Poughkeepsie Waterfront Development v. The Travelers Indemnity Company of…

Background

Poughkeepsie Waterfront Development, LLC brought a proposed class action against The Travelers Indemnity Company of America and Travelers Companies, Inc. The plaintiff sought coverage under an insurance policy’s Business Income, Extra Expense, Extended Business Income, and Civil Authority provisions for losses related to the COVID-19 pandemic and government orders. The insurers denied the plaintiff’s claim. The defendants moved to dismiss the complaint.

Court’s Analysis

The court relied on its decision in a related case and concluded that the plaintiff had not stated a claim for Business Income, Extra Expense, or Extended Business Income coverage. The policy required “direct physical loss of or damage to property” caused by a covered cause of loss. The complaint did not allege that the plaintiff’s property suffered direct physical loss or damage; instead, it advanced the theory that loss of use was enough. The court rejected that theory as legally insufficient. The Extended Business Income claim also failed because it depended on a qualifying Business Income loss, which the plaintiff had not alleged.

The court separately concluded that the complaint did not establish the requirements for Civil Authority coverage. In particular, it did not allege that the government orders prohibited access to the property or that the orders were issued because of direct physical loss of or damage to other property caused by a covered cause of loss. The complaint and the orders indicated that the orders were issued to slow the spread of COVID-19, not because surrounding property had suffered the required damage.

The court also held that, even if the plaintiff had alleged direct physical loss or damage, the policy’s Virus Exclusion barred coverage for loss or damage caused by or resulting from a virus capable of inducing illness or disease. The court did not analyze other exclusions because the failure to allege direct physical loss or damage caused by a covered cause of loss was independently sufficient to defeat the claims.

Disposition

Judge Kenneth M. Karas granted the defendants’ motion to dismiss. The court dismissed the breach-of-contract claim and denied declaratory relief because the complaint did not plead facts sufficient to establish coverage. The court dismissed the complaint with prejudice and without leave to amend, finding that amendment would be futile. It also declined to consider the proposed class allegations because the plaintiff’s individual claims failed. The clerk was directed to terminate the motion and close the case.