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10012 Holdings, Inc. v. Sentinel Ins. Co.

10012 Holdings, Inc. v. Sentinel Ins. Co.

United States Court of Appeals for the Second Circuit

September 2, 2021, Argued; December 27, 2021, Decided

Docket No. 21-80-cv

Opinion

 [*218]  LOHIER, Circuit Judge:

In a scenario that has become all too familiar during the COVID-19 pandemic, 10012 Holdings, Inc. d/b/a Guy Hepner, which operates as a brick-and-mortar art gallery and dealership in New York City, was forced to suspend its operations to comply with government restrictions on [**3]  nonessential businesses. As a result, 10012 Holdings could no longer sell paintings at its gallery and resorted to online sales, with employees allowed to access the gallery for routine business purposes such as packing and shipping a painting purchased online. The company, which was insured under a widely used business property insurance policy (the "Policy") issued by Sentinel Insurance Company, Ltd., sought coverage under the Policy for its business income losses and expenses relating to the gallery's closure. Sentinel denied coverage on the ground that 10012 Holdings did not suffer direct physical loss of or physical damage to its property or property within its vicinity, as the Policy required. Invoking three provisions of the Policy, 10012 Holdings brought this action for breach of contract and a declaratory judgment that Sentinel was liable for coverage  [*219]  of its COVID-19-related business losses, claiming that the Policy's references to "physical damage" or "physical loss" include the loss of use of property as a result of the suspension of business operations. The United States District Court for the Southern District of New York (Schofield, J.), applying New York law, agreed [**4]  with Sentinel's reason for denying coverage and dismissed 10012 Holdings's claims with prejudice under Federal Rule of Civil Procedure 12(b)(6).

For the reasons that follow, we AFFIRM.

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21 F.4th 216 *; 2021 U.S. App. LEXIS 38270 **

10012 HOLDINGS, INC. DBA GUY HEPNER, Plaintiff-Appellant, v. SENTINEL INSURANCE COMPANY, LTD., Defendant-Appellee.1

Prior History:  [**1] 10012 Holdings, Inc. d/b/a Guy Hepner, which owns and operates a fine arts gallery and dealership in New York City, sought coverage under three provisions of an insurance policy issued by Sentinel Insurance Company, Ltd. for losses and extra expenses incurred when it suspended its operations in accordance with government restrictions on non-essential businesses during the COVID-19 pandemic. When Sentinel denied coverage, 10012 Holdings filed suit asserting claims for breach of contract and declaratory judgment. The United States District Court for the Southern District of New York (Schofield, J.) dismissed the claims with prejudice, and 10012 Holdings appealed. Under New York law, the policy provisions that 10012 Holdings invokes provide coverage only where the insured suspends its operations because its property or property in its immediate area suffered physical damage. Because 10012 Holdings does not plausibly allege such physical damage, we AFFIRM.

10012 Holdings, Inc. v. Sentinel Ins. Co., 507 F. Supp. 3d 482, 2020 U.S. Dist. LEXIS 235565, 2020 WL 7360252 (S.D.N.Y., Dec. 15, 2020)

CORE TERMS

coverage, physical loss, physical damage, provisions, Appeals, premises, business income, civil authority, extra expense, certification, district court, courts, losses, loss of use, closure, gallery, cases, property damage, insured, insured property, provide coverage, state law, neighboring, quotation, pandemic, certify, suspend, theater, orders, marks

Contracts Law, Contract Interpretation, Intent, Insurance Law, Policy Interpretation, Ambiguous Terms, Construction Against Insurers, Claim, Contract & Practice Issues, Ordinary & Usual Meanings, Coverage Favored, Unambiguous Terms, Governments, Courts, Judicial Precedent, Business Insurance, Commercial General Liability Insurance, Property Claims, Property Insurance, Coverage, Property Damage, Technical Constructions & Meanings, Evidence, Inferences & Presumptions, Presumptions, Creation, Policy Interpretation, Civil Procedure, Appeals, Appellate Jurisdiction, Certified Questions