Project Lion Llc v. Badger Mut. Ins. Co.

Project Lion Llc v. Badger Mut. Ins. Co.

Opinion

Order Granting Motion to Dismiss and Closing Case

[ECF No. 31]

Project Lion LLC, Project M LLC, and Project W LLC sue Badger Mutual Insurance Company for failing to provide coverage for economic losses that they incurred from the government-mandated closures of their restaurants during the COVID-19 pandemic.¹ Badger moves to dismiss under Federal Rule of Civil Procedure 12(b)(6), arguing that the restaurants' respective "all-risk" insurance policies do not cover their claims and coverage for any alleged damage caused by the SARS-CoV-2 virus is precluded by the policies' exclusions.² The restaurants maintain that they have sufficiently alleged coverage under the policy, asserting that the Badger-policy provisions are vague, they have alleged direct physical loss and damage to their properties, and the virus is not the efficient proximate cause of their injuries. While I am sympathetic to the economic woes these restaurants face, they cannot show direct physical loss or damage to their properties caused by a covered peril and, regardless, their policies' virus exclusions [*6]  unambiguously bar their coverage claims. So I grant Badger's motion and dismiss plaintiffs' claims with prejudice.

Background

In March 2020, the federal government and the State of Nevada began grappling with the severity of the SARS-CoV-2 virus by ordering sweeping social-distancing measures, closing businesses, and directing customers to avoid restaurants, bars, and food courts to reduce the spread of the disease.³ Among those hit by these measures were plaintiffs' restaurants—Crush, La Comida, and La Cave—each of whom wiped its counters one final time and turned off its ovens, "unable to use [its] property for its intended purpose" and "forced to close."⁴ In the restaurants' case, this was largely a preventative measure; the novel coronavirus was not found in or on the plaintiffs' property.⁵ To recoup the losses caused by the closure policies, the restaurants sought coverage from Badger, submitting a claim under their all-risk policies.⁶

La Comida's policy states that Badger will pay "the actual loss of Business Income you sustain due to the necessary suspension of your operations during the period of restoration," when the suspension of operations is "caused by direct physical [*7]  loss of or damage to property at the described premises."⁷ Business income is defined to include "net income . . . that would have been earned or incurred if no physical loss or damage had occurred."⁸ Crush and La Cave's respective policies provide coverage "during the restoration period when your business is necessarily interrupted by direct physical loss to real or personal property as a result of a covered peril."⁹ That coverage is extended to losses incurred "while access to the described premises is specifically denied by an order of civil authority," when that order is the "result of damage to property other than at the described premises and caused by a covered peril."¹⁰ And all three policies exclude coverage for "loss, cost, or expense caused by, resulting from, or relating to any virus, bacterium, or other microorganism that causes disease, illness, or physical distress," including but "not limited to" losses incurred as a result of "contamination" or "denial of access to property because of any virus."¹¹

Full case includes Shepard's, Headnotes, Legal Analytics from Lex Machina, and more.