NMA Investments LLC v. Travelers Companies, Inc., The

Background

NMA Investments L.L.C., doing business as Giant Express Wash, operates a laundromat at 3725 Chicago Avenue South in Minneapolis. NMA sought coverage for lost business income under an insurance policy issued by Fidelity and Guaranty Insurance Company. NMA alleged that, after George Floyd’s murder and the resulting civil unrest, the City of Minneapolis placed cement barricades near the laundromat. NMA also alleged that memorials, structures, and armed and unarmed community members blocked or redirected vehicle, pedestrian, and public-transit access, reduced parking, and caused a partial suspension of its business operations.

The case was originally filed in Hennepin County District Court against Fidelity and The Travelers Companies, Inc. Fidelity and Travelers removed it to federal court based on diversity jurisdiction. NMA’s second amended complaint named only Fidelity; the court treated references to Travelers as mistakes or as not indicating that Travelers remained a defendant. NMA did not challenge the removal allegations.

Insurance provisions and legal standard

The policy’s general business-income provision covered actual lost business income caused by the necessary suspension of operations during a restoration period, if the suspension resulted from direct physical loss of or damage to covered property caused by a covered cause of loss. The policy separately provided civil-authority coverage when a covered cause of loss damaged property other than the insured premises and a civil authority prohibited access to the premises under specified conditions.

Fidelity moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint states a legally sufficient claim. At this stage, the court accepted the complaint’s factual allegations as true and drew reasonable inferences in NMA’s favor, but required facts plausibly showing an entitlement to relief. The parties agreed that Minnesota law governed interpretation of the policy.

General business-income coverage

The court held that NMA did not plausibly allege direct physical loss of or damage to property. NMA’s theory was that the barriers, memorials, and people blocking access were themselves physical damage. The court rejected that theory, explaining that barriers ordinarily are not physical property damage and that NMA alleged no separate physical damage caused by the barriers or memorials.

The court also rejected NMA’s argument that the barriers’ continued presence became physical loss over time. The complaint did not allege that the barriers or memorials acted as contaminants, and the court explained that Minnesota contamination cases still require physical damage. The court noted that coverage generally requires a physical alteration, contamination, or destruction rather than an economic loss without a distinct physical change.

The court identified an additional problem with the general coverage claim: NMA did not allege that it suspended its business activities, either partially or completely. Instead, NMA alleged that customers and potential customers had more difficulty reaching the laundromat, which reduced business. The court held that reduced customer demand and decreased business were not a necessary suspension of business activities under the policy.

Civil-authority coverage

The court held that NMA also failed to plausibly allege that a civil authority prohibited access to the laundromat. Relying on Minnesota authority, the court explained that this coverage generally requires access to be completely prohibited, not merely more difficult or less convenient.

NMA alleged that Minneapolis placed cement barricades in response to civil unrest and that memorials, structures, and people occupied nearby streets, parking spaces, and a bus stop. But NMA did not allege that the barricades barred all potential customers from reaching the laundromat. NMA argued that intermittent access should satisfy the policy, but the court found no Minnesota case adopting that rule and concluded that the allegations described diminished ease of access rather than a prohibition.

Disposition

The court granted Fidelity’s motion to dismiss. It dismissed NMA’s second amended complaint with prejudice because NMA had already amended twice, did not request another opportunity to amend, and had not identified additional allegations that might change the result. The court ordered judgment to be entered.