. 93 Id. at 61-62. 94 Hartford’s Open. Br. at 43-45.

-16- the first instance; too, it points to the routine and ordinary manner in which the

claims were handled and ultimately denied.95

The Non-Hosanna tours counter that Hartford acted in bad faith when it denied

their claims under the Standard Policy, so summary judgment cannot be rendered on

Count II.96 In the Non-Hosanna tours’ view, Hartford failed to properly investigate

the claims and instead issued “boilerplate denials” when coverage of their

COVID-19-related claims was indeed due.97

B. HOSANNA’S BREACH-OF-CONTRACT AND GOOD FAITH CLAIMS

Hartford contends that it is entitled to summary judgment on Hosanna’s

breach-of-contract claim (Count VI).98 In short, Hartford maintains that the only

reasonable interpretation of Hosanna’s Theatrical Extension is that the tour

cancellation due to COVID-19 constituted one singular “covered occurrence.”99

Additionally, Hartford argues that Hosanna’s shutdown was due to the pandemic as

a whole, not the individual closure orders that occasioned it.100 Hosanna opposes

Hartford’s motion, arguing that each cancelled engagement was a separate

95 Id.; Hartford’s Repl. Br. at 12-13. 96 Tours’ Ans. Br. at 62-66. 97 Id. at 2, 65. 98 Hartford’s Open. Br. at 39-43. 99 Id. 100 Id.

-17- “occurrence” under the policy.101 Hosanna relies on Jujamcyn Theaters LLC v. Fed.

Ins. Co.—where a federal district court in New York found a nearly identical policy

to be ambiguous—to posit that “covered occurrence” is subject to more than one

reasonable interpretation.102

Relatedly, Hartford contends it is also entitled to summary judgment on

Hosanna’s bad faith claim (Count VII). Hartford argues that its denial of Hosanna’s

second claim was proper, ordinary, and reasonable.103 In opposition, Hosanna

protests that Hosanna acted unreasonably.104

C. NETWORKS TOURS’ FRAUD CLAIM

Hartford further moves for summary judgment on the NETworks tours’ fraud

claim found in Count IV.105 Here, Hartford makes three main arguments: (1) No

one at Hartford made any false statements directed to the NETworks tours regarding

the addition of the Theatrical Extension; (2) Hartford cannot be held vicariously

liable for Mr. Middleton’s statements, and; (3) even if Hartford could be vicariously

liable for Mr. Middleton’s statements, there is no basis for liability because

101 Tours’ Ans. Br. at 66-67. 102 2023 WL 2366789, at *6-7 (S.D.N.Y. Mar. 6, 2023); id. at 51-52. 103 Hartford’s Open. Br. at 43-45. 104 Tours’ Ans. Br. at 66-68. 105 Hartford’s Open. Br. at 61-66.

-18- Mr. Middleton did not perpetuate an actionable fraud.106

In opposing Hartford’s attack on its fraud claim, the NETworks tours suggest

first that a genuine issue of material fact remains whether a principal-agent

relationship existed between Hartford and MDP, as evidenced by the written Agency

Agreement.107 Second, the NETworks tours argue that there is sufficient evidence

of Mr. Middleton’s fraudulent misrepresentations to present to a jury, contending

that Mr. Middleton made false statements about the addition of the Theatrical

Extension to the Standard Policy.108 The NETworks tours maintain that Hartford is

vicariously liable for MDP and Mr. Middleton’s purported fraudulent

misrepresentations regarding the Theatrical Extension.109

D. DECLARATORY JUDGMENT CLAIM REGARDING MODIFICATION OF THE STANDARD POLICY

Finally, Hartford says it is entitled to summary judgment on the Tours’ prayer

for declaratory judgment demanding the addition of the Theatrical Extension to the

Standard Policy (Count V).110 Hartford identifies the policy’s endorsement

requirement as forestalling any finding that the Standard Policy was or could be

106 Id. at 61. 107 Tours’ Ans. Br. at 24-40. 108 Id. at 31-40. 109 Id. at 24-40. 110 Hartford’s Open. Br. at 45-60.

-19- deemed modified to include the Theatrical Extension.111 Put simply, because such

an endorsement was never issued, the Standard Policy cannot be deemed

modified.112 And, adds Hartford, even if Mr. Middleton had the authority to bind

Hartford and issue such an endorsement, he never did so.113

III. APPLICABLE LEGAL STANDARDS

“Summary judgment is appropriate where the record demonstrates that ‘there

is no genuine issue as to any material fact and that the moving party is entitled to a

judgment as a matter of law.’”114 The standards the Court employs to determine

whether summary judgment is due are well-known. The Court: “(i) construes the

record in the light most favorable to the non-moving party; (ii) detects, but does not

decide, genuine issues of material fact; and (iii) denies the motion if a material fact

is in dispute.”115 A fact is material if it “might affect the outcome of the suit under

governing law.”116

111 Id. at 45-50. 112 Id. 113 Id. at 50-61. 114 Parexel Int’l (IRL) Ltd. v. Xynomic Pharms., Inc., 2020 WL 5202083, at *4 (Del. Super. Ct. Sept. 1, 2020) (quoting Del. Super. Ct. Civ. R. 56(c)). 115 US Dominion, Inc. v. Fox News Network, LLC, 2023 WL 2730567, at *17 (Del. Super. Ct. Mar. 31, 2023 (quoting CVR Ref., LP v. XL Specialty Ins. Co., 2021 WL 5492671, at *8 (Del. Super. Ct. Nov. 23, 2021)) (cleaned up). 116 Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment.”). See also In re Asbestos Litigation, 2006 WL 3492370, at *3 (Del. Super. -20- During summary judgment proceedings, the movant bears the initial burden

of demonstrating that the undisputed facts support that party’s claims or defenses.117

Only if the motion is properly supported, does the burden then shift to the opponent

to demonstrate that there are material issues of fact for the resolution by the ultimate

fact-finder.118 Of course, the “issue of fact must be genuine.”119 And one opposing

summary judgment “must do more than simply show that there is some metaphysical

doubt as to material facts.”120

To be sure, the Court must—in the same instant—be both willing and cautious

during its summary judgment examination.121 But in the end, if it “finds that no

genuine issues of material fact exist, and the moving party has demonstrated [its]

entitlement to judgment as a matter of law, then summary judgment is

appropriate.”122

Ct. Nov. 28, 2006); Farmers Bank of Willards v. Becker, 2011 WL 3925428, at *3 (Del. Super. Ct. Aug. 19, 2011). 117 Moore v. Sizemore, 405 A.2d 679, 680 (Del. 1979) (citing Ebersole v. Lowengrub, 180 A.2d 467, 470 (Del. 1962)). 118 Brzoska v. Olson, 668 A.2d 1355, 1364 (Del. 1995). 119 Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986) (cleaned up). 120 Id. 121 See McCabe v. Wilson, 1986 WL 8008, at *2 (Del. Super. Ct. June 26, 1986) (observing first that it is “true that although difficult questions of law may exist, that in and of itself is not a ground for denying summary judgment inasmuch as refusing to grant the motion does not obviate the Court’s obligation to make a difficult decision” but then cautioning that “summary judgment, with ever-lurking issues of fact, is a treacherous shortcut”).121 122 Brooke v. Elihu-Evans, 1996 WL 659491, at *2 (Del. Aug. 23, 1996) (citing Oliver B. Cannon & Sons, Inc. v. Dorr-Oliver, Inc., 312 A.2d 322 (Del. Super. Ct. 1973)); see also Jeffries v. Kent -21- IV. DISCUSSION

A. HARTFORD IS ENTITLED TO SUMMARY JUDGMENT ON NETWORKS AND TROIKA’S BREACH-OF-CONTRACT AND GOOD FAITH CLAIMS.

1. Maryland law applies to NETworks and Troika’s claims.

As the forum state, Delaware applies its own choice-of-law rules.123 Courts

in Delaware follow the Second Restatement’s “most significant relationship”

analysis when considering choice of law in contract disputes.124

There are three potential steps to be taken in Delaware’s “most significant

relationship” analysis:

(i) determining if the parties made an effective choice of law through their contract; (ii) if not, determining if there is an actual conflict between the laws of the different states each party urges should apply; and (iii) if so, analyzing which state has the most significant relationship.125

These Hartford policies do not specify which state’s law applies to disputes

arising thereunder.126 So, the Court must determine whether there is an actual

Cnty. Vocational Tech. Sch. Dist. Bd. of Educ., 743 A.2d 675, 677 (Del. Super. Ct. 1999) (“However, a matter should be disposed of by summary judgment whenever an issue of law is involved and a trial is unnecessary.” (citing Mitchell v. Wolcott, 83 A.2d 759, 761 (Del. 1951)). 123 See Sinnott v. Thompson, 32 A.3d 351, 354 (Del. 2011). More broadly, all questions of procedure in this dispute will be addressed under Delaware law. See Weinstein v. Luxeyard, Inc., 2022 WL 130973, at *3 (Del. Super. Ct. Jan. 14, 2022) (“. . . the general principle that the procedural law of the forum state governs . . .”). 124 Certain Underwriters at Lloyds, London v. Chemtura Corp., 160 A.3d 457, 464 (Del. 2017). 125 Id. 126 See Standard Policy.

-22- conflict between the jurisdiction’s laws each party urges should apply.127 If the

parties urge the application of the same state laws though, further inquiry on any

potential conflict becomes unnecessary; the choice of law may be deemed

established by “implied consent.”128

Hartford urges that Maryland law applies to NETworks and Troika tours’

claims.129 NETworks and Troika agree.130 This is sufficient to establish that

Maryland law governs all claims by the NETworks and Troika tours.131

2. Under Maryland law, “direct physical loss” unambiguously means tangible, concrete, and material harm. The interpretation of an insurance policy is a question of law for the court.132

Maryland follows the “objective theory of contract interpretation.”133 If language in

an insurance policy is ambiguous when interpreted according to the objective theory

of contract interpretation, Maryland courts “construe that language ‘liberally in favor

127 Certain Underwriters at Lloyds, London, 160 A.3d at 464. 128 See Golden Pacific Bancorp v. F.D.I.C., 273 F.3d 509, 514, 514 n.4 (2d Cir. 2001) (finding that choice of law was established by implied consent through the briefs of both parties, since both parties assumed New York substantive law governed the issues) (citation omitted). 129 Hartford’s Open. Br. at 24-32. 130 Tours’ Ans. Br. at 24. 131 See Golden Pacific Bancorp, 273 F.3d at 514 n.4. 132 See Clancy v. King, 954 A.2d 1092, 1101 (Md. 2008) (describing the interpretation of a contract as a question of law). 133 Plank v. Cherneski, 231 A.3d 436, 476 (Md. 2020) (citations omitted).

-23- of the insured and against the insurer as drafter of the instrument.’”134 A contract “is

ambiguous if, ‘when viewed from [a] reasonable person perspective, that language

is susceptible to more than one meaning.’”135 When interpreting insurance policies

in particular, Maryland courts “examine the instrument as a whole, focusing on the

character, purpose, and circumstances surrounding the execution of the contract.”136

The Supreme Court of Maryland in Tapestry, Inc. v. Factory Mutual Ins. Co.

interpreted the phrase “physical loss or damage” in an insurance policy as requiring

“tangible, concrete, and material harm.”137 In Tapestry, the plaintiff retailer operated

15 stores in Maryland and over 1,400 worldwide.138 That retailer was insured by the

defendant company under two policies139 covering “property . . . against all risks of

physical loss or damage, except as hereinafter excluded.”140 The Maryland high

134 Connors v. Gov’t Emps. Ins. Co., 113 A.3d 595, 605 (Md. 2015) (quoting Megonnell v. United Servs. Auto. Ass’n, 796 A.2d 758, 772 (Md. 2002)). 135 Ocean Petroleum, Co., Inc. v. Yanek, 5 A.3d 683, 690-91 (Md. 2010) (citing United Servs. Auto. Assoc. v. Riley, 899 A.2d 819, 833 (Md. 2006)). 136 Bailer v. Erie Ins. Exchange, 687 A.2d 1375, 1378 (Md. 1997); see also Plank, 231 A.3d at 476-77 (“in interpreting a contract provision, we look to the entire language of the agreement, not merely a portion thereof.” (quoting Nova Rsch., Inc. v. Penske Truck Leasing Co., 952 A.2d 275, 283 (Md. 2008))). 137 286 A.3d 1044, 1055 (Md. 2022). 138 Id. at 1049. 139 The two policies in Tapestry provide “property damage” coverage and “time element” coverage. Business interruption or business income loss coverage is sometimes referred to as time element coverage, as it is here. Only the time element coverage analysis is relevant for this analysis. Time element or business income loss coverage protects against the consequence of the loss, not the damage to the property itself. See id. 140 Id.

-24- court determined that the phrase “physical loss or damage” is not ambiguous, and

thus its interpretation was grounded on the phrase’s ordinary meaning.141 The

Tapestry court then gleaned from dictionary definitions that “physical loss or

damage” must involve “tangible, concrete, and material harm to the property or

a deprivation of possession of the property.”142

Here, the Standard Policy includes two coverage provisions of note: Loss of

Use Coverage and Dependent Property Coverage. Loss of Use Coverage includes

“the actual loss of Business Income you sustain during the ‘period of restoration’

due to the necessary ‘suspension’ of your operations . . . caused by direct physical

loss to ‘Covered Property’ . . . by a Covered Cause of Loss . . .” 143 Dependent

Property Coverage includes payment “for the actual loss of Business Income you

sustain . . . due to direct physical loss to Dependent Property caused by or resulting

from a Covered Cause of Loss.”144 “Covered Cause of Loss” is defined as “direct

physical ‘loss’ to Covered Property from an external cause that occurs by chance,”

and “loss” is defined as “accidental loss or damage.”145 When incorporating internal

definitions, “direct physical loss” equates to “direct physical loss or damage.”

141 Id. at 1054-56. 142 Id. at 1056 (emphasis added) (citations omitted). 143 Standard Policy (Loss of Use Coverage) § A.1. 144 Id. (Dependent Property Coverage) § A.1. 145 Id. (Entertainment Equipment Coverage) §§ A.3, F.1.

-25- The Standard Policy’s phrase “direct physical loss” is unambiguous: The

property in question must be lost or damaged. There is a physicality component,

and such physicality must be directed toward the property. Moreover, the property

loss or damage must be that which “caused” the insured’s loss of business income

due to necessary suspension or interruption of operations. Even when construing

the terms liberally and in favor of the insured, the Court finds no reason to stray from

the ordinary meaning of the at-issue coverage terms just as Tapestry set out.

The NETworks and Troika tours insist the Court should give weight to

Hartford’s omission of a “virus exclusion” from the Standard Policy—despite

Hartford’s prior knowledge of the dangers of viruses.146 The same was said in

Tapestry,147 and the same consideration thereof abides. As the Tapestry court noted,

“[u]ltimately, we are interpreting the [p]olicies . . . issued. We do not think the

availability on the insurance market of a broader virus exclusion undermines the

unambiguous language employed in the [p]olicies.”148 Just so here.

Accordingly, “direct physical loss” as it is used in the Business Income

Coverage, Dependent Property, and Civil Authority provisions of the Standard

Policy is interpreted to require “tangible, concrete, and material harm” to property

146 Compl. ¶ 142; Tours’ Ans. Br. at 2, 54, 66. 147 Tapestry, 286 A.3d at 1058-59. 148 Id.

-26- be the cause of business income loss under Maryland law.

3. COVID-19 did not cause tangible, concrete, and material harm to the NETworks and Troika tours’ (or dependent) property.

As established, “direct physical loss” requires “tangible, concrete, and

material harm” to property under Maryland law.149 When applying this definition,

the Tapestry court held that “tangible, concrete, and material harm to property . . .

unambiguously requires a loss of property, not the loss of use of property.”150 The

court elaborated, “[a]lthough the complete destruction or ruin of property can,

indeed, constitute a loss of that property, by permanently depriving the owner of any

value in it, the temporary loss of functional use of the same thing is different.”151

COVID-19 did not cause tangible, concrete, and material harm to the

NETworks and Troika tours’ property (or dependent property). First, the general

presence of COVID-19 and the ensuing global pandemic did (and still does) not

constitute direct physical loss as meant in the Standard Policy. Such “presence” is

too attenuated to qualify as tangible or concrete, and too abstract to be found

material.

Second, government closure orders because of that presence fall under the

category of mere loss of functionality or use. Just as the loss of functionality did not

149 Id. at 1056 (citations omitted). 150 Id. (quoting Terry Black’s Barbecue v. State Auto. Mut. Ins. Co., 22 F.4th 450, 456 (5th Cir. 2022)) (emphasis in original). 151 Id.

-27- constitute “physical loss or damage” in Tapestry,152 neither the suspension of the

touring theater productions nor the cancellation of engagements by venues constitute

“direct physical loss” envisaged upon a reasonable read of the Standard Policy.

Third, even if COVID-19 was present at the venues, the evidence presented

does not support a claim that the Maryland-based tours’ property was damaged so

as to be the actual necessary cause of business interruption. If COVID-19 does in

any way physically damage the air, these tours haven’t explained how that physical

“damage” effected the Covered Property in the Standard Policy in the manner

anticipated to trigger the specific defined coverage. If COVID-19 does physically

alter surfaces during contamination, these tours have shown neither the permanence

of said alteration nor the physical alteration of the structures themselves. Thus, these

contentions are insufficient to establish a genuine issue for trial under Maryland law.

Contrary to the NETworks and Troika’s contentions,153 the Supreme Court of

Maryland reviewed extensive scientific evidence explaining how SARS-CoV-2, the

virus that causes COVID-19, physically alters both the air and surfaces it touches.

Specifically, the court in Tapestry responded to nearly identical arguments regarding

the physicality of COVID-19, including that: those coronavirus particles “altered”

objects like doorknobs and purses into “vectors or disease”; when such coronavirus-

152 Id. at 1059-61. 153 See supra Part II(A).

-28- infected particles settle on a surface, that surface becomes a ‘fomite’ and may remain

infectious for days, and; coronavirus particles enter the air in droplet or aerosol form

and physically alter the composition of the air.154 Even when assuming the truth of

these facts, the Tapestry court found that “the combination of a virus’s proximity to

property and resulting risk to human health does not constitute ‘physical loss or

damage’ to the property.”155 So too here.

Furthermore, expert testimony of a substantial statistical likelihood that

COVID-19 was present at the venues where the Tours would perform156 is

inconsequential. Such testimony neither establishes that COVID-19 was in fact

present at the venues, nor renders its effects tangible, concrete, or material.

Put simply, there is a claim-dooming disconnect between any theoretical

change to physical structures of and within the theatres and the actual reason that

these productions were shut down.

When viewing the facts in the light most favorable to NETworks and Troika,

the evidence presented creates no genuine issue of material fact as to whether

COVID-19 caused “direct physical loss” under Maryland law. Accordingly,

summary judgment on the NETworks and Troika tours’ claim in Count I and

154 Tapestry, 286 A.3d at 1059-61. 155 Id. at 1061. 156 Tours’ Ans. Br., Ex. 53 (“Expert Wit. Dep.”)

-29- associated declaratory relief in Count III is GRANTED.

4. Hartford did not act in bad faith toward NETworks and Troika.

NETworks and Troika also allege that Hartford breached the implied covenant

of good faith and fair dealing.157 No independent cause of action at law exists in

Maryland for breach of the implied covenant of good faith and fair dealing.158 “A

breach of the implied duty of good faith and fair dealing is better viewed as an

element of another cause of action at law, e.g., breach of contract, than as a stand-

alone cause of action for money damages[.]”159 Bad faith “is not simply bad

judgment or negligence, but implies a dishonest purpose or some moral obliquity

and a conscious doing of wrong.”160 Maryland courts hold that in the insurance

context, a determination of whether an insurer reached a decision in good faith

generally requires “an evaluation of the insurer’s efforts to obtain information

related to the loss, accurately and honestly assess this information, and support its

conclusion with evidence obtained or reasonably available.”161

Here, Hartford did not act in bad faith under Maryland law. Hartford acted

157 Compl. ¶¶ 160-170. 158 Mount Vernon Props., LLC v. Branch Banking & Trust Co., 907 A.2d 373, 381 (Md. Ct. Spec. App. 2006). 159 Id. at 381-82. 160 Rite Aid Corp. v. Hagley, 824 A.2d 107, 116 (Md. 2003) (quoting Catterton v. Coale, 579 A.2d 781, 783 (Md. Ct. Spec. App. 1990)). 161 All Class Const., LLC v. Mut. Ben. Ins. Co., 3 F. Supp. 3d 409, 417 (D. Md. 2014) (applying Maryland law).

-30- reasonably in denying NETworks and Troika’s claims. The Court has already

determined that the general impact of COVID-19 and the global pandemic do not

constitute “direct physical loss” under Maryland law. Therefore, NETworks and

Troika can’t sustain a claim of breach of the implied covenant of good faith and fair

dealing against Hartford solely for denying payment under the Standard Policy;

the denial was reasonable.

What’s more, Hartford followed ordinary claims-processing procedure when

denying coverage. There is no evidence of the requisite “moral obliquity” or

“conscious doing of wrong” to maintain a bad faith claim.162 Instead, the record

demonstrates that Hartford processed the claims, investigated them through

reasonable means, and denied them in a prompt, routine manner.163 The ordinary

denial of an insurance claim does not amount to bad faith.

Both because the underlying coverage claim fails for the reasons already

explained and there is no evidence supporting a charge of bad faith, summary

judgment on NETworks and Troika’s Count II must be GRANTED.

162 See Rite Aid Corp., 824 A.2d at 116. 163 See Band’s Visit Claim; Escape on Tour Claim.

-31- B. HARTFORD IS ENTITLED TO SUMMARY JUDGMENT ON BANDSTAND’S BREACH-OF-CONTRACT AND GOOD FAITH CLAIMS.

1. New Jersey law applies to Bandstand’s claims.

Hartford urges that New Jersey law applies to Bandstand’s claims. Bandstand

agrees. So, the Court applies New Jersey law here.164

2. Under New Jersey law, “direct physical loss” unambiguously requires demonstrative damage. In New Jersey, the interpretation of an insurance policy is a question of law.165

New Jersey courts first examine the plain language of the insurance policy and, if

the terms are clear, give them “their plain, ordinary meaning.”166 Further, if there is

no ambiguity in a policy’s terms, those terms are enforced “as written.”167 If its

terms are ambiguous, courts will ordinarily “construe [the] insurance contract

ambiguities in favor of the insured via the doctrine of contra proferentem.”168

Generally, “the basic notion [is] that the premium paid by the insured does not buy

coverage for all . . . damage but only for that type of damage provided for in the

164 See Golden Pacific Bancorp, 273 F.3d at 514 n.4. 165 E.g., Selective Ins. Co. of Am. v. Hudson E. Pain Mgmt. Osteopathic Med., 46 A.3d 1272, 1276 (N.J. 2012) (“An insurance policy is a form of contract, and the interpretation of contract language is a question of law.”) (citations omitted). 166 Pizzullo v. New Jersey Mfrs. Ins. Co., 952 A.2d 1077, 1088 (N.J. 2008) (quoting Zacarias v. Allstate Ins. Co., 775 A.2d 1262, 1264 (N.J. 2001)). 167 Zacarias, 775 A.2d at 1266. 168 Oxford Realty Grp. Cedar v. Travelers Excess & Surplus Lines Co., 160 A.3d 1263, 1270-71 (N.J. 2017) (citing Progressive Cas. Ins. Co. v. Hurley, 765 A.2d 195, 202 (N.J. 2001)).

-32- policy.”169

New Jersey courts have interpreted the meaning of “direct physical loss” as

used in insurance policies170 and have “adopted a broad notion of the term

physical.”171 When “physical” is paired with another word, such as in “physical

injury,” New Jersey courts have found that the resulting term means a “detrimental

alteration[]” or “damage or harm to the physical condition of a thing.”172

With this, the phrase “direct physical loss” as it is used in Bandstand’s

Standard Policy isn’t ambiguous. The ordinary parlance and widely accepted

definitions of the phrase’s terms govern here: “direct physical loss” as it is used in

the Standard Policy requires some level of demonstrable damage or harm to the

physical condition of the subject property. An average policyholder like Bandstand

would well-understand that coverage would be extended only if the insured’s

property suffered a detrimental physical alteration or physical loss of some kind173

169 Weedo v. Stone-E-Brick, Inc., 405 A.2d 788, 790 (N.J. 1979). 170 See, e.g., Phibro Animal Health Corp. v. Nat’l Union Fire Ins. Co. of Pittsburgh, 142 A.3d 761, 771-72 (N.J. Super. Ct. App. Div. 2016); Customized Distrib. Servs. v. Zurich Ins. Co., 862 A.2d 560, 564-65 (N.J. Super. Ct. App. Div. 2004), cert. denied, 871 A.2d 91 (N.J. 2005). 171 Phibro Animal Health Corp., 142 A.3d at 771 (internal quotations omitted). 172 See id. at 771-72 (citations omitted); see also Port Auth. of New York & New Jersey v. Affiliated FM Ins. Co., 311 F.3d 226, 235 (3d Cir. 2002) (predicting what would become the law of New Jersey in an action against property insurers to recover costs of asbestos abatement, the Third Circuit observed that “[i]n ordinary parlance and widely accepted definition, physical damage to property means ‘a distinct, demonstrable, and physical alteration’ of its structure.”) (quoting 10 Couch on Insurance § 148:46 (3d ed. 1998)). 173 See Mac Prop. Grp. LLC & The Cake Boutique LLC v. Selective Fire & Cas. Ins. Co., 278 A.3d 272, 284 (N.J. Super. Ct. App. Div.), cert. denied sub nom. MAC Prop. Grp. LLC v. Selective -33- and that damage, in turn, caused loss of business income.

3. COVID-19 did not cause demonstrable damage to Bandstand’s (or dependent) property.

As established, “direct physical loss” requires demonstrable damage or harm

to the physical condition of the insured’s property under New Jersey law. 174 In

applying this standard, New Jersey courts have required some sort of alteration to

the property’s physical structure.175 For example, in Mac Prop. Grp. LLC & The

Cake Boutique LLC v. Selective Fire & Cas. Ins. Co., the plaintiffs were denied

recovery under their property insurance policies for business income losses as a

result of COVID-19 closures and restrictions.176 Those plaintiffs’ insurance policies

obligated the insurers to “pay for direct physical loss of or damage to Covered

Property,” as well as for business loss “caused by direct physical loss of or damage”

Fire & Cas. Ins. Co., 284 A.3d 440 (N.J.), and cert. denied sub nom. MAC Prop. Grp. LLC v. Selective Fire & Cas. Ins. Co., 284 A.3d 443 (N.J. 2022). 174 See Id.; Phibro Animal Health Corp, 142 A.3d at 771; Port Auth. of New York & New Jersey, 311 F.3d at 235. 175 See Rockleigh Country Club LLC v. Hartford Ins. Group et al., 2022 WL 2204374, at *4-5 (N.J. Super. Ct. App. Div. June 21, 2022) (affirming dismissal because a country club’s pandemic- related losses were not direct physical loss or direct physical damage); TMN LLC et al. v. Ohio Sec. Ins. Co., 2023 WL 1830456, at *2 (N.J. Super. Ct. App. Div. Feb. 9, 2023) (upholding dismissal of ice shops’ claim for COVID-19 related losses because of the failure to show sustained property damage rendering the shops inoperable); Pure Hair Salon LLC v. Hiscox Ins. Co. Inc., 2023 WL 2439546, at *4 (N.J. Super. Ct. App. Div. Mar. 10, 2023) (finding that, even if no virus exclusion existed, hair salon could not show that it sustained any direct physical loss of or damage to its facility due to COVID-19); Appearance Workshop Inc. v. Mercer Ins. Co. of New Jersey Inc., 2023 WL 382305, at *2 (N.J. Super. Ct. App. Div. Jan. 25, 2023) (denying businesses’ claims for pandemic-related loss coverage because no showing of direct physical loss or damage was made). 176 Mac Prop. Grp. LLC, 278 A.3d at 278-80.

-34- to plaintiffs’ covered premises.177 In upholding the coverage denial, the appellate

court found that “there was no damage to plaintiffs’ equipment or property . . . that

caused their premises to lose their physical capacity to operate, and there was no

physical alteration that made their premises dangerous to enter” resulting in

COVID-19 closures.178 The court further elaborated: “None of the plaintiffs’

premises required any repairs due to damage, nor needed to be relocated and then

reopened” due to COVID-19.179

Here too, there is nigh-on no evidence of demonstrable damage to

Bandstand’s (or dependent) properties. And mere pandemic-related loss of use,

access, or functionality is not enough for “direct physical loss or damage.”

The proffered scientific evidence of COVID-19’s physicality, even when

viewed in the light most favorable to Bandstand, reveals no demonstrable damage

to the physical condition of any of the venues at which Bandstand was scheduled to

perform. Like NETworks and Troika’s failure to show that COVID-19 and its

effects constitute direct, tangible, and concrete harm under Maryland law, Bandstand

fails in its burden to show COVID-19 caused demonstrable damage to its property.180

177 Id. at 282-83. 178 Id. at 284-85. 179 Id. at 285. 180 See analysis in Part IV(A)(3), supra. This is so even considering Bandstand’s postulation that the appeal pending before the Supreme Court of New Jersey in AC Ocean Walk, LLC v. Am. Guar. & Liab. Ins. Co. might signal that New Jersey has no true definitive ruling on whether COVID-19 causes “direct physical loss or damage.” see 288 A.3d 447 (N.J. 2023) (granting petition for -35- When looking for guidance beyond Maryland and New Jersey, it’s

informative that any number of sister state courts have upheld denials of insured’s

coverage claims brought under policies with identical or near-identical terms. In

each instance, these courts have found denial of coverage for COVID-19 losses

proper when the questioned policy included a physicality requirement.181 Indeed,

certification of judgment in 2022 WL 2254864 (N.J. Super. Ct. App. Div. June 23, 2022)); Tours’ Ans. Br. at 56-57. 181 See, e.g., Connecticut Dermatology Grp., PC v. Twin City Fire Ins. Co., 288 A.3d 187, 202- 03 (Conn. 2023) (“[COVID-19] 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.”); Cajun Conti LLC v. Certain Underwriters at Lloyd’s, London, 359 So. 3d 922, 926-27 (La. 2023) (reinstating summary judgment dismissal because “the plain, ordinary and generally prevailing meaning of direct physical loss of or damage to property requires the insured’s property sustain a physical, meaning tangible or corporeal, loss or damage” and COVID-19 did not cause such loss or damage) (internal citations omitted); Verveine Corp. v. Strathmore Ins. Co., 184 N.E.3d 1266, 1275-78 (Mass. 2022) (“Evanescent presence of a harmful airborne substance that will quickly dissipate on its own, or surface-level contamination that can be removed by simple cleaning, does not physically alter or affect property.”); Starr Surplus Lines Ins. Co. v. Eighth Judicial Dist. Ct. in and for County of Clark, 535 P.3d 254, 266-67 (Nev. 2023) (dismissing insured’s claim on summary judgment despite scientific evidence that COVID-19 “is a physical particle” and of its “fomite-based transmission,” because the evidence “does not demonstrate that the virus is harmful to the property” (emphasis in original)); Schleicher and Stebbins Hotels, LLC v. Starr Surplus Lines Ins. Co., 302 A.3d 67, 77-81 (N.H. 2023) (reversing trial court’s denial of summary judgment because COVID-19 does not change property in a distinct and demonstrable way, and the absence of a virus exclusion cannot be used to contradict the contract); Hill & Stout, PLLC v. Mutual of Enumclaw Ins. Co., 515 P.3d 525, 532 (Wash. 2022) (“[T]he claim for loss of intended use and loss of business income [during the COVID-19 pandemic] is not a physical loss of property.”); Inns-by-the-Sea v. California Mut. Ins. Co., 286 Cal. Rptr. 3d 576, 591-95 (Cal. Ct. App. 2021) (finding that mere loss of the ability to use physical premises does not constitute direct physical loss of property, and that the absence of an exclusion cannot be used to create an ambiguity in an otherwise unambiguous insuring clause); Commodore Inc. v. Certain Underwriters at Lloyd’s, London, 342 So. 3d 697, 702 (Fla. Dist. Ct. App. 2022) (denying coverage for a Miami café’s financial losses after COVID-19 forced it to halt in-person dining service because the ordinary meaning of physical carries a tangible aspect); MTDB Corp. v. Am. Auto Ins. Co., 2022 WL 18012348, at *5 (Ill. App. Ct. Dec. 30, 2022) (dismissing claim for pandemic-related losses because the likely presence of COVID-19 was insufficient proof that the virus caused physical loss or damage); Isaac’s At Spring Ridge LLP v. MMG Ins. Co., 2023 WL 4074057, at *4 (Pa. Super. -36- there has been near unanimity in both state and federal courts182 that COVID-19

losses are not physical damage/loss in nature. As for our federal siblings, they have

found too that claimed business losses occasioned by COVID-19 government

shutdown orders were not due to “physical loss or damage.”183 Same here.

Ct. June 20, 2023) (affirming lower court’s dismissal of restaurant’s claim for coverage of losses due to COVID-19 because the policy required physical loss or damage). 182 See Carilion Clinic v. Am. Guarantee & Liab. Ins. Co., 583 F. Supp. 3d 715, 722-25 (W.D. Va. 2022) (summarizing federal appellate court decisions, each concluding that property insurance policies providing coverage for direct physical loss of or damage to property do not cover property damage and business interruption losses stemming from COVID-19); Promotional Headwear Int’l v. Cincinnati Ins. Co., 504 F. Supp. 3d 1191, 1200 (D. Kan. 2020) (“[T]he overwhelming majority of cases to consider business income claims stemming from COVID-19 with similar policy language hold that direct physical loss or damage to property requires some showing of actual or tangible harm to or intrusion on the property itself.”). See also, e.g., Olmsted Med. Ctr. V. Cont’l Cas. Co., 65 F.4th 1005, 1010 (8th Cir. 2023)) (“[A]lthough [COVID-19] may have a physical element, it does not have a physical effect on real or personal property.”) (internal quotations and citations omitted); Farmington Village Dental Associates, LLC v. Cincinnati Ins. Co., 2022 WL 2062280, at *1 (2d Cir. June 8, 2022) (“allegations that [COVID-19] causes physical loss or physical damage to [] property by way of its transmissibility through physical particles in the air and on surfaces fail to allege how the presence of those virus-transmitting particles tangibly alter or impact the property” (emphasis in original)); Menominee Indian Tribe of Wisconsin v. Lexington Ins. Co., 556 F. Supp. 3d 1084, 1101 (N.D. Cal. 2021), (“the presence of a virus, which can be eliminated through cleaning and disinfecting, would not constitute a physical event that caused the loss”) (internal citations omitted), appeal dismissed, 2022 WL 19697110 (9th Cir. Oct. 7, 2022); Kim-Chee LLC v. Philadelphia Indem. Ins. Co., 535 F. Supp. 3d 152, 158-160 (W.D.N.Y. 2021) (adopting the reasoning of other New York courts that COVID-19 does not cause direct physical loss or damage because it does not alter the characteristics of the covered property and is rendered harmless by the passage of a few days), aff’d, 2022 WL 258569 (2d Cir. Jan. 28, 2022);Ceres Enterprises, LLC v. Travelers Ins. Co., 520 F. Supp. 3d 949, 961-62 (N.D. Ohio 2021) (finding that the mere physical presence of the virus on property does not constitute physical loss under the applicable policy or Ohio law). 183 E.g., Estes v. Cincinnati Ins. Co., 23 F.4th 695, 700 (6th Cir. 2022) (“The average person would not say that [insured] suffered a physical loss of its dental offices when describing the harms that befell it in this case. COVID-19 did not destroy its dental offices, and the government shutdown orders did not dispossess it of them for a single day. [Insured] bought a property insurance policy, not a profit insurance policy.”) (cleaned up); Santo’s Italian Café, LLC v. Acuity Ins. Co., 15 F.4th 398, 401 (6th Cir. 2021) (“Whether one sticks with the terms themselves (a direct physical loss of property) or a thesaurus-rich paraphrase of them (an immediate tangible deprivation of property), the conclusion is the same. The policy does not cover this loss resulting from the suspension of -37- Bandstand has not presented a genuine issue for trial under New Jersey law,

so summary judgment on its claim in Count I and for associated declaratory relief in

Count III is GRANTED to Hartford.

4. Hartford did not act in bad faith toward Bandstand.

Hartford is also entitled to summary judgment on Bandstand’s claim of bad

faith. Under New Jersey law, an insurance company owes a duty of good faith to its

insured in processing a first-party claim. Indeed, under New Jersey law, there is an

implied covenant of good faith and fair dealing is in every contract.184 Bad faith is

not explicitly defined in New Jersey, but courts have emphasized that “principles of

equity, fair dealing and good faith” govern the contractual relationship between

insured and insurer.185 Here, Hartford did not act in bad faith toward Bandstand.

First, Hartford acted reasonably in denying Bandstand’s claim. Bandstand’s

business operations during the COVID-19 pandemic.”) (cleaned up); Bradley Hotel Corp. v. Aspen Specialty Ins. Co., 19 F.4th 1002, 1007-08 (7th Cir. 2021) (finding that government closure orders caused a mere loss of use of property without any physical alteration, not direct physical loss or damage); Oral Surgeons, P.C. v. Cincinnati Ins. Co., 2 F.4th 1141, 1145 (8th Cir. 2021) (determining that losses due to government-imposed restrictions related to COVID-19 do not constitute direct physical loss or damage to property); Mudpie, Inc. v. Travelers Cas. Ins. Co. of Am., 15 F.4th 885, 889, 894 (9th Cir. 2021) (affirming district court’s dismissal because the insured “fail[ed] to allege any intervening physical force beyond the government closure orders” that caused direct physical loss of or damage to insured’s property); Michael Cetta, Inc. v. Admiral Indem. Co., 506 F. Supp. 3d 168, 179 (S.D.N.Y. 2020) (concluding that loss of use of premises due to a governmental closure order “does not trigger business income coverage premised on physical loss to property”). 184 Onderdonk v. Presbyterian Homes of New Jersey, 425 A.2d 1057, 1062 (N.J. 1981); Bak–A– Lum Corp. of Am. v. Alcoa Bldg. Prods., Inc., 351 A.2d 349, 352 (N.J. 1976); Palisades Properties, Inc. v. Brunetti, 207 A.2d 522, 531 (N.J. 1965). 185 Rova Farms Resort, Inc. v. Invs. Ins. Co. of Am., 323 A.2d 495, 504 (N.J. 1974).

-38- Standard Policy required “direct physical loss,” which New Jersey law defines as

requiring demonstrable damage to the insured’s property.186 COVID-19 and its

effects did not cause “demonstrable damage” to Bandstand’s (or dependent)

property. So, Hartford’s denial was reasonable.

Second, just as with the denial of NETworks and Troika’s claims, the record

shows that Hartford followed standard procedure in its handling of Bandstand’s

claim.187 There’s no evidentiary support for any suggestion that Hartford violated

principles of equity, fair dealing and good faith under New Jersey law when denying

Bandstand’s requested coverage.

Summary judgment on Bandstand’s claim of breach of the implied covenant

of good faith and fair dealing in Count II is GRANTED.

C. HARTFORD IS ENTITLED TO SUMMARY JUDGMENT ON HOSANNA’S BREACH-OF-CONTRACT AND GOOD FAITH CLAIMS.

1. Hosanna’s claims are governed by New Jersey law.

Hartford urges that New Jersey law applies for Hosanna’s claims, and

Hosanna agrees. Because both parties agree, the Court turns to New Jersey law.188

2. The Theatrical Extension in Hosanna’s policy is unambiguous.

New Jersey law governs the interpretation of Hosanna’s Theatrical

186 See supra Part IV(B)(2)-(3). 187 See Band’s Visit Claim. 188 See Golden Pacific Bancorp, 273 F.3d at 514 n.4.

-39- Extension.189 Unlike the Non-Hosanna tours’ Standard Policy, Hosanna’s policy

includes the Theatrical Extension which has no “physical loss or damage”

requirement.190 So, the Hosanna policy covers “the actual loss of Business Income

you sustain due to the necessary[] interruption, postponement or cancellation of a

production due to a ‘covered occurrence.’”191 It also provides a $1.4 million

Business Income limit “per occurrence.”192

3. The “Covered Occurrence” was the pandemic as a whole, not individual jurisdictions’ or venues’ closures.

The key terms of the Hosanna Policy’s Theatrical Extension are unambiguous.

A “covered occurrence” is indeed defined in the policy as “any unexpected

circumstances beyond your control except as listed in the Exclusions.” 193 And the

listed exclusions include specific circumstances that are not “covered occurrences,”

including strikes, weather conditions, and loss of financial support.194 But one

cannot start there.

The Theatrical Extension coverage provision states that coverage will be

extended for loss sustained “due to the necessary, interruption, postponement or

189 For the governing New Jersey rules on contract interpretation, see supra Part IV(B)(2). 190 See Hosanna Policy. 191 Id. (Theatrical Extension) § B.1.a. 192 Id. § Schedule. 193 Id. § B.9.a. 194 Id. § B.4.

-40- cancellation of a production due to a ‘covered occurrence.’”195 When viewed in its

contractual context,196 it is “the” event of necessary interruption, postponement or

cancellation of a production that’s covered.197 And it matters not the duration of the

production’s shutdown—i.e. that it is days, weeks, or months, spanning multiple

performances and venues—just its root cause and continuation from that single

“covered occurrence.” This makes sense when giving a natural read to the contract

as a whole.198 The Theatrical Extension plainly and unambiguously insures Hosanna

for each interruption that begins and endures because of a covered occurrence; it

does not break that single interruption (even if prolonged) down by performance or

195 Id. § B.1.a. (punctuation errors in original) (emphasis added). 196 See Prather v. Am. Motor. Ins. Co., 67 A.2d 135, 138 (N.J. 1949) (applying the “elemental rule of construction” that a contract will be “read and considered as a whole.”). 197 “The” is a word of limitation that particularizes the subject it precedes, as opposed to the indefinite or generalizing force of ‘a’ or ‘an.’” Black’s Law Dictionary 1477 (6th ed. 1990) (“In construing statute, definite article ‘the’ particularizes the subject which it precedes and is word of limitation as opposed to indefinite or generalizing force ‘a’ or ‘an’”); Brooks v. Zabka, 450 P.2d 653, 655 (Colo. 1969) (describing principle as “a rule of law well established”); Stephan v. Pennsylvania General Insurance Co., 621 A.2d 258, 261 (Conn. 1993) (applying same principle to construction of insurance policy); see Pike Creek Recreational Servs., LLC v. New Castle Cnty., 238 A.3d 208, 213-14 (Del. Super. Ct. 2020) (explaining that “Delaware applies equivalent interpretive rules in the statutory and contractual contexts”). Here, the “the” does important work. See Weinberg v. Waystar, Inc., 249 A.3d 1039, 1044 (Del. 2023) (providing an important reminder that resolution of a contract dispute sometimes “lies in the correct interpretation of . . . one of the most common words in the English language”—the word “and” in that case—and “[o]ne should not be fooled by the size and ubiquity of the word” at issue, because even the use or specific placement of a “seemingly simple word in legal drafting” is critical). 198 See Chicago Bridge & Iron Co. N.V. v. Westinghouse Electric Co. LLC, 166 A.3d 912, 913- 14 (Del. 2017) (“In giving sensible life to a real-world contract, courts must read the specific provisions of the contract in light of the entire contract.”).

-41- venue.199

Not so, says Hosanna. In its view, each individual government closure

constitutes a “covered occurrence” under the Hosanna Policy. As such, Hosanna

believes that the $1.4 million policy limit should be applied on a per-show or per-

venue basis, not to the production cancellation in its entirety. This postulation fails

both factually and as a matter of contract interpretation.

First, the facts bear out that the “interruption, postponement or cancellation”

of Hosanna’s “production” was caused by the pandemic as a whole, not individual

closures. New Jersey courts use the majority-rule “cause test” to determine number

of occurrences under a liability insurance policy.200 That is of utility here. Under

the cause test, the Court asks if there was but one proximate, uninterrupted, and

continuing cause that resulted in all the claimed injuries and damage.201 New Jersey

199 In opposition, Hosanna cites to the Southern District of New York’s decision in Jujamcyn Theaters LLC v. Fed. Ins. Co. as support for its argument that the term “covered occurrence” is ambiguous. 2023 WL 2366789 (S.D.N.Y. Mar. 6, 2023); Tours’ Ans. Br. at 51-52. In Jujamcyn, however, the ambiguity stemmed not from the term “occurrence,” but from the term “loss,” which was defined differently. Id. at *2. Additionally, the Jujamcyn decision was made at the pleadings stage and the Jujamcyn court did not then resolve the issue on the pleadings because it would be inappropriate to do so. Id. at *7. In contrast, this matter is now on summary judgment and the interpretation of the entirety of the policy’s operative terms is a matter of law that the Court must resolve. EQR-LPC Urb. Renewal N. Pier, LLC v. City of Jersey City, 173 A.3d 243, 249 (N.J. Super. Ct. App. Div. 2016) (“Contractual interpretation is a legal matter ordinarily suitable for resolution on summary judgment.”) (citations omitted), aff’d, 173 A.3d 184 (N.J. 2017). 200 Doria v. Ins. Co. of N. Am., 509 A.2d 220, 223-24 (N.J. Super. Ct. App. Div. 1986). 201 See id.; see also Westinghouse Elec. Corp. v. Am. Home Assurance Co., 2004 WL 1878764, at *27 (N.J. Super. Ct. App. Div. July 8, 2004) (stating the general rule but applying Pennsylvania law).

-42- courts have elaborated that if injuries “are so closely linked in time and space as to

be deemed by the average person as a single event, there is but one occurrence.”202

Comparatively, “if enough time has elapsed between the injuries or damages to the

various items involved or if the latter are widely separated in space, the courts have

been inclined to allow separate claims even though they sprang from the same

cause.”203

Without doubt, Hosanna’s production was suspended due to the pandemic as

a single event. When the COVID-19 pandemic struck, the entertainment industry

shut down. As part of that industry, Hosanna suspended its touring production in

March 2020. While government closure orders ensued, those orders cannot be

excised from the body of the pandemic as instigator. The cause of Hosanna’s

continuous production interruption wasn’t the intermittent government orders, but

the pandemic as a singular force causing proximate, uninterrupted, continuing

closure of the nation.204

202 Bomba v. State Farm Fire & Cas. Co., 879 A.2d 1252, 1255 (N.J. Super. Ct. App. Div. 2005) (quoting Doria, 509 A.2d at 221). 203 Doria, 509 A.2d at 224 (citations omitted). 204 When applying this cause test, decisions in other jurisdictions with analogous facts are helpful. In Owens-Illinois, Inc v Aetna Casualty & Surety Co, the action concerned claims brought against the policyholder by plaintiffs exposed to its asbestos-containing products. 597 F. Supp. 1515, 1517 (D.D.C. 1984). The federal district court there held that “the underlying circumstance that gave rise to the claims for damages was [the policyholder’s] manufacture and sale of a hazardous asbestos containing product.” Id. at 1527. That circumstance constituted a single occurrence. Id. And in Appalachian Ins. Co. v. Liberty Mut. Ins. Co., a company’s discriminatory employment policies were found to be a singular occurrence for purposes of policy coverage in a class action sex discrimination lawsuit. 676 F.2d 56, 58-63 (3d Cir. 1982). The Third Circuit explained that -43- Second, the term “covered occurrence” cannot be reasonably interpreted to

include specific government closure orders when reading the entire policy. “A basic

principle of contract interpretation is to read the document as a whole in a fair and

common-sense manner.”205 Indeed, the Court “will, if possible, give effect to all

parts of the instrument, and an interpretation which gives a reasonable meaning to

all its provisions will be preferred to one which leaves a portion of the writing useless

or inexplicable.”206

In the Civil Authority provision of Hosanna’s policy, coverage is extended to

“actions of civil authority” that are “caused by or result from a ‘covered

occurrence.’”207 Were the term “covered occurrence” interpreted to include actions

of civil authority such as closure orders, then those orders would be both the covered

occurrence and the cause of the covered occurrence per the terms of the Civil

Authority coverage provision. The Court cannot reasonably interpret the policy this

way.

Based on the plain and unambiguous terms of the Hosanna Policy and the

facts presented, the Court finds that Hosanna is not entitled to additional payments

“as long as the injuries stem from one proximate cause there is a single occurrence.” Id. at 61 (citation omitted). Just so here. 205 Hardy ex rel. Dowdell v. Abdul-Matin, 965 A.2d 1165, 1169 (N.J. 2009) (citation omitted). 206 Maryland Cas. Co. v. Hansen–Jensen, Inc., 83 A.2d 1, 4 (N.J. Super. Ct. App. Div. 1951) (citations omitted). 207 Hosanna Policy (Theatrical Extension) § B.3.

-44- from Hartford. Accordingly, summary judgment for Hartford on Count VI is

GRANTED.

4. Hartford did not act in bad faith toward Hosanna.

Hartford is entitled to summary judgment on Hosanna’s bad faith claim under

New Jersey law.208 The record shows that Hartford paid Hosanna the full amount

allowed under the policy for what it rightly deemed to be a single “covered

occurrence.”209 Again, the ordinary claim-processing procedure was followed in

responding to Hosanna’s second request for coverage under its policy. In turn, the

request was properly and promptly investigated and denied.210 There is no evidence

of bad faith.

Contrary to Hosanna’s contentions, the appropriate question at this stage is

not merely whether Hartford’s denial was at the time debatable because bad faith

requires more than just a debatable claims decision.211 Moreover, Hosanna can point

to no evidence that Hartford made what it dubs a debatable decision in an

unreasonable manner. Accordingly, summary judgment on Count VII is GRANTED

to Hartford.

208 See supra Part IV(B)(4) for the governing rules on bad faith in New Jersey. 209 Hosanna Claim Payment. 210 See id. 211 Badiali v. New Jersey Mfrs. Ins. Grp., 107 A.3d 1281, 1288 (N.J. 2015) (“[M]ere failure to settle a debatable claim does not constitute bad faith.”).

-45- D. HARTFORD IS ENTITLED TO SUMMARY JUDGMENT ON THE TOURS’ FRAUD CLAIM. Maryland law governs the NETworks tours’ fraud claim (Count IV).212 Here,

the NETworks tours allege that Mr. Middleton and MDP, acting as Hartford’s

agents, perpetuated a fraud regarding the addition of the Theatrical Extension (or, in

NETworks’ view, an unjustified failure to effect its addition) to the NETworks tours’

policies. Summary judgment dismissal of this fraud claim is warranted because:

(1) Mr. Middleton and MDP were not Hartford’s agents; and (2) the record is devoid

of facts showing that Hartford perpetuated a fraud.

1. Mr. Middleton and MDP’s relationship with Hartford was not such that it could visit fraud liability upon Hartford.

Hartford first argues that it is entitled to summary judgment on the NETworks

tours’ fraud claim because neither MDP nor Mr. Middleton are (or were) Hartford’s

agents, so Hartford cannot be held liable for any alleged misrepresentations by

them.213 Under Maryland law, an insurance “broker”214 is generally the “agent of

212 See supra Part IV(A)(1). 213 Hartford’s Open. Br. at 50-53, 62-64. 214 A “broker” is defined in Maryland Code § 1–101(i) of the Insurance Article (“Insur.”) as follows: (i) Broker.—“Broker” means a person that, for compensation, solicits, procures, or negotiates insurance contracts or the renewal or continuance of insurance contracts: (1) for insureds or prospective insureds other than the broker; and (2) not for an insurer or agent. MD. CODE ANN. Insur. § 1–101(i) (2020).

-46- the insured, not the insurer.”215 As Maryland’s highest court has explained:

An insurance . . . broker[] is one who acts as a middleman between the assured and the insurer, and who solicits insurance from the public under no employment from any special company, but having secured an order, either places the insurance with a company selected by the assured, or in the absence of any selection by him, then with a company selected by the broker. Ordinarily, the relation between the insured and the broker is that between principal and agent.216

Just so here—neither Mr. Middleton nor MDP were Hartford’s agents. To start,

Mr. Middleton and MDP are not employed by Hartford. Instead, MDP is an

independent company utilized by, but not tied to, multiple insurance providers.

Next, Mr. Middleton and MDP did not have the power to set the terms of any

policies on behalf of Hartford. The Agency Agreement between Hartford and MDP

grants limited authority, only exercisable with Hartford’s ultimate approval, to

“solicit, quote and bind insurance” on behalf of Hartford.217 This agreement allowed

for MDP and Mr. Middleton to serve only as a middleman. The limitations of that

arrangement are evidenced by the repeated back-and-forth emails between

Mr. Middleton and Hartford, in which Mr. Middleton had to ask for permissions and

Hartford’s position on every aspect of the policy provisions before any were

implemented. As is clear from the record, and supported by Maryland law, MDP

215 Green v. H & R Block, Inc., 735 A.2d 1039, 1054 (Md. 1999). 216 Id. (quoting American Casualty Co. v. Ricas, 22 A.2d 484, 487 (Md. 1941)). 217 Agency Agreement § II.1(a).

-47- and Mr. Middleton weren’t Hartford’s agents upon whose statements Hartford’s

fraud liability could be built.

NETworks contends that even if MDP and Mr. Middleton were independent

insurance brokers, a sufficient principal-agent relationship existed between them and

Hartford in this instance.218 The components of a principal-agent relationship in

Maryland were described comprehensively in Green v. H&R Block.219 In Green, the

Maryland high court used three non-determinative factors to determine the existence

of an agency relationship: (1) the principal’s right of control over the agent, (2) the

agent’s duty to act primarily for the benefit of the principal, and (3) the agent’s power

to alter the legal relations of the principal.220 These three factors adapted in Green

are “neither exclusive nor conclusive considerations in determining the existence of

an agency relationship.”221 Indeed, said the Green court, “the primary determination

of whether a principal-agent relationship exists involves ascertaining the parties’

intent, as evidenced by their agreements and actions.”222

Here, the record does not support a finding that MDP and Mr. Middleton were

in a principal-agent relationship with Hartford. Mr. Middleton’s duty was to act

218 Tours’ Ans. Br. at 33-36. 219 735 A.2d 1039, 1048-49 (Md. 1999). 220 Id. at 1048. 221 Id. at 1049. 222 Id.

-48- primarily for the benefit of NETworks, not for Hartford. Both Mr. Middleton and

NETworks understood that he was acting on NETworks’ behalf to solicit and

procure insurance for upcoming shows.223 If the agent of anyone, Mr. Middleton

was the agent of NETworks. What’s more, Mr. Middleton had absolutely no power

to set or alter the terms of Hartford’s insurance policies. In short, there’s next to

nothing to support a finding of a principal-agent relationship between Mr. Middleton

and Hartford.

Maryland law is clear—insurance brokers are not agents of the insurer. Here,

MDP and Mr. Middleton were independent insurance brokers. Given that, Hartford

cannot be held vicariously liable for Mr. Middleton’s representations in assisting

NETworks to seek out and attempt to procure certain policy coverage.

2. NETworks fails to show Hartford perpetuated a fraud.

The NETworks tours contend that the back-and-forth between Ms. Gladding

(on behalf of Hartford), Mr. Middleton, and NETworks supports its charge that

Hartford fraudulently misrepresented that the Theatrical Extension would be added

to existing insurance policies for the 2019-2020 touring season. On each and every

element of their fraud claim, the NETworks tours fall short.

Under Maryland law, “[f]raud encompasses, among other things, theories of

fraudulent misrepresentation, fraudulent concealment, and fraudulent

223 Middleton Dep. 31 (“We always represent the policyholder.”); NETworks Exec. Dep. 69-71.

-49- inducement.”224 Regardless of the particular theory, the plaintiff must establish the

elements of fraud “by clear and convincing evidence.”225 To assert a fraud claim, a

plaintiff must show:

(1) the defendant made a false representation to the plaintiff, (2) the falsity of the representation was either known to the defendant or the representation was made with reckless indifference to its truth, (3) the misrepresentation was made for the purpose of defrauding the plaintiff, (4) the plaintiff relied on the misrepresentation and had the right to rely on it, and (5) the plaintiff suffered compensable injury as a result of the misrepresentation.226 To reiterate, Maryland’s clear-and-convincing burden of proof applies to each

individual element of one’s fraud claim.227

At the outset, neither Hartford nor Mr. Middleton made any false

representations to NETworks. A “false representation” is a statement, conduct, or

action that intentionally misrepresents a material fact.228 “A material fact is one on

which a reasonable person would rely in making a decision,”229 or a fact that “the

224 Sass v. Andrew, 832 A.2d 247, 261 (Md. Ct. Spec. App. 2003) (citations omitted). 225 Md. Envtl. Trust v. Gaynor, 803 A.2d 512, 516 (Md. 2002); see also First Nat’l Bank v. U.S.F. & G. Co., 340 A.2d 275, 283 (Md. 1975) (“When fraud . . . is imputed, something more than a mere preponderance of evidence must be produced . . . .”). 226 White v. Kennedy Krieger Inst., Inc., 110 A.3d 724, 744 (Md. Ct. Spec. App. 2015) (quoting Hoffman v. Stamper, 867 A.2d 276, 292 (Md. 2005)). 227 Central Truck Center, Inc. v. Central GMC, Inc., 4 A.3d 515, 522-23 (Md. Ct. Spec. App. 2010) (“A plaintiff must present clear and convincing evidence of each element in its claims.” (citing Gourdine v. Crews, 955 A.2d 769, 791 (Md. 2008))). 228 Sass, 832 A.2d at 260 (citations omitted). 229 Id. (internal quotations omitted).

-50- maker of the misrepresentation knows . . . [the] recipient is likely to regard . . . as

important . . . .”230

There’s no evidence that Hartford itself made false representations to

NETworks. Through multiple back-and-forth emails, Hartford communicated with

Mr. Middleton about adding the Theatrical Extension to renewals and new shows.

At no point did Hartford misrepresent, intentionally or not, that the Theatrical

Extension were or would be, without further negotiation, added to Networks’

existing policies.

Even if Hartford could be held liable for Mr. Middleton’s representations, the

extensive record developed does not demonstrate that his future hopeful promises

rise to the level of present falsity. It is well-established that “fraud cannot be

predicated on statements which are merely promissory in nature, or upon expressions

as to what will happen in the future.”231 Therefore, “an action for deceit will not lie

for the unfulfillment of promises or the failure of future events to materialize as

predicted.”232 On multiple occasions, Mr. Middleton was overly enthusiastic and

unduly positive in relaying the progress on the development and availability of the

sought-after Theatrical Extension. But he was not then being presently deceitful.

230 Gross v. Sussex Inc., 630 A.2d 1156, 1161 (Md. Ct. Spec. App. 1993) (citations omitted). 231 Sass, 832 A.2d at 265 (quoting Levin v. Singer, 175 A.2d 423, 432 (Md. Ct. Spec. App. 1961)). 232 Appel v. Hupfield, 84 A.2d 94, 96 (Md. 1951).

-51- The failure of future events to materialize as hoped and predicted does not amount

fraud on Mr. Middleton’s part or, by extension, Hartford’s based on his

representations about the Theatrical Extension. No one could have foreseen the

COVID-19 pandemic’s sudden arrival and eventual effect; those events simply

outpaced the development and final negotiations needed for the addition of the

Theatrical Extension to NETWorks’ extant policies in March 2020.

NETworks likewise cannot meet its burden on the knowledge requirement.

The second element of fraud requires that an alleged fraudster must “know . . . that

his representation is false” or be “recklessly indifferent in the sense that he knows

that he lacks knowledge as to its truth or falsity.”233 A “reckless indifference to

truth” arises when one makes the representation even though he’s aware that he does

not know whether it is true or false. Put differently, one is recklessly indifferent to

the truth when he knows he lacks knowledge as to the truth or falsity of his

representation, but nonetheless makes that representation without caring about his

own lack of knowledge.234

Again, nowhere does NETworks identify facts demonstrating Hartford itself

knew its representations were “false.” Nor does the record show that Hartford had

a reckless indifference to the truth. In fact, it appears that Hartford was genuinely

233 Ellerin v. Fairfax Sav., F.S.B., 652 A.2d 1117, 1125 (Md. 1995). 234 11 M.L.E. Fraud and Negligent Misrepresentation § 10 (citing Hoffman v. Stamper, 867 A.2d 276, 300-01 (Md. 2005)).

-52- working to develop a Theatrical Extension for the NETworks tours to use and

negotiating with NETworks about its future implementation. Once again here,

Mr. Middleton’s exuberant promises of imminent action on the Theatrical Extension

in this context are insufficient to demonstrate any knowledge of falsehood or

reckless indifference to truth on his part.

Nor can an intent to deceive be derived from the record. Maryland courts

require a “deliberate”235 fraudulent representation made with “an intention that

another should believe it to be true and act upon it.”236 That is, Maryland’s scienter

element requires not just a false statement but also an “evil motive or bad intent.”237

None is evident here.

Additionally, NETworks fails to show its reliance on any purported

misrepresentations. This necessary element of a fraud claim requires proof that “the

plaintiff relied on the misrepresentation and had the right to rely on it.”238 Reliance

at its core is the action or inaction of a party that results from the misrepresentation

of another.239 In determining if reliance is reasonable, a court is required to “view

235 VF Corp. v. Wrexham Aviation Corp., 715 A.2d 188, 193 (Md. 1998) (quoting Ellerin, 652 A.2d at 1124)). 236 Id. (quoting McAleer v. Horsey, 35 Md. 439, 453 (Md. 1872)). 237 Ellerin, 652 A.2d at 1124. 238 Hoffman, 867 A.2d at 292 (citations omitted). 239 Nails v. S & R, Inc., 639 A.2d 660, 669 (Md. 1994) (finding that reliance exists if “the misrepresentation substantially induced the plaintiff to act”).

-53- the act in its setting, which will include the implications and promptings of usage

and fair dealing.”240

But reliance on Hartford or Mr. Middleton’s representations complained-of

here can’t support the fraud claim NETworks champions. Those representations of

imminence were made only after the existing policies were entered into. The

NETworks tours bound coverage with Hartford in late March and early April 2019

for their 2019-2020 touring productions.241 At the time these policies were signed,

no Theatrical Extension even existed.242 Instead, Mr. Middleton had merely

conceptualized the idea and had shared it with Ms. Gladding.243 There is no

indication that the NETworks tours relied on any promises of later addition of the

as-yet-nonexistent Theatrical Extension when they entered into their 2019-2020

policies. As for the communications that occurred between September 2019 and

March 2020, there is no evidence that NETworks relied to their detriment on any of

the predictions made then. Nor could they—each NETworks tour was already

insured under existing policies and had yet to renew or sign new ones.

240 Giant Food v. Ice King, 536 A.2d 1182, 1186 (Md. Ct. Spec. App. 1988) (quoting Glanzer v. Shepard, 135 N.E. 275, 276 (N.Y. 1922)). 241 See, e.g., Standard Policy; see also Hartford’s Open. Br. at 11. Those one-year policies took effect months later—between late June and late October 2019. Id. 242 See Email from Gladding to Middleton 05/21/19 (informing Middleton that the Theatrical Extension would not be ready until “3rd quarter 2019”–i.e., in July at the earliest). 243 See id.; Emails between Middleton and Gladding May 2018.

-54- NETworks attempts to use Mr. Middleton’s January 14, 2019 email to

NETworks stating that the Theatrical Extension would be added “automatically on

renewals and new shows” as evidence that they relied on his representations when

signing the policies for 2019-2020.244 But as that same email clarifies, “to provide

on existing shows it has to be done by endorsement.”245 The email does not purport

to show a misrepresentation on which the NETworks could have relied on to enter

into their 2019-2020 policies. Instead, it states that renewals and new shows would

include the not-yet-finalized Theatrical Extension but, absent a separate

endorsement by Hartford, the extension would not be part of policies that were in-

effect during its final development.

Finally, NETworks suffered no compensable injury. To constitute cognizable

fraud, “it must appear that the plaintiff actually suffered damage directly resulting

from the fraud.”246 Fraud without a resulting injury is not actionable.247 The

NETworks tours state that they forewent seeking out and signing other policies

containing no “direct physical loss” requirement, and therefore they suffered a

244 Email from Middleton to NETworks 01/14/19. 245 Id. 246 11 M.L.E. Fraud and Negligent Misrepresentation § 14 (citing Empire Realty Co. Inc. v. Fleisher, 305 A.2d 144, 147 (Md. 1973); Diener Enterprises, Inc. v. Miller, 371 A.2d 439, 441 (Md. Ct. Spec. App. 1977)). 247 Id. (citing Educ. Testing Serv. v. Stanley H. Kaplan, Educ. Ctr., Ltd., 965 F. Supp. 731, 740 (D. Md. 1997) (applying Maryland law)).

-55- compensable injury based on the alleged misrepresentations. The record says

differently. The NETworks tours did not change their position on then-existing

coverage—they just didn’t get the extra coverage from Hartford they hoped for.

Summary judgment for Hartford on the fraud claim (Count IV) is

E. HARTFORD IS ENTITLED TO SUMMARY JUDGMENT ON NETWORKS CLAIM FOR DECLARATORY RELIEF SEEKING MODIFICATION OF THEIR POLICIES. Lastly, Hartford moves for summary judgment on the NETworks tours’

request for a declaration that each show’s Standard Policy includes the Theatrical

Extension in accord with Hartford’s purported express and implied

representations.248

Delaware’s Declaratory Judgment Act empowers this Court to “declare rights,

status and other legal relations whether or not further relief is or could be

claimed.”249 But “[n]ot all disputes . . . are appropriate for [a declaration] when the

parties request it.”250 The Court “has discretion to decline declaratory judgment

jurisdiction, and will do so where a proposed declaration would not advance the

248 Compl. ¶¶ 199-205. 249 DEL. CODE ANN. tit. 10, § 6501-13 (2022). The “purpose of the Declaratory Judgment Act is to enable the courts to adjudicate a controversy prior to the time when a remedy is traditionally available and, thus, to advance the stage at which a matter is traditionally justiciable.” Reylek v. Albence, 2023 WL 4633411, at *6 (Del. Super. Ct. July 19, 2023) (quoting Diebold Computer Leasing, Inc. v. Commercial Credit Corp., 267 A.2d 586, 591–92 (Del. 1970)) (cleaned up). 250 Intermec IP Corp. v. TransCore, LP, 2021 WL 3620435, at *25 (Del. Super. Ct. Aug. 16, 2021) (quoting Town of Cheswold v. Cent. Del. Bus. Park, 188 A.3d 810, 816 (Del. 2018)).

-56- litigation, but rather, would waste judicial resources.”251

Prior to entertaining a declaratory judgment action, the Court must first make

a threshold determination that an “actual controversy” exists.252 An “actual

controversy” has four elements:

(1) It must be a controversy involving the rights or other legal relations of the party seeking declaratory relief; (2) it must be a controversy in which the claim of right or other legal interest is asserted against one who has an interest in contesting the claim; (3) the controversy must be between parties whose interests are real and adverse; (4) the issue involved in the controversy must be ripe for judicial determination.253

With respect to the second element, “[a]n actual controversy which justifies resort

to the declaratory judgment act exists where one side makes a claim of a present,

specific right and the other side makes an equally definite claim to the contrary.”254

The fourth requires that a controversy be “ripe.”255 To make a ripeness

determination, Delaware courts “weigh the reasons ‘for not rendering a hypothetical

opinion . . . against the benefits to be derived from the rendering of a declaratory

251 Id. (citations omitted). 252 Reylek, 2023 WL 4633411, at *6 (quoting XL Specialty Ins. Co. v. WMI Liquidating Tr., 93 A.3d 1208, 1216 (Del. 2014)). 253 Id. (citations omitted). 254 In re COVID-Related Restrictions on Religious Servs., 302 A.3d 464, 494 (Del. Super. Ct. 2023) (quoting Clemente v. Greyhound Corp., 155 A.2d 316, 320 (Del. Super. Ct. 1959)). 255 Id.

-57- judgment.’”256 Such a balancing necessitates “the exercise of judicial discretion

which should turn importantly upon a practical evaluation of the circumstances

present.”257 Put simply, “for a case to be ripe, the facts must be sufficiently

developed for the court to resolve the matter.”258 And “if the Court would be forced

to construct hypothetical factual situations on which it could then rule then the

ripeness requirement is not met.”259

For two reasons, the Court should not and cannot render the declaration sought

here—that is, add the Theatrical Extension (with premiums and limits the tours never

pin down) to each NETworks tours’ show’s then-extant Standard Policy.

First, no actual controversy exists surrounding the Standard Policy’s

modification or the method to effect such. The Standard Policy includes a

“Changes” provision that states that its “terms can be amended or waived only by

endorsement issued by [Hartford] and made a part of this policy.”260 Hartford points

to the “Changes” provision’s endorsement requirement as conclusive evidence that

256 Id. (quoting The O’Brien Corp. v. Hunt-Wesson, Inc., 1999 WL 126996, at *4 (Del. Ch. Feb. 25, 1999) (quoting Stroud v. Milliken Enters., Inc., 552 A.2d 476, 480 (Del. 1989)). 257 Id. (internal quotations and citations omitted). 258 Id. Of course, with the other claims at play and the resolution of those claims above, there might also be an “overripeness” concern lurking in the background of this particular declaratory judgment proceeding. See generally CRE Niagara Holdings, LLC v. Resorts Grp., Inc., 2023 WL 2625838, at *9-12 (Del. Super. Ct. Mar. 24, 2023) (explaining and engaging the overripeness analysis employed by Delaware courts). 259 In re COVID-Related Restrictions, 302 A.3d at 494 (cleaned up). 260 Standard Policy (Common Policy Provisions) § B.

-58- the Standard Policy was never modified to include the Theatrical Extension. 261

In its response, the NETworks tours appear to concede the issue. They parry that

“[t]he question is not whether the policies contained the Theatrical Extension, but

whether [Mr.] Middleton represented that Hartford would add it to them.”262

NETworks sidesteps the “Changes” provision and the endorsement requirement. So,

the NETworks tours have not established that there is an actual controversy as to

whether the Standard Policy was modified to include the Theatrical Extension. In

fact, the NETworks tours have confessed the opposite is true but hopes the Court

will inflict such modification outside the policy’s clear terms.

Second, there are far too many uncertainties for the court to provide any sort

of declaratory relief. To declare that the Theatrical Extension is a part of the

Standard Policy, the Court would need to determine for each different show, inter

alia: (1) the amount of premiums to be paid; (2) when in the life of the policy the

Theatrical Extension took force; and, (3) the per occurrence limits afforded by the

extension. As a prudential matter, the Court should not exercise its discretion to

make the nebulous declaration the tours seek when there are so many very real gaps

to fill. In declaratory judgment terms, the facts in question are not sufficiently

developed and the modification question is not ripe for judicial determination. In

261 Hartford’s Open. Br. at 45-46. 262 Tours’ Ans. Br. at 40.

-59- more practical terms, the tours’ ask amounts to that which a Delaware court eschews

without fail—using litigation and the Court to rewrite a deal.263

Summary judgment on Count V asking for just such relief via the Declaratory

Judgment Act is GRANTED.

V. CONCLUSION

In March 2020, COVID-19 brought the world to a screeching halt. Its effects

on our modern living were unprecedented. And its disruption cost most industries—

including the entertainment industry—dearly. While some then-extant forms of

business-income disruption coverage were broad enough to cover some or all losses,

those in this case were not. A creative mix of policy language and proffered

scientific evidence does not change the fact that 14 of the 15 insurance contracts here

did not cover the losses incurred with the shuttering occasioned by COVID-19’s

grip. And the Court cannot engage its discretionary authority to declare into those

14 policies that which just never made it therein. As to the fifteenth, that policy’s

language covered that show’s interruption due to the COVID-19 shutdown from the

interruption’s start to finish, not in the segmented way that production now posits.

263 See generally Nemec v. Shrader, 991 A.2d 1120, 1126 (Del. 2010) (Delaware courts cannot rewrite a contract to appease a party who later wishes a better deal had been struck); Nationwide Emerging Managers, LLC v. Northpointe Hldgs., LLC, 112 A.3d 878, 881 (Del. 2015) (“Delaware law requires that [a] contract’s express terms be honored, and prevents a party who has after-the- fact regrets from . . . obtain[ing] in court what it could not get at the bargaining table.”) (cleaned up).

-60- The insurer here engaged in no misdoings when it provided the coverage the

Tours’ procured or when it made the now-contested coverage decisions.

For these reasons—as they are more fully explicated above—Hartford is

GRANTED summary judgment on each of the seven counts leveled against it.

IT IS SO ORDERED.

Paul R. Wallace, Judge

Original to Prothonotary cc: All counsel via File & Serve

-61-