Pacific Indemnity Company v. Kiton Corporation

Background

Kiton moved under Federal Rule of Civil Procedure 59(e) to alter or amend the court’s June 24, 2022 judgment. That earlier judgment granted Pacific Indemnity Company’s motion to dismiss Kiton’s claim for business-interruption coverage under a commercial general liability insurance policy. Applying New York law, the court had concluded that Kiton did not allege facts sufficient to show entitlement to coverage for losses caused by the COVID-19 pandemic.

Kiton argued that the court should have applied the law of each state where it operated and sought coverage, identifying New York, California, Nevada, and Texas. Kiton contended that New Jersey choice-of-law rules required applying the law of the location of the property. Kiton also argued that decisions relied on in the earlier dismissal were distinguishable because Kiton alleged that employees who had COVID-19 were present at its stores and that the stores consequently closed.

Pacific argued that Kiton had multiple opportunities to raise the choice-of-law issue but had not done so. Pacific also argued that Kiton had affirmatively relied on New York law in its opposition to the dismissal motion.

Rule 59(e) standard

A Rule 59(e) motion allows a district court to alter or amend a recently entered judgment. The court explained that relief may be justified by an intervening change in controlling law, newly available evidence, clear legal error, or manifest injustice. The motion cannot be used to relitigate old matters or raise arguments that could have been made before judgment.

Court’s analysis

The court held that Kiton had not identified an intervening change in controlling law or new evidence. The choice-of-law authorities Kiton cited were available when the dismissal motion was briefed. The later California and Nevada decisions cited by Kiton did not show that controlling law had changed; at most, they showed that Kiton later recognized the potential importance of the choice-of-law issue.

The court also rejected Kiton’s claim of clear error or manifest injustice. The court had assumed that New York law applied because both parties had argued under New York law. Kiton had argued in its opposition to dismissal that New York law entitled it to relief, and Pacific had also relied on New York law. The court stated that Kiton had never suggested before judgment that the law of another state should apply and that it could not use Rule 59(e) to obtain a redo of that choice.

The court likewise rejected Kiton’s argument concerning employees with COVID-19. The allegation came from a declaration by Kiton’s Chief Operating Officer rather than from the pleadings, and the court said it had already considered the relevant contention in the earlier dismissal decision. Under the authority discussed by the court, the presence of coronavirus on property was not enough to show “direct physical loss or damage.” The insured property had to be changed, damaged, or tangibly affected; impaired use or loss of access alone was insufficient. The court concluded that it did not matter whether employees or another source brought the virus onto the premises if Kiton could not demonstrate physical damage to the property.

Disposition

The court denied the motion to alter or amend. The Clerk of Court was directed to close Docket Number 30. Judge Lewis J. Liman signed the order.