WM Bang LLC v. Travelers Casualty Insurance Company of America

Background

WM Bang LLC and JBang LLC d/b/a Bang owned and operated a restaurant in a shopping mall in White Plains, New York. They held an all-risk Businessowners Property Coverage policy issued by Travelers Casualty Insurance Company of America. The policy provided Business Income coverage for actual losses caused by a necessary suspension of operations resulting from direct physical loss of or damage to the restaurant. It also provided Civil Authority coverage when a government action prohibited access to the restaurant because of direct physical loss of or damage to property at another location within 100 miles.

The plaintiffs alleged that New York government orders issued during the COVID-19 pandemic prohibited the restaurant from operating normally and, for some period, prohibited access to it. They submitted a claim for coverage, but Travelers denied it, stating that the virus did not constitute direct physical loss of or damage to property and that the policy excluded losses caused by viruses. The plaintiffs sued for breach of contract and declaratory relief on behalf of themselves and a proposed class. Travelers moved to dismiss the amended complaint.

Court’s analysis

A motion to dismiss tests whether the complaint alleges enough facts to state a legally plausible claim. The court accepted the complaint’s factual allegations as true for purposes of the motion but applied the policy’s language under New York contract law.

Business Income coverage. The policy required a suspension of operations caused by “direct physical loss of or damage to” the restaurant. The court held that the plaintiffs alleged only loss of use and loss of access, not actual physical loss or damage to the restaurant. The COVID-19 pandemic and the government orders did not change the restaurant’s physical condition. The court therefore dismissed the Business Income breach-of-contract claim. The court also stated that the policy’s separate exclusion for loss of use provided an additional basis for dismissal.

Civil Authority coverage. The policy required the government action to prohibit access because of direct physical loss of or damage to property other than the restaurant and within 100 miles. The court found that the amended complaint did not identify specific physical damage to nearby or neighboring property. Allegations that the orders were issued to slow the spread of COVID-19 were insufficient. The court dismissed the breach-of-contract claims based on Civil Authority coverage.

Virus exclusion. The policy excluded loss or damage caused by or resulting from a virus capable of causing illness or disease. The exclusion expressly applied to Business Income and Civil Authority coverage. Because the plaintiffs alleged that their losses resulted from the COVID-19 pandemic and related orders, the court held that the virus exclusion independently barred their claims. The court also declined to apply the plaintiffs’ regulatory-estoppel theory under New York law.

Declaratory relief and proposed class

The court stated that the declaratory-judgment request seeking the same rights addressed by the breach-of-contract claim was duplicative and dismissed it. In a footnote, the court stated that the request for declaratory relief tied to Civil Authority coverage was denied because the related breach-of-contract claim was dismissed. The court did not consider the proposed class allegations because the plaintiffs’ individual claims failed.

Disposition

The court granted Travelers’ motion to dismiss. It directed the Clerk of Court to terminate the motion and close the case. The opinion does not state that the dismissal was with or without prejudice.