Michael J. Redenburg, Esq. PC v. Midvale Indemnity Company

Background

Michael J. Redenburg, Esq. PC was a law firm owned and operated by Michael J. Redenburg, Esq. The firm had a commercial property-insurance policy with Midvale Indemnity Company covering its offices. The policy promised coverage for direct physical loss of or damage to covered property caused by a covered cause of loss.

Redenburg claimed that New York’s COVID-19 stay-at-home, social-distancing, and court-filing restrictions prevented clients from visiting the firm and reduced its business income. It sought a declaration that the policy covered losses under the policy’s Business Income, Extra Expense, Extended Business Income, and Civil Authority provisions. Midvale denied the insurance claim, stating that there was no direct physical damage and that the policy excluded losses caused by a virus.

Motion to Remand

Midvale removed the case from New York state court based on diversity jurisdiction. Diversity jurisdiction requires complete diversity of citizenship between the parties and an amount in controversy exceeding $75,000.

The court held that complete diversity existed because Redenburg was a citizen of New York and Midvale was a Wisconsin corporation with its principal place of business in Wisconsin. The court rejected Redenburg’s arguments that Midvale had to identify members, parent companies, subsidiaries, or an affiliated company whose citizenship might affect jurisdiction. The court also held that the amount in controversy exceeded $75,000. Redenburg’s estimated weekly losses, multiplied by the period at issue, put the value of the requested insurance coverage above that threshold.

The court therefore denied Redenburg’s motion to remand. Because remand was denied, the court also denied Redenburg’s request for attorney fees and costs connected with the removal and remand motion.

Motion to Dismiss

Midvale moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which permits dismissal when a complaint does not state a legally sufficient claim. Applying New York law, the court treated the insurance policy as a contract and interpreted its clear terms according to their ordinary meaning.

The court focused on the policy’s virus exclusion. Each coverage provision Redenburg invoked applied only to a covered cause of loss. The policy defined a covered cause of loss as risks of direct physical loss unless excluded, and excluded loss or damage caused directly or indirectly by any virus. The exclusion also applied regardless of any other cause or event contributing concurrently or in any sequence to the loss.

The court held that the claimed losses fell within this exclusion. Although the government orders were more immediate causes of the firm’s business losses, Redenburg’s complaint acknowledged that the orders were issued because of COVID-19. The policy expressly excluded losses caused indirectly by a virus and losses involving other contributing causes. The court therefore held that the virus exclusion barred recovery under all four policy provisions on which Redenburg relied.

The court did not reach Midvale’s alternative arguments that the losses did not involve direct physical loss or damage, or that the Civil Authority provision’s additional requirements were not met. The court stated that those arguments appeared substantial but did not decide them.

Disposition

Judge Paul A. Engelmayer denied Redenburg’s motion to remand, denied its request for fees and costs, and granted Midvale’s motion to dismiss. The Clerk was directed to terminate the pending motions and close the case.