JRLDDS, LLC v. The Hartford Financial Services Group Inc.

Background

JRLDDS, LLC, doing business as Jeffrey R. Lemler, DDS, sued Trumbull Insurance Company and Trumbull’s parent company, The Hartford Financial Services Group Inc. JRLDDS alleged that Trumbull improperly denied coverage for income losses and extra expenses incurred because of and during the COVID-19 pandemic.

The policy was an “all-risk” policy in effect from March 1, 2020, to March 1, 2021. It included Business Income, Extra Expense, and Civil Authority coverage. The Business Income and Extra Expense provisions required direct physical loss of or physical damage to property at the scheduled premises. The Civil Authority provision covered business-income losses when access to the scheduled premises was specifically prohibited by a civil-authority order because of covered physical loss or damage to property in the immediate area.

JRLDDS asserted claims for breach of contract, breach of the implied covenant of good faith and fair dealing, violation of New York General Business Law Section 349, and unjust enrichment. The defendants moved to dismiss the amended complaint under Rule 12(b) of the Federal Rules of Civil Procedure. The opinion’s discussion applies the legal-sufficiency standard for a Rule 12(b)(6) motion, which asks whether the complaint alleges enough facts to state a plausible claim.

Court’s Analysis

The court relied on Second Circuit and Southern District of New York decisions applying New York law to similar COVID-19 insurance claims. Those decisions held that “direct physical loss of or damage to” property does not include merely losing the use of business facilities; that the presence of COVID-19 in the air or on surfaces does not constitute direct physical loss or damage; and that COVID-19 shutdown orders did not trigger civil-authority coverage when they resulted from the pandemic’s danger to people rather than a risk of physical damage to property.

The court rejected JRLDDS’s attempts to distinguish the policy language from earlier cases. It held that the Second Circuit’s decision in 10012 Holdings involved materially identical language and rejected the same types of arguments. The court therefore concluded that the precedent controlled and required dismissal of JRLDDS’s breach-of-contract claim and related declaratory-judgment claim.

The court also dismissed the claims for breach of the implied covenant of good faith and fair dealing, violation of General Business Law Section 349, and unjust enrichment. It reasoned that those claims ultimately rested on the alleged improper denial of insurance coverage.

The Hartford Financial Services Group separately challenged personal jurisdiction, meaning the court’s authority over that defendant. The court did not decide that issue. Because it had personal jurisdiction over Trumbull and dismissed the claims in their entirety based on their legal insufficiency, it determined that it did not need to address the parent company’s personal-jurisdiction arguments.

Disposition

The court granted the defendants’ motion in full and dismissed JRLDDS’s amended complaint in its entirety. It declined to grant JRLDDS leave to file another amended complaint, explaining that the problems with the claims were substantive and that amendment would be futile. The court also noted that JRLDDS had already received permission to amend once and had been warned that it would not receive another opportunity to address the motion-to-dismiss issues.

The Clerk of Court was directed to terminate the motion, enter judgment in favor of the defendants, and close the case.