Petition for Writ of Certiorari — Bel Air Auto Auction, Inc., Petitioner v. Great Northern Insurance Company
Supreme Court briefOct 24, 2022
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App. 1
UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
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No. 21-1493
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BEL AIR AUTO AUCTION, INC.,
Plaintiff - Appellant,
v.
GREAT NORTHERN INSURANCE COMPANY,
Defendant - Appellee.
AMERICAN PROPERTY CASUALTY INSURANCE
ASSOCIATION; NATIONAL ASSOCIATION OF
MUTUAL INSURANCE COMPANIES,
Amici Supporting Appellee.
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Appeal from the United States District Court for the
District of Maryland, at Baltimore. Richard D. Bennett, Senior District Judge. (1:20-cv-02892-RDB)
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Submitted: June 9, 2022
Decided: June 14, 2022
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Before WYNN, THACKER, and QUATTLEBAUM, Circuit Judges.
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App. 2
Affirmed by unpublished per curiam opinion.
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ON BRIEF: Lawrence J. Gebhardt, Gregory L. Arbogast, Robert T. Nanovsky, GEBHARDT & SMITH
LLP, Baltimore, Maryland, for Appellant. Gabriela
Richeimer, M. Addison Draper, CLYDE & CO US LLP,
Washington, D.C.; Jonathan D. Hacker, Bradley N. Garcia, Jenya Godina, O’MELVENY & MYERS LLP,
Washington, D.C., for Appellee. Wystan M. Ackerman,
ROBINSON & COLE LLP, Hartford, Connecticut;
George E. Reede, Jr., ZELLE LLP, Washington, D.C.;
Laura A. Foggan, CROWELL & MORING LLP, Washington, D.C., for Amici American Property Casualty
Insurance Association and National Association of
Mutual Insurance Companies.
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Unpublished opinions are not binding precedent in
this circuit.
PER CURIAM:
Bel Air Auto Auction, Inc. (“Bel Air”) appeals the
district court’s order denying Bel Air’s Fed. R. Civ. P. 56
motion for summary judgment and granting Great
Northern Insurance Company’s (“Great Northern”)
Fed. R. Civ. P. 12(c) motion for judgment on the pleadings in Bel Air’s declaratory judgment action. Bel Air’s
claims stem from Great Northern’s denial of insurance benefits Bel Air asserts Great Northern owed it
to cover business loss Bel Air incurred during the
COVID-19 pandemic. We have reviewed the record and
App. 3
find no reversible error. Accordingly, we affirm the district court’s order. See Bel Air Auto Auction, Inc. v.
Great N. Ins. Co., No. 1:20-cv-02892-RDB (D. Md. April
14, 2021); see also Uncork & Create LLC v. Cincinnati
Ins. Co., 27 F.4th 926, 933-34 (4th Cir. 2022) (holding
that insurance “policy’s coverage for business income
loss and other expenses d[id] not apply to [plaintiff ’s]
claim for financial losses [caused by the COVID19 pandemic] in the absence of any material destruction or
material harm to its covered premises” and further
“observ[ing] that our holding is consistent with the
unanimous decisions by our sister circuits, which have
applied various states’ laws to similar insurance
claims and policy provisions”). We deny Bel Air’s motions to defer and for reconsideration.
We dispense with oral argument because the facts
and legal contentions are adequately presented in the
materials before this court and argument would not
aid the decisional process.
AFFIRMED
App. 4
FILED: July 27, 2021
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
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No. 21-1493
(1:20-cv-02892-RDB)
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BEL AIR AUTO AUCTION, INC.
Plaintiff - Appellant
v.
GREAT NORTHERN INSURANCE COMPANY
Defendant - Appellee
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ORDER
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Upon consideration of submissions relative to the
motion for reconsideration, the court denies the motion.
For the Court
/s/ Patricia S. Connor, Clerk
App. 5
FILED: June 30, 2021
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
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No. 21-1493
(1:20-cv-02892-RDB)
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BEL AIR AUTO AUCTION, INC.
Plaintiff - Appellant
v.
GREAT NORTHERN INSURANCE COMPANY
Defendant - Appellee
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ORDER
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Upon consideration of submissions relative to appellant’s motion to certify questions of law to the Court
of Appeals of Maryland, the court denies the motion.
For the Court
/s/ Patricia S. Connor, Clerk
App. 6
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
BEL AIR AUTO AUCTION, *
INC.
*
Plaintiff,
*
v.
*
*
GREAT NORTHERN
INSURANCE COMPANY,
*
*
Defendant.
*
*
*
*
*
*
*
*
*
*
Civil Action No.
RDB-20-2892
*
*
*
*
*
*
*
MEMORANDUM OPINION
(Filed Apr. 14, 2021)
In August of 2020, Plaintiff Bel Air Auto Auction,
Inc. (“Bel Air” or “Plaintiff ”) filed suit against Defendant Great Northern Insurance Company1 (“Great
Northern” or “Defendant”), seeking a declaratory judgment that coverage exists under the business interruption provisions in a property insurance policy issued by
Great Northern to Bel Air. (ECF No. 1-2.) The now operative Amended Complaint specifically alleges that
Bel Air’s policy with Great Northern provides coverage
for losses caused as a direct and sole result of the Pandemic. (ECF No. 4.) It is alleged that the presence of
SARS-Cov-2 and its potential for causing COVID-19,
1
Plaintiff originally sued both Great Northern and its parent
company, Chubb Limited. Chubb Limited was voluntarily dismissed from the suit prior to the removal of the case to this Court.
(ECF No. 1-7.)
App. 7
as well as the State of Maryland and Harford County’s
governmental orders have impaired, diminished, and
decreased Bel Air’s business and operations. (Id. ¶ 22.)
The suit was originally filed in the Circuit Court for
Harford County, Maryland and was removed to this
Court pursuant to 28 U.S.C. §§ 1332, 1441, and 1446 by
Defendant Great Northern on October 7, 2020. (ECF
No. 1.)
On January 7, 2021, Plaintiff Bel Air filed a Motion for Summary Judgment (ECF No. 18) in which it
asserts that there are no genuine facts in dispute and
that the only issues left to resolve are issues of Maryland contract law as applied to insurance policies. (See
ECF No. 18-9 at 1.) That same day, the Plaintiff also
filed a Motion to Certify Questions of Law to the Maryland Court of Appeals (ECF No. 19). That motion
notes that Maryland courts have not directly addressed those questions which remain in dispute and
asserts that available Maryland law is presently both
insufficient and unsettled in addressing such legal issues in the context of the COVID-19 Pandemic. (ECF
No. 19 ¶ 6.) On February 17, 2021, Defendant Great
Northern filed a Motion for Judgment on the Pleadings
(ECF No. 26). The parties’ submissions have been reviewed, and no hearing is necessary. See Local Rule
105.6 (D. Md. 2018). For the reasons that follow, the
Plaintiff Bel Air’s Motion for Summary Judgment
(ECF No. 18) and Motion for Other Relief to Certify
Questions of Law to the Maryland Court of Appeals
(ECF No. 19) are DENIED. The Defendant Great
App. 8
Northern’s Motion for Judgment on the Pleadings
(ECF No. 26) is GRANTED.
BACKGROUND
Plaintiff Bel Air is a Maryland corporation with its
headquarters in Harford County, Maryland. (ECF No.
4 ¶ 2.) It occupies and operates a vehicle auction facility located at 4805 Philadelphia Road, Belcamp, Maryland, as well as other locations. (ECF No. 4 ¶ 19.) Bel
Air alleges that the company typically processes over
100,000 vehicles per year through consignments from
new and used car dealers, private business fleets, and
fleets from public service and government agencies.
(Id. ¶ 20.) Bel Air offers weekly auto auctions, including repossessed car auctions, government auctions, salvage auctions, and wholesale auctions and provides a
wide range of auto-related services, including floor
planning, storage, transportation, internet sales, full
vehicle reconditioning and certification, and sales of
donated vehicles for charitable organizations. (Id.) Before the COVID-19 Pandemic, Bel Air ran ten “lanes”
of vehicles at its auctions in which prospective buyers
could view the cars during “in-lane bidding.” (Id. ¶ 20.)
Bel Air’s services also included “online bidding from
anywhere.” (Id. ¶ 21.)
Bel Air purchased from the Chubb Group of Insurance a policy for property and liability insurance
issued on October 18, 2019 by Defendant Great
Northern, a corporation organized under the laws
of Indiana with its principal place of business in
App. 9
Whitehouse Station, New Jersey. (Id. ¶ 29; ECF No. 1
¶ 3.) The purchased policy, with policy number 360195-62 BAL (the “Policy”), was effective for the period
from October 1, 2019 to October 1, 2020. (Id.; see Ex. 1,
ECF No. 18-1.)
On March 5, 2020, Maryland Governor Lawrence
Hogan issued a proclamation which declared a state of
emergency due to the spread of SARS-Cov-2, the virus
causing the COVID-19 disease. (ECF No. 4 ¶ 16.) The
Governor issued several other executive orders and
proclamations throughout March of 2020 prohibiting
large gatherings, canceling events, and closing the use
and occupancy of restaurants, bars, and fitness centers
to the general public. (Id.) However, Interpretive Guidance issued on March 23, 2020 made clear that “[a]uto
and truck dealerships” were permitted to remain open
as essential businesses. See Interpretive Guidance
COVID 19-05 (Mar. 23, 2020).2 According to the Defendant, Bel Air’s website stated that, consistent with
that Guidance, it would remain open throughout the
Pandemic. (See ECF No. 27 at 7-8 (citing Richeimer
Decl. ¶ 6, ECF No. 27-1).) On March 30, 2020, Governor
2
When considering a Rule 12(c) motion for judgment on the
pleadings, a court may take judicial notice of a public document,
without converting the motion into one for summary judgment.
See, e.g., Armbruster Products, Inc. v. Wilson, 35 F.3d 555 (Table),
1994 WL 489983, at *2 (4th Cir. 1994) (“The consideration of judicially noticed facts does not transform a motion for judgment on
the pleadings into a motion for summary judgment.”); Ancient
Coin Collection Guild v. U.S. Customs and Border Protection, 801
F. Supp. 2d 383, 410 (D. Md. 2011); Lefkoe v. Jos. A. Bank Clothiers, No. WMN-06-1892, 2008 WL 7275126, at *3-4 (D. Md. May
13, 2008).
App. 10
Hogan issued a “stay at home” order, which ordered all
persons in the State of Maryland to “stay in their
homes or places of residence” except “to conduct or participate in Essential Activities” (defined in the order),
and closing “Non-Essential Businesses” except for
“Minimal Operations,” which included allowing the
presence of staff and owners to perform essential administrative functions. See Order of the Governor of
the State of Maryland, Number 20-03-30-01 (Mar. 30,
2020). On March 18, 2020, Barry Glassman, the Harford County Executive, issued Executive Order 20-01
declaring a state of emergency due to the COVID-19
Pandemic and placing Harford County in line with the
orders and proclamations issued by Governor Hogan.
See Executive Order 20-01 (Mar. 18, 2020).
Nevertheless, according to Bel Air, as a direct and
sole result of the presence of SARS-Cov-2 and its potential for causing COVID-19 and the orders of both
Governor Hogan and Executive Glassman, Bel Air’s
business and operations were, and continue to be, impaired, diminished, and decreased. (Id. ¶ 22.) “All inperson, in-lane, live bidding has been forced to cease,”
and the company has had to conduct sales by “remote
Simulcast” because it “has lost the full, unfettered use
of its facility.” (Id. ¶ 23.) Bel Air alleges that the food
services it previously offered have been forced to close,
and various restrictions inside the facility have been
imposed, such as requiring visitors to wear masks and
installing signage and safe distancing reminders,
COVID-screens, and plexiglass dividers. (Id. ¶ 25.) As
the Plaintiff explains, “[a]lthough the SARS-Cov-2 and
App. 11
Covid-19 and the State and local governmental orders
have not resulted in a structural alteration or physical
change to its premises,” they have “caused direct physical loss or damage in the form of a loss of full use.” (Id.
¶ 28.) The Plaintiff alleges that such loss of full use
“has directly resulted in an actual and substantial impairment of operations, including loss of business income and an increase in business expense.” (Id.) Bel
Air asserts that such loss is recoverable under its policy with Great Northern.
Bel Air seeks coverage for its losses under various
sections of the Policy. The “Premises Coverages” section of the Policy states that the insurer will “pay for
direct physical loss or damage to” building or personal
property “caused by or resulting from a peril not otherwise excluded.” (Id. ¶ 33; see also Ex. 1 at 000035,
ECF No. 18-1.) The Policy does not define “direct physical loss” or “damage.” The Policy does, however, define
“property damage” as:
•
physical injury to tangible property, including resulting loss or use of that property. All such loss of use shall be deemed
to occur at the time of the physical injury
that caused it; or
•
loss of use of tangible property that is not
physically injured. All such loss of use
shall be deemed to occur at the time of the
occurrence that caused it.
(Ex. 1 at 000179, ECF No. 18-1.)
App. 12
The Policy also contains business interruption coverage predicated upon on the loss of use of the subject
property. For example, the “Business Income with Extra Expense” section provides coverage for “business
income loss” incurred “due to the actual impairment of
[ ] operations” and “extra expense” incurred “due to
the actual or potential impairment of [ ] operations”
incurred “during the period of restoration.” (Id. at
000064.) However, for this section to apply, there must
be “direct physical loss or damage” that must “be
caused by or result from a covered peril,” and must
have “occur[ed] at, or within 1,000 feet of, the premises,
other than a dependent business premises, shown the
in Declarations.” (Id.) “Covered peril” is defined as
“peril covered by the Form(s) shown in the Property
Insurance Schedule Forms . . . applicable to the lost or
damaged property.” (Id. at 000115.) The “period of restoration” is defined as the period “immediately after
the time of direct physical loss or damage by a covered
peril to property” and continuing until operations are
restored with reasonable speed, including the time required to “repair and replace the property.” (Id. at
000124.)
The “Civil Authority” section of the Policy also provides coverage for business interruption, but specifically covers such loss incurred “due to the actual
impairment” of operations and “extra expense” incurred, “directly caused by the prohibition of access to:
your premises; or a dependent business premises, by a
civil authority.” (Id. at 000067.) “This prohibition of access by a civil authority,” the Policy states, “must be the
App. 13
direct result of direct physical loss or damage to property away from such premises or such dependent business premises by a covered peril,” and applies if the
property is within one mile or another pre-identified
distance from the premises or the dependent business
premises, “whichever is greater.” (Id.)
Finally, the Policy includes certain exclusions. The
“Acts Or Decisions” exclusion applicable to the Business Income and Extra Expense coverage and the Civil
Authority coverage provides that the insurance “does
not apply to loss or damage caused by or resulting from
acts or decisions, including the failure to act or decide,
of any person, group, organization or government
body.” (Id. at 000088.) It continues, providing that the
Acts Or Decisions exclusion “does not apply to ensuing
loss or damage caused by or resulting from a peril not
otherwise excluded.” (Id.) The Policy does not include a
specific, explicit exclusion for damage caused by a virus. On July 6, 2006, the Insurance Services Office3
(commonly referred to as the “ISO”) published for the
benefit of the insurance industry a new endorsement
for property insurance policies designated CP 01 40 07
06 – “Exclusion Of Loss Due To Virus Or Bacteria,”
which states that there is no coverage for loss or damage caused by or resulting from any “virus, bacterium
3
Insurance Services Office, Inc. is an insurance advisory organization that provides statistical and actuarial information to
businesses. The company provides statistical, actuarial, underwriting, and claims information, as well as form policy language
clients may adopt and use in their policies. See About ISO,
https://www.verisk.com/insurance/brands/iso/ (last visited April
14, 2021).
App. 14
or other microorganism that induces or is capable of
inducing physical distress, illness or disease.” (Answer
¶ 39, ECF No. 14.) An exclusion of this nature is not
included in the subject Policy in this case. (See ECF No.
18-1.)
As a result of purported impairment of its business and operations and extra expenses allegedly incurred due to the spread of SARS-Cov-2, Bel Air filed a
claim for business interruption and extra expense insurance coverage with Defendant Great Northern.
(Answer ¶ 47, ECF No. 14.) Great Northern denied the
claim for business interruption insurance coverage on
May 27, 2020, and provided several reasons for this denial. (See Ex. 4, ECF No. 18-4.) The Defendant asserted
that SARS-Cov-2 and COVID-19 have not resulted in
direct physical loss or damage to the building or personal property of the Plaintiff and that the Civil Authority coverage income portion of the policy did not
apply because (1) the civil authorities did not totally
prohibit all access to the premises given that employees were permitted access the property, and (2) there
was no physical loss or damage to a premises away
from but within one mile of the insured premises because there was no evidence of an order from a civil
authority issued due to structural or other alteration
to any such property. (Id.) The Defendant also asserted
that the Acts Or Decision exclusion in the Policy would
apply and bar coverage for losses based on the acts or
decision of any person, group, organization, or government body, there being no ensuing loss or damage
App. 15
caused by or resulting from a peril not otherwise excluded. (Id.)
Bel Air filed the presently pending suit in October
of 2020 seeking a declaratory judgment that coverage
exists under the business interruption provisions in
the Policy. (ECF No. 1-2.) The suit was originally filed
in the Circuit Court for Harford County, Maryland and
was removed to this Court pursuant to 28 U.S.C.
§§ 1332, 1441, and 1446 by Defendant Great Northern
on October 7, 2020. (ECF No. 1.) The now operative
Amended Complaint seeks an order stating that business interruption and extra expense coverage exists
under the Policy for Bel Air’s losses due to the loss of
use of the insured premises caused by the SARS-Cov2 virus and COVID-19 disease and the State and local
government orders, and that the Acts Or Decisions exclusion does not apply. (ECF No. 4 at p. 20-21.)
On January 7, 2021, Plaintiff Bel Air filed a Motion for Summary Judgment (ECF No. 18) as well as a
Motion for Other Relief to Certify Questions of Law to
the Maryland Court of Appeals (ECF No. 19). In its
Motion for Summary Judgment, Bel Air asserts that
summary judgment in its favor is appropriate because
the Policy provides coverage for its losses arising from
the COVID-19 Pandemic’s contamination of its facility
and governmental orders issued in response to the
Pandemic. (ECF No. 18-9 at 1.) The Plaintiff contends
that the material facts in this case are not in dispute,
and that the only issues in dispute are legal issues of
Maryland contract law as applied to insurance policies.
App. 16
(Id.) According to the Plaintiff, three issues of law are
in dispute:
1.
Whether coverage under the Business Income
with Extra Expense provision providing coverage for “direct physical loss or damage” requires a structural change to or physical
alteration of the insured premises, or whether
a loss of use of the insured premises due to
contamination suffices for coverage to exist;
2.
Whether all access has to be completely prohibited for the Civil Authority section to apply; and
3.
Whether the Acts Or Decisions exclusion has
any application to the question of coverage in
the Business Income With Extra Expense portion of the Policy.
(Id. at 1-2.) The Plaintiff moved for certification to the
Maryland Court of Appeals on these legal questions
under Md. Code Ann., Cts. & Jud. Proc. § 12-603, and
noted that it understood the Court may defer ruling on
its Motion for Summary Judgment if it granted such
motion for certification. (Id. at 2 n.1.)
On February 17, 2021, the Defendant Great
Northern filed a Motion for Judgment on the Pleadings
pursuant to Rule 12(c) (ECF No. 26), in which it argues
that the Plaintiff ’s Motion for Summary Judgment
should be denied and requests that this Court award
judgment in its favor because the presence or absence
of a virus is irrelevant under the clear language of the
Policy. (See ECF No. 27.) According to the Defendant,
App. 17
more than 100 courts have acknowledged the distinction between actual, physical loss or damage and the
partial loss of use and diminished business income associated with the COVID-19 Pandemic and resulting
“stay at home” orders. (Id. at 1.) The Defendant contends that applying basic rules of statutory construction, these courts have held that the terms “direct” and
“physical” modify both “loss” and “damage” and ensure
that policies are limited to tangible, physical losses to
property, or, at the very least, permanent dispossession
of property rendered unfit or uninhabitable by physical
forces. (Id.) Such decisions, the Defendant asserts,
“fully comport” with Maryland law, and, therefore, no
certification is necessary.
STANDARD OF REVIEW
A. Motion for Summary Judgment
Rule 56 of the Federal Rules of Civil Procedure
provides that a court “shall grant summary judgment
if the movant shows that there is no genuine dispute
as to any material fact and the movant is entitled to
judgment as a matter of law.” Fed. R. Civ. P. 56(c). A
material fact is one that “might affect the outcome of
the suit under the governing law.” Libertarian Party of
Va. v. Judd, 718 F.3d 308, 313 (4th Cir. 2013) (quoting
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
(1986)). A genuine issue over a material fact exists “if
the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson, 477
U.S. at 248. When considering a motion for summary
App. 18
judgment, a judge’s function is limited to determining
whether sufficient evidence exists on a claimed factual
dispute to warrant submission of the matter to a jury
for resolution at trial. Id. at 249. In undertaking this
inquiry, this Court must consider the facts and all reasonable inferences in the light most favorable to the
nonmoving party. Libertarian Party of Va., 718 F.3d at
312; see also Scott v. Harris, 550 U.S. 372, 378 (2007).
In the specific context of a “claim for breach of an
insurance policy, ‘the insured bears the burden of proving every fact essential to his or her right to recovery,
ordinarily by a preponderance of the evidence.’ ” See
Jowite Ltd. P’ship v. Federal Ins. Co., No. DLB-18-2413,
2020 WL 4748544, at *5 (D. Md. Aug. 17, 2020) (quoting
Gen. Ins. Co. v. Walter E. Campbell Co., 214 F. Supp. 3d
578, 597 (D. Md. 2017) (citing N. Am. Acc. Ins. Co. v.
Plummer, 176 A. 466, 469 (Md. 1935), aff ’d sub nom.
Gen Ins. Co. v. United States Fire Ins. Co., 886 F.3d 346
(4th Cir. 2018), as amended (Mar. 28, 2018))). “If the
insured meets its burden and the ‘insurer [has] relie[d]
upon a policy exclusion to deny coverage, the insurer
bears the burden of proving that the exclusion applies.’ ” Id. (quoting Ellicott City Cable, LLC v. Axis Ins.
Co., 196 F. Supp. 3d 577, 584 (D. Md. 2016) (citing Finci
v. Am. Cas. Co., 323 Md. 358, 593 A.2d 1069, 1087
(1991))).
B. Motion for Judgment on the Pleadings
Rule 12(c) of the Federal Rules of Civil Procedure authorizes a party to move for judgment on the
App. 19
pleadings any time after the pleadings are closed, as
long as it is early enough not to delay trial.4 See Fed.
R. Civ. P. 12(c). The legal standard governing such a
motion is the same as a motion to dismiss under Rule
12(b)(6). See, e.g., Edwards v. City of Goldsboro, 178
F.3d 231, 243 (4th Cir. 1999); Booker v. Peterson Cos.,
412 F. App’x 615, 616 (4th Cir. 2011); Economides v.
Gay, 155 F. Supp. 2d 485, 488 (D. Md. 2001). Under
Rule 8(a)(2) of the Federal Rules of Civil Procedure, a
complaint must contain a “short and plain statement
of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). Rule 12(b)(6) of the Federal
Rules of Civil Procedure authorizes the dismissal of a
complaint if it fails to state a claim upon which relief
can be granted. The purpose of Rule 12(b)(6) is “to test
the sufficiency of a complaint and not to resolve contests surrounding the facts, the merits of a claim, or
the applicability of defenses.” Presley v. City of Charlottesville, 464 F.3d 480, 483 (4th Cir. 2006).
In determining whether dismissal is appropriate,
this Court assumes as true all well-pleaded facts in the
plaintiff ’s complaint but does not accept the plaintiff ’s
legal conclusions. Ashcroft v. Iqbal, 556 U.S. 662 (2009);
Nemet Chevrolet, Ltd. v. Consumeraffairs.com, Inc., 591
F.3d 250, 253 (4th Cir. 2009). A complaint must be dismissed if it does not allege “enough facts to state a
claim to relief that is plausible on its face.” Bell Atl.
4
Defendant filed an Answer (ECF No. 14) on November 4,
2020, prior to filing the Motion for Judgment on the Pleadings
(ECF No. 26) on February 17, 2021. Trial has yet to be set in this
matter.
App. 20
Corp. v. Twombly, 550 U.S. 544, 570 (2007); see also
Simmons v. United Mort. & Loan Inv., LLC, 634 F.3d
754, 768 (4th Cir. 2011); Andrew v. Clark, 561 F.3d 261,
266 (4th Cir. 2009). In making this assessment, a court
must “draw on its judicial experience and common
sense” to determine whether the pleader has stated a
plausible claim for relief. Iqbal, 556 U.S. at 679.
ANALYSIS
As the basis of this Court’s jurisdiction lies in diversity of citizenship, under 28 U.S.C. § 1332(a), Maryland law applies. Hartford Fire Ins. Co. v. Harleysville
Mut. Ins. Co., 736 F.3d 255, 261 n.3 (4th Cir. 2013) (citing Erie R. Co. v. Tompkins, 304 U.S. 64 (1938)). Under
Maryland law, courts follow the general rules of contract construction in the interpretation of an insurance
contract. See Cheney v Bell Nat’l Life Ins. Co., 315 Md.
761, 556 A.2d 1135, 1138 (1998); Pacific Indem. Co. v.
Interstate Fire & Cas. Co., 488 A.2d 486, 488 (Md.
1985). Additionally, “Maryland does not follow the rule,
adopted in many jurisdictions, that an insurance policy
is to be construed most strongly against the insurer.”
Id. As such, principles of contract law govern the property insurance policy at issue, and the rights and obligations of the parties are determined by the terms of
that contract. Columbia Town Ctr. Title Co. v. 100 Inv.
Ltd. P’ship., 36 A.3d 985, 1005 (Md. Ct. Spec. App.
2012). “[I]f no ambiguity in the terms of the insurance
contract exists, a court has no alternative but to enforce those terms.” Dutta v. State Farm Ins. Co., 769
App. 21
A.2d 948, 957 (Md. 2001) (citing Kendall v. Nationwide
Ins. Co., 702 A.2d 767, 773 (Md. 1997)).
When interpreting an insurance policy’s terms,
this Court is instructed to interpret such policy “as a
whole, according words their usual, everyday sense,
giving force to the intent of the parties, preventing absurd results, and effectuating clear language.” United
Capitol Ins. Co. v. Kapiloff, 155 F.3d 488, 495 (4th Cir.
1998). The test for that “usual, everyday sense,” is
“what meaning a reasonably prudent layperson would
attach to the term.” See Pacific Indem., 488 A.2d at 488.
Words in a contract are only considered ambiguous if
“they reasonably can be understood to have more than
one meaning.” Nationwide Mut. Ins. Co. v. Regency Furniture, Inc., 963 A.2d 253, 260 (Md. Ct. Spec. App. 2009)
(internal citation omitted). This Court should give effect to each clause “so that a court will not find an
interpretation which casts out or disregards a meaningful part of the language of the writing unless no
other course can be sensibly and reasonably followed.” Muhammad v. Prince George’s Cty. Bd. of
Educ., 228 A.3d 1170, 1179 (Md. Ct. Spec. App. 2020)
(internal citation omitted), cert. denied, 238 A.3d 273
(Md. 2020).
Where a plaintiff asserts entitlement to coverage
under an insurance policy, that party bears the burden
of proving coverage under the policy. See Prop. & Cas.
Ins. Guar. Corp. v. Beebe-Lee, 66 A.3d 615, 624 (Md.
2013). Therefore, to prevail on its claim for coverage in
this case, Plaintiff Bel Air has the burden to show a
covered loss under the terms of the Policy. As explained
App. 22
above, the Plaintiff seeks coverage under the Premises
Coverage (Ex. 1 at 000035, ECF No. 18-1), Business Income with Extra Expense (id. at 000064), and the Civil
Authority subcoverage (id. at 000067) portions of the
Policy. Each of these sections requires that there be a
“direct physical loss or damage” to property—either to
the covered property itself, or surrounding property
identified by the Civil Authority provision. Bel Air
claims that “direct physical loss or damage” includes
not only detrimental and harmful structural changes
or alterations to a property, but also includes “a detrimental or harmful loss of use of that tangible property.”
(ECF No. 18-9 at 16 (emphasis added).) Bel Air seeks
certification of a question related to this issue of state
law to the Court of Appeals of Maryland. (ECF No. 19
¶ 3.)
Although Maryland courts have not directly
opined on the meaning of “direct physical loss or damage” to property in the context of a commercial property insurance policy, this Court is not required to
certify questions of law to the state court as the Plaintiff requests because a straightforward application of
Maryland contract law detailed above can resolve all
remaining issues in this case. This Court may certify a
question of law to the Court of Appeals of Maryland “if
the answer may be determinative of an issue in pending litigation in the certifying court and there is no controlling [Maryland] appellate decision, constitutional
provision, or statute. . . .” See Maryland Uniform Certification of Questions of Law Act, Md. Code Ann., Cts.
& Jud. Proc. § 12-603. However, as this Court noted in
App. 23
Marshall v. James B. Nutter & Co., “it is well established that the decision to certify a question to the
Court of Appeals of Maryland is not obligatory and
‘rests in the sound discretion of the federal court.’ ”
No. RDB-10-3596, 2013 WL 3353475, at *7 (D. Md. July
2, 2013), aff ’d, 758 F.3d 537 (4th Cir. 2014) (quoting
Hafford v. Equity One, Inc., No. AW-07-1633, 2008 WL
906015, at *4 (D. Md. Mar. 31, 2008) (citing Lehman
Bros. v. Schein, 416 U.S. 386, 391 (1974))); see also
Boyter v. Comm’r of Internal Revenue Serv., 668 F.2d
1382, 1385 (4th Cir. 1981) (“Certainly we have discretion as to whether to employ the Maryland certification
procedure.”).
In exercising such discretion, federal courts may
decide not to certify a question to a state court where
the federal court can reach a “reasoned and principled
conclusion.” Hafford, 2008 WL 906015, at *4. As the
U.S. Court of Appeals for the Fourth Circuit instructs,
“[o]nly if the available state law is clearly insufficient
should the court certify the issue to the state court.”
Roe v. Doe, 28 F.3d 404, 407 (4th Cir. 1994) (citing
Smith v. FCX, Inc., 744 F.2d 1378, 1379 (4th Cir. 1984),
cert. denied, 471 U.S. 1103 (1985)). “When this guidance is available the federal court should decide the
case before it rather than staying and prolonging
the proceedings.” Arrington v. Coleen, Inc., No. AMD00-191, AMD-00-421, and AMD-00-1374, 2001 WL
34117735, at *5 (D. Md. Mar. 29, 2001). When the Court
is satisfied that it is “able to anticipate the way in
which the Maryland Court of Appeals would rule,” certification is not necessary. See Bethany Boardwalk Grp.
App. 24
LLC v. Everest Security Ins. Co., ___ F. Supp. 3d ___,
2020 WL 1063060, at *11 n.6 (D. Md. Mar. 5, 2020). As
the following discussion will explain, under the
straightforward application of Maryland contract law
as applied to insurance policies, Plaintiff Bel Air does
not have a claim to coverage under the plain language
of its commercial property insurance policy with Defendant Great Northern, and no certification is necessary. There is sufficient guidance from Maryland state
courts, this Court, and other federal district courts applying the same basic principles of contract law to almost identical insurance policy provisions to guide this
Court’s analysis.5
5
Other federal district court addressing almost identical
questions of state law under commercial property insurance policies have come to decisions without certification of such questions
of law to state courts. Some courts have specifically denied motions for certification like the one filed in this case by Plaintiff Bel
Air. See Hillcrest Optical, Inc. v. Cont’l Cas. Co., No. 1:20-CV-275JB-B, 2020 WL 6163142, at *5 (S.D. Ala. Oct. 21, 2020) (“Indeed,
the Court could find no Alabama decision addressing whether a
temporary inability to use one’s property for its intended purpose
constituted a ‘direct physical loss of property.’ However, there is
sufficient authority to guide the Court’s decision on the meaning
of that phrase.”) See also Henry’s Louisiana Grill, Inc. v. Allied
Ins. Co. of Am., No. 1:20-CV-2939-TWT, 2020 WL 5938755, at *7
(N.D. Ga. Oct. 6, 2020); Drama Camp Productions, Inc. v. Mt.
Hawley Ins. Co., No. 1:20-CV-266-JB-MU, 2020 WL 8018579, at
*4 (S.D. Ala. Dec. 30, 2020).
App. 25
A. “Direct physical loss or damage” to
property does not include loss of use
unrelated to tangible, physical damage.
Applying basic principles of Maryland contract
law, this Court has interpreted the words “physical”
and “damage” in the context of a commercial general
liability insurance policy. See M Consulting & Export,
LLC v. Travelers Cas. Ins. Co. of America, 2 F. Supp. 3d
730, 735-737 (D. Md. 2014). In that case, the policy provided coverage for property damage, defined as “[p]hysical injury to tangible property, including all resulting
loss of use of that property” and “[l]oss of use of tangible property that is not physically injured.” Id. at
735-36. The plaintiff argued that conversion of the
property, a form of a “loss of use” claim, qualified as
“physical loss” to tangible property. Id. at 736. This
Court found such claim was unsupported by any applicable case law and stated that the term “physical damage” was “in no way ambiguous.” Id. Looking to the
definitions of “physical” and “physical harm” as provided in the Merriam-Webster Online Dictionary and
Black’s Law Dictionary, this Court held that “inclusion
of the term ‘physical’ clearly indicates that the damage
must affect the good itself, rather than the Plaintiff ’s
use of the good.” Id. (emphasis added) (citing MerriamWebster Online Dictionary (defining “physical” as
“having a material existence,” “perceptible especially
through the senses and subject to the laws of nature,”
or “of or relating to material things”) and Black’s Law
Dictionary (8th ed.) (defining “physical harm” as “[a]ny
App. 26
physical impairment of land, chattels, or the human
body.”)).
The Maryland Court of Appeals has in one context
found a loss of use to constitute a form of “damage to
property” in a case applying the Maryland uninsured
motorist statute. See Berry v. Queen, 469 Md. 674, 233
A.3d 42 (2020). The Court held that the statute, which
mandated coverage for “damage to property,” required
automobile insurers to pay for a car rental while an
insured’s physically damaged vehicle was being repaired. Id. at 48. The court found that the ordinary
meaning of “damage” necessarily included a “loss of
something” and that “loss of property” could include
circumstances in which “the lawful owner is deprived
of the ability to apply the object in a manner he or she
desires—i.e., a loss of use.” Id. at 51. However, the context of Berry still involved physical harm or injury to
property. As the Defendant aptly notes, “[t]he Court of
Appeals was not asked to hold, nor did it hold . . . that
a policyholder could make an uninsured motorist claim
for rental car coverage every time it suffered a ‘loss of
use’ of a vehicle untethered to physical damage to that
vehicle.” (ECF No. 30 at 9.)
Further, the language of the uninsured motorist
statute did not include the modifier “physical.” Numerous courts have found that the phrase “direct physical
loss or damage” to property, commonly used in property insurance policies, is unambiguous and have specifically held that the modifier “direct physical” applies
to both “loss” and “damage.” See, e.g., AFLAC, Inc. v.
Chubb & Sons, Inc., 581 S.E.2d 317, 319 (Ga. Ct. App.
App. 27
2003); Ward Gen. Ins. Servs., Inc. v. Emp’rs Fire Ins. Co.,
7 Cal. Rptr. 3d 844, 849 (Cal. Ct. App. 2003); Phila.
Parking Auth. v. Fed. Ins. Co., 385 F. Supp. 2d 280, 28788 (S.D.N.Y. 2005). Accordingly, such courts have held
that the phrase “direct physical loss or damage” to
property expressly limits coverage to tangible, physical
changes to insured property. Id. For example, in
AFLAC, Inc., the court was unable to find any state
precedent directly “construing the term of insurance
‘direct physical loss or damage,’ ” but found that “the
common meaning of the words and the policies as a
whole, indicate that it contemplates an actual change
in insured property . . . causing it to become unsatisfactory for future use or requiring that repairs be made
to make it so.” 581 S.E.2d at 319 (citing Trinity Indus.
v. Ins. Co. of North America, 916 F.2d 267, 271 (5th Cir.
1990), Wolstein v. Yorkshire Ins. Co., 985 P.2d 400
(Wash. Ct. App. 1999), and North American Shipbldg.,
Inc. v. Southern Marine & Aviation Underwriting, Inc.,
930 S.W.2d 829, 833 (Tex. App. 1996)).
Numerous courts have had the opportunity to directly address the meaning of identical “direct physical
loss or damage” language in commercial property insurance policies in the context of a plaintiff claiming
loss of use due to the COVID-19 Pandemic and stay at
home orders. Those courts have overwhelming held
that the phrase requires tangible, physical losses to
property, or, at the very least, permanent dispossession
of the property rendered unfit or uninhabitable by
physical forces, rejecting plaintiffs’ claims for coverage
in the context of COVID-19 through the application of
App. 28
the same basic principles of contract law that this
Court must apply under Maryland law. See, e.g., Bluegrass Oral Health Ctr. v. Cincinnati Ins. Co., No. 1:20CV-00120-GNS, 2021 WL 1069038, at *4 (W.D. Ky. Mar.
18, 2021) (finding that “the great weight of decisions
recently considering” the issue of the meaning of “direct physical loss or damage” in “the midst of the current pandemic have reached the same conclusion” that
the phrase requires some physical damage, rather
than mere loss of use).6
In 1 S.A.N.T. Inc. v. Berkshire Hathaway, Inc., the
plaintiff, an operator of a restaurant and tavern business, claimed that it had incurred and was continuing
to incur substantial loss of business income and other
expenses due to state orders closing all “non-life sustaining businesses,” which included 1 S.A.N.T., a restaurant property covered by a property insurance
6
The court in Bluegrass Oral Health cited to numerous opinions of other courts. See 10E, LLC v. Travelers Indemnity Co. of
Connecticut, 483 F. Supp. 3d 828, 836 (C.D. Cal. 2020); Diesel Barbershop, LLC v. State Farm Lloyds, No. 5:20-CV-461-DAE, 2020
WL 4724305, at *5 (W.D. Tex. Aug. 13, 2020); Rose's 1, LLC v.
Erie Ins. Exch., No. 2020 CA 002424 B, 2020 WL 4589206, at *2
(D.C. Super. Ct. Aug. 6, 2020); Turek Enters., Inc. v. State Farm
Mut. Auto. Ins. Co., 484 F. Supp. 3d 492, 500 (E.D. Mich. 2020)
(citing Merriam Webster's definition of “loss” to reject the interpretation of loss as, inter alia, loss of use); Kirsch v. Aspen Am.
Ins. Co., No. 20-11930, 2020 WL 7338570, at *5 (E.D. Mich. Dec.
14, 2020) (same); Fam. Tacos, LLC v. Auto Owners Ins. Co., No.
5:20-CV-01922, 2021 WL 615307, at *5 (N.D. Ohio Feb. 17, 2021)
(same); Ceres Enters., LLC v. Travelers Ins. Co., No. 1:20-CV1925, 2021 WL 634982, at *5 (N.D. Ohio Feb. 18, 2021) (same);
Dakota Girls, LLC v. Phila. Indem. Ins. Co., No. 2:20-CV-2035,
2021 WL 858489, at *6 (S.D. Ohio Mar. 8, 2021) (same).
App. 29
policy. ___ F. Supp. 3d ___, 2021 WL 147139, at *1 (W.D.
Pa. Jan. 15, 2021). The plaintiff was denied coverage
under that policy because it did not sustain “direct
physical loss or damage to a Covered Property.” Id. The
plaintiff filed suit against its insurer, contending the
policy should cover its claim because it could not use
the property for its intended purpose during the Pandemic and, therefore, had suffered “direct physical loss
or damage” to such property. Id. The court held that
the plain meaning of the phrase “direct physical loss or
damage” to property could not support the plaintiff ’s
claim. Id. at 630. As the court explained, the words
“ ‘loss’ and ‘damage’ do not stand alone but are modified by the terms ‘direct physical.’ ” Id. Just as under
Maryland law, the state law at issue required the court
to “give effect to all the terms in the context of the Policy language.” Id. According to the court, the presence
of both “direct” and “physical” meant “there [was] no
reasonable question that the Policy language presupposes that the request for coverage stems from an actual impact to the property’s structure, rather than the
diminution of its economic value because of governmental actions that do not affect the structure.” Id. The
court granted the defendant-insurer’s motion to dismiss in this context of a restaurant property where the
plaintiff, unlike Bel Air, did not concede that customers
still had access to the premises.
Similarly, in Chief of Staff, LLC v. Hiscox Ins.
Co. Inc., the court granted a motion to dismiss in a
case where the plaintiff, a hospitality support agency,
sought to recover its loss of income caused by a
App. 30
governor’s COVID-19-related orders under a commercial property insurance policy issued by the defendant
pursuant to the “Business Income,” “Excess Expense,”
and “Civil Authority” provisions of the applicable policy. No. 20-C-3169, 2021 WL 1208969, at *1-*2 (N.D. Ill.
Mar. 31, 2021). As in the case at hand, the policy at issue limited the applicability of “Business Income” and
“Excess Expense” provisions to the “direct physical loss
of or damage to property at the described premises.”
Id. at *2. The court, as others, turned to the plain
meaning of the words in the policy and held that
“ ‘physical loss’ refers to a deprivation caused by a tangible or concrete change in or to the thing that is lost.’ ”
Id. The plaintiff ’s complaint alleged loss of the use of
its property due to the governor’s closure orders, but
without any allegation of a tangible or concrete change
in or to the property, the court held that the plaintiff
had failed to state a claim for relief under either the
business income or excess expense provisions. Id.
The Civil Authority provision in that case included
language almost identical to the one at hand, and the
court held that such provision failed to provide coverage for the same reasons as the other business interruption provisions. As the court explained, the Civil
Authority section provided coverage for actual loss of
business income and excess expenses “caused by action
of civil authority that prohibits access to the described
premises” when a “Covered Cause of Loss causes damage to property other than property at the described
premise.” Id. at *5. The section was limited to those
cases in which (1) “[a]ccess to the area immediately
App. 31
surrounding the damaged property [was] prohibited by
civil authority as a result of the damage,” and the
premises was within a mile of the damaged property;
and (2) the civil action was “taken in response to dangerous physical conditions resulting from the damage
or continuation of the Covered Cause of Loss that
caused the damage, or the action [was] taken to enable
a civil authority to have unimpeded access to the damaged property.” Id. The court held there could not be
coverage under this section because the “other property,” like the premises covered by the policy, had not
suffered the type of physical damage the plain language of the policy required. Id. As the court explained,
a “Civil Authority provision requires that the ‘other
property’ have suffered ‘damage,’ and the complaint
does not allege, nor does [the plaintiff ] argue, that the
closure orders were due to some property within one
mile of the [plaintiff ’s] premises having been damaged
by the coronavirus.” Id. at *6. The court noted that “[i]n
holding that the Civil Authority provision does not provide coverage to [the plaintiff ], this Court joins the
many other courts to have interpreted materially identical provisions in the same manner.” Id. (citing Bluegrass Oral Health Ctr., 2021 WL 1069038, at *4.)7
7
See also Kahn v. Pa. Nat’l Mut. Cas. Ins. Co., ___ F. Supp.
3d ___, 2021 WL 422607, at *8 (M.D. Pa. Feb. 8, 2021) (“Plaintiffs
here do not allege any loss of or damage to another property
caused by any ‘covered cause of loss’ that triggered an action of
civil authority.”); O’Brien Sales & Mktg., Inc. v. Transp. Ins. Co.,
___ F. Supp. 3d ___, 2021 WL 105772, at *5 (N.D. Cal. Jan. 12,
2021) (“[I]t is apparent from the plain language of the cited civil
authority orders that such directives were issued to stop the
App. 32
Bel Air asserts that despite the clear language of
the Policy, Great Northern “intended” to provide coverage for losses related to the COVID-19 Pandemic because it did not include an express virus exclusion.
(ECF No. 18-9 at 19.) Bel Air is not entitled to coverage
in contravention to the plain meaning of “direct physical loss or damage” to property under the Premises
Coverage, Business Income with Extra Expense, or the
Civil Authority provisions of the Policy simply because
of this alleged omission. It is true, as noted above, that
the Insurance Services Office (“ISO”) form endorsement entitled “Exclusion Of Loss Due to Virus Or Bacteria” was promulgated in 2006 in response to a
previous SARS outbreak. (Id.) The Plaintiff contends
that “[t]he ISO published this form exclusion in response to the SARS pandemic and in recognition that
virus contagion was at least potentially covered under
the standard property policy.” (Id.) The Plaintiff argues
that when Great Northern elected not to include a similar virus exclusion in its property policies, it signaled
that it did want to provide virus-related coverage. (Id.)
This argument is without merit. As the court noted in
Bluegrass Oral Health, it is “elementary” that “ ‘an exclusion cannot grant coverage.’ ” See 2021 WL 1069038,
at *4 (citing Kemper Nat’l Ins. Cos. v. Heaven Hill Distilleries, Inc., 82 S.W.3d 869, 873 (Ky. 2002)). Omission
of an exclusion does not alter the plain language of the
spread of COVID-19 and not as a result of any physical loss of
or damage to property.”); Gerleman Mgmt., Inc. v. Atl. States Ins.
Co., ___ F. Supp. 3d ___, 2020 WL 8093577, at *6 (S.D. Iowa Dec.
11, 2020) (“Plaintiffs have not alleged damage to another property.”), appeal docketed, No. 21-1082 (8th Cir. Jan. 12, 2021);
App. 33
provisions under which the Plaintiff seeks coverage,
and such provisions simply do not provide coverage for
a loss of use unrelated to physical, structural, tangible
damage to property.
B. “Contamination” by the COVID-19 virus does not constitute “direct physical
loss or damage” to property.
In an attempt to distinguish itself from other
plaintiffs who have failed to assert claims for loss of
use due to the COVID-19 Pandemic, Bel Air asserts a
new argument in its Motion for Summary Judgment.
(ECF No. 18; Memorandum in Support, ECF No. 18-9.)
Bel Air claims that COVID-19 did in fact physically
“damage” its property, as well as surrounding properties, by “contaminating” the property with the virus.
(ECF No. 18-9 at 11-29.) This argument fails for several reasons.
First, this Court notes that Plaintiff Bel Air did
not allege that COVID-19 “contaminated” its covered
property or other surrounding property in the
Amended Complaint. (See ECF No. 4.) In granting
the defendant’s motion to dismiss in Bluegrass Oral
Health, the court noted the plaintiff ’s omission of any
allegations that the relevant property was actually
contaminated by the virus was relevant to its decision.
2021 WL 1069038, at *4. In this case, the Amended
Complaint alleges that aerosolized respiratory droplets can remain on a surface and contaminate any person coming into contract with that surface, but Bel Air
App. 34
does not specifically allege that its property or surrounding property was in fact contaminated by the virus. (Id. ¶ 10.) The Plaintiff in fact concedes that “the
SARS-Cov-2 and Covid-19 and the State and local governmental orders have not resulted in a structural alteration or physical change to its premises.” (Id. ¶ 28
(emphasis added).) Given that the standard of review
for a motion for judgment on the pleadings is the same
as a motion to dismiss, Edwards, 178 F.3d at 243, the
Plaintiff ’s allegations, and omitted allegations, are relevant in ruling on the Defendant’s motion.
Nevertheless, even if the Plaintiff had clearly alleged contamination of its property, the argument still
fails. First, the Plaintiff cannot prevail under the Civil
Authority section of the Policy because, as it concedes,
the stay at home orders issued by the Governor and
County Executive did not actually prohibit Bel Air’s
use of its facilities. Bel Air asserts that its operations
were, and continue to be, “impaired, diminished, and
decreased,” but it admits that visitors may still access
its facilities. (Id. ¶ 22-25.) As Bel Air alleges, visitors
are required to wear face masks and practice social distancing, but the Amended Complaint does not allege
that Bel Air employees or, its customers, ever completely lost use of its facilities. (Id.) Additionally, as
noted above, Interpretive Guidance issued on March
23, 2020 made clear that “[a]uto and truck dealerships”
were permitted to remain open as essential businesses.
See Interpretive Guidance COVID 19-05 (Mar. 23,
2020). Unlike restaurants, bars, and fitness centers
shuttered by the Governor’s stay at home order, Bel Air
App. 35
was never required to completely cease its operations.
This is significant. The Civil Authority section explicitly requires that the claimed loss be attributable to
“the prohibition of access to” the covered premises or a
dependent business premises, by a civil authority.
(ECF No. 18-1 at 000067.) In granting a motion to dismiss in Skillets, LLC v. Colony Ins. Co., the court noted
that COVID-19 did not cause “physical damage” to
property at or near the plaintiff ’s premises and that
“[t]he closure orders restricted the services [the plaintiff ] could provide to customers, but ‘[m]erely restricting access . . . does not trigger coverage under [a] Civil
Authority provision.’ ” No. 3:20cv678-HEH, 2021 WL
926211, at *7 (E.D. Va. Mar. 10, 2021) (quoting Raymond H Nahmad DDS PA v. Hartford Casualty Ins. Co.,
No. 1:20CV22833-BLOOM/Louis, 2020 WL 6392841,
at *9 (S.D. Fla. Nov. 1, 2020)). As Great Northern notes,
“if the presence of COVID-19 were actual ‘contamination’ . . . then every place of business in the State and
the country” would have a claim for “contamination,”
“including hospitals, grocery stores and other businesses where people continue to flock during the pandemic.” (ECF No. 27 at 23.)
Second, Bel Air cannot recover for contamination
under the Business Income with Extra Expense provision either. As noted above, Maryland law requires this
Court to give effect to each clause of a contract such
that “a court will not find an interpretation which casts
out or disregards a meaningful part of the language of
the writing unless no other course can be sensibly and
reasonably followed.” Muhammad, 228 A.3d at 1179
App. 36
(internal citation omitted). The Business Income with
Extra Expense section of the Policy provides coverage
for “business income loss” incurred “due to the actual
impairment of [ ] operations” and “extra expense” incurred “due to the actual or potential impairment of [ ]
operations” incurred “during the period of restoration.”
(Ex. 1 at 000064, ECF No. 18-1 (emphasis added).) The
“period of restoration” is defined as the period “immediately after the time of direct physical loss or damage
by a covered peril to property” and continuing until operations are restored with reasonable speed, including
the time required to “repair and replace the property.”
(Id. at 000124.) In other words, coverage under this
section of the Policy is triggered by physical loss or
damage to the property, and the coverage period is defined by the “period of restoration,” the time it takes to
“repair and replace” the damaged property. See Summit Hosp. Grp., Ltd. v. Cincinnati Ins. Co., No. 5:20-CV254-BO, 2021 WL 831013, at *4 (E.D.N.C. Mar. 4, 2021);
see also Moody v. Fin. Grp., Inc., ___ F. Supp. 3d ___,
2021 WL 135897, at *6 (E.D. Pa. Jan. 14, 2021) (“Built
into coverage for business income, extra expense, or extended business income losses under the Policy, then,
is the idea that there is something to repair, rebuild, or
replace.”).
In order for the period of restoration definition to
have some effect in this case, Bel Air would seemingly need to argue that cleaning surfaces of a property constitutes repair or replacement. However, as
the court held in Moody, contamination by the COVID19 virus would not “render the property useless or
App. 37
uninhabitable or nearly eliminate or destroy its functionality,” and “cleaning surfaces cannot reasonably be
described as repairing, rebuilding, or replacing property.” Moody, 2021 WL 135897, at *6. In doing so, the
court in Moody relied on Port Authority of New York
and New Jersey v. Affiliated FM Ins. Co., in which the
U.S. Court of Appeals for the Third Circuit considered
whether the presence of asbestos in a building constituted “direct physical loss or damage” to property under New Jersey law. 311 F.3d 226, 235 (3d Cir. 2002).
The Court held that “[i]n ordinary parlance and widely
accepted definition, physical damage to property
means distinct, demonstrable, and physical alteration
of its structure.” Id. (quoting 10 Couch on Ins., § 148:46
(3d ed. 1998)). The Court noted that damages not visible to the eye could qualify as this sort of alteration,
but that such damage must “meet a higher threshold”
and that asbestos could qualify as such damage “only
if an actual release of asbestos fibers . . . has resulted
in contamination of the property such that its function
is nearly eliminated or destroyed, or the structure is
made useless or uninhabitable.” Id. at 236. Particles of
a virus are akin to asbestos, or are perhaps more similar to a layer of dust or debris, which courts have held
is insufficient to establish physical damage or loss. See
Rococo Steak, LLC v. Aspen Specialty Ins. Co., ___
F. Supp. 3d ___, 2021 WL 268478, at *4 (M.D. Fla. Jan.
27, 2021) (granting motion to dismiss, stating “[r]ather,
like the coating of dust and debris in [Mama Jo’s Inc.
v. Sparta Ins. Co., 823 F. App’x 868, 879 (11th Cir.
2020)], the surfaces allegedly contaminated by COVID19 seem to only require cleaning to fix.”)
App. 38
In sum, “[t]he virus does not threaten the structures covered by property insurance policies, and can
be removed from surfaces with routine cleaning and
disinfectant.” See Barbizon Sch. of San Francisco, Inc.
v. Sentinel Ins. Co. LTD, No. 20-cv-08578-TSH, 2021
WL 1222161, at *9 (N.D. Cal. Mar. 31, 2021) (citing Promotional Headwear Int’l v. Cincinnati Ins. Co., ___
F. Supp. 3d ___, 2020 WL 7078735, at *8-*9 (D. Kan.
Dec. 3, 2020)). Plaintiff Bel Air has not had to repair or
replace its property due to the Pandemic. Arguments
that the surfaces at its premises needed to be cleaned
cannot qualify as restoration, and “[t]o adopt plaintiff ’s reading, which would allow for intangible damage to trigger coverage, would render other sections of
the provision ineffective, which is something the Court
cannot do.” Summit Hosp. Grp., 2021 WL 831013, at *4
(citing Woods v. Nationwide Mut. Ins. Co., 295 N.C. 500,
246 S.E.2d 773, 777 (N.C. 1978) (relying on the same
rule as under Maryland law that “every word and
every provision [in the policy] is to be given effect”)).
C. The Plaintiff cannot recover under the
Policy for losses related to COVID-19.
Quite simply, this Court is unpersuaded that the
COVID-19 virus in some way physically altered Bel
Air’s covered properties or the surrounding areas in a
manner that triggers coverage under the plain language of the Policy. A mere loss of use of property is not
“physical damage” within the meaning of Maryland
law. See M Consulting & Export, LLC, 2 F. Supp. 3d at
735-737. Further, “even actual presence of the virus
App. 39
would not be sufficient to trigger coverage for physical
damage or physical loss to the property,” as “routine
cleaning . . . eliminates the virus on surfaces,” and
there is simply “nothing for an insurer to cover” as required to invoke coverage for loss of business income
under the Policy.8 See Uncork and Create LLC v. Cincinnati Ins. Co., ___ F. Supp. 3d ___, 2020 WL 6436948,
at *5 (S.D.W. Va. Nov. 2, 2020). To allow contamination
of property to constitute a physical loss would render
the “period of restoration” definition meaningless and
would “ignore the reality” that businesses like Bel Air
“have continued to operate during the pandemic.”
Bluegrass, LLC v. State Auto. Mut. Ins. Co., No. 2:30CV-00414, 2021 WL 42050, at *5 (S.D.W. Va. Jan. 5,
2021). As one court within the Fourth Circuit neatly
summarized:
In short, the pandemic impacts human health
and human behavior, not physical structures.
Those changes in behavior, including changes
required by governmental action, caused the
Plaintiff economic losses. The Court is not
unsympathetic to the situation facing the
Plaintiff and other businesses. But the unambiguous terms of the Policy do not provide
coverage for solely economic losses unaccompanied by physical property damage.
Uncork and Create, 2020 WL 6436948, at *5. Having
considered the allegations in the pleadings and briefs,
8
This Court need not consider the applicability of the Acts
Or Decision exclusion in this case, as there is no coverage under
the plain language of the allegedly applicable provisions.
App. 40
this Court finds there is no genuine issue of material
fact as to the Plaintiff Bel Air’s claims, and this Court
will grant the Defendant’s Motion for Judgment on the
Pleadings (ECF No. 26).
CONCLUSION
For these reasons, the Plaintiff Bel Air’s Motion for
Summary Judgment (ECF No. 18) is DENIED. The
Plaintiff Bel Air’s Motion for Other Relief to Certify
Questions of Law to the Maryland Court of Appeals
(ECF No. 19) is also DENIED. The Defendant Great
Northern’s Motion for Judgment on the Pleadings
(ECF No. 26) is GRANTED. Judgment will be entered
in favor of the Defendant.
A Separate Order follows.
Dated: April 14, 2021
/s/
Richard D. Bennett
United States District Judge
App. 41
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
BEL AIR AUTO AUCTION, *
INC.
*
Plaintiff,
v.
*
GREAT NORTHERN
INSURANCE COMPANY,
*
Defendant.
*
*
*
*
*
*
Civil Action No.
RDB-20-2892
*
*
*
*
*
*
*
*
*
*
*
*
ORDER
(Filed Apr. 14, 2021)
For the reasons stated in the foregoing Memorandum Opinion, it is HEREBY ORDERED this 14th Day
of April, 2021, that:
1.
Plaintiff Bel Air Auto Auction, Inc.’s Motion
for Summary Judgment (ECF No. 18) is DENIED;
2.
Plaintiff Bel Air Auto Auction, Inc.’s Motion
for Other Relief to Certify Questions of Law to
the Maryland Court of Appeals (ECF No. 19)
is DENIED;
3.
Defendant Great Northern Insurance Company’s Motion for Judgment on the Pleadings
(ECF No. 26) is GRANTED;
App. 42
4.
Pursuant to Rule 58(a) Judgment is entered
in favor of the Defendant on the Plaintiff ’s
Amended Complaint (ECF No. 4);
5.
The Clerk of this Court shall CLOSE THIS
CASE;
6.
The Clerk of this Court shall transmit a copy
of this Order and accompanying Memorandum Opinion to counsel of record.
/s/
Richard D. Bennett
United States District Judge
App. 43
FILED: July 26, 2022
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
-----------------------------------------------------------------------
No. 21-1493
(1:20-cv-02892-RDB)
-----------------------------------------------------------------------
BEL AIR AUTO AUCTION, INC.
Plaintiff - Appellant
v.
GREAT NORTHERN INSURANCE COMPANY
Defendant - Appellee
-------------------------------AMERICAN PROPERTY CASUALTY INSURANCE
ASSOCIATION; NATIONAL ASSOCIATION OF
MUTUAL INSURANCE COMPANIES
Amici Supporting Appellee
-----------------------------------------------------------------------
ORDER
-----------------------------------------------------------------------
The court denies the petition for rehearing and rehearing en banc. No judge requested a poll under Fed.
R. App. P. 35 on the petition for rehearing en banc.
App. 44
Entered at the direction of the panel: Judge Wynn,
Judge Thacker, and Judge Quattlebaum.
For the Court
/s/ Patricia S. Connor, Clerk
App. 45
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
Bel Air Auto Auction, Inc., *
Appellant,
Great Northern
Insurance Company,
*
Appellee.
*
*
*
*
*
Appeal No.:
21-1493
*
v.
*
*
*
*
*
*
*
*
* *
*
*
*
Petition for Panel or En Banc Rehearing
Appellant, Bel Air Auto Auction, Inc., petitions the
Court under Fed. R. App. P. 40 for a panel rehearing or
a rehearing en banc of the order denying Bel Air’s motion to defer any decision on the issues presented in
this appeal until the Maryland Court of Appeals in
Tapestry, Inc. v. Factory Mutual Insurance Company,
COA-MISC-0001-2022 (September Term, 2022) has
ruled on the issue certified to it by the United States
District Court for the District of Maryland in Tapestry,
Inc. v. Factory Mutual Insurance Company, No. CV
GLR-21-1941, 2022 WL 1227058, at *1 (D. Md. Apr. 25,
2022). Bel Air requests that the Decision and Judgment of June 14, 2022, (ECF 65 and 66) be vacated and
that further proceedings in this appeal be stayed until
after the Maryland Court of Appeals has answered the
certified question, with further proceeding determined
based on the answer given by the Maryland Court of
Appeals to the certified question.
App. 46
I.
Introduction: Statement of Purpose
As required by Local Rule 40(b), in counsel’s judgment, the Petition should be granted because:
1. The Court’s refusal to defer a ruling in this appeal conflicts with the decisions of the Ninth and First
Circuit in appeals considering similar issues and in
which stays were granted pending decisions of the
highest courts of the states of Washington and Massachusetts in pending cases. Exhibits A and B are correct
copies of the orders of the Ninth Circuit and Seventh
Circuits imposing stays pending a decision by the highest courts of the states of Washington and Massachusetts.
2. This appeal involves a question of exceptional
importance to this and other cases dependent on the
law of the state of Maryland as decided by the Maryland Court of Appeals that cannot be finally and definitively determined other than by the Maryland Court
of Appeals under the principle of Erie R. Co. v. Tompkins, 304 U.S. 64, 78 (1938). See also West v. Am. Tel. &
Tel. Co., 311 U.S. 223, 236 (“the highest court of the
state is the final arbiter of what is state law.”)
3. Refusing to stay a decision in this appeal
pending an answer by the Maryland Court of Appeals
to the question certified to it by the United States District Court for the District of Maryland on the principal
issue involved in this appeal violates the principles of
Erie R. Co. v. Tompkins, 304 U.S. 64, 78 (1938) and denied Bel Air the right to have its appeal decided under
App. 47
Maryland law as pronounced by the Maryland Court
of Appeals.
II.
Grounds for the Relief Sought
and Legal Argument in Support
A. The certified question before the Maryland Court of Appeals.
The certified question pending for decision by the
Maryland Court of Appeals can be simply and succinctly stated:
Is the “physical loss or damage” requirement
in an all-risk property insurance policy satisfied by a loss of full use of the insured property
caused by the contamination of the insured
property from the presence of a ubiquitous
and hazardous virus like SARS-Cov-2 despite
the lack of a structural change in or alteration
of the insured property from the contamination.
While perhaps stated in different language by the
District Court in its certification order (Case 1:21-cv—
GLR, EFC DOC No. 45), this question is the principal
question in Bel Air’s appeal and is the principal question in at least 8 other cases that have been filed in
Maryland federal or state courts and governed by
Maryland law. The answer to this question will conclusively decide Bel Air’s appeal without further proceedings before this Court: if the answer is that structural
change or alteration is not required, Bel Air is entitled
App. 48
to a reversal of the District Court; if the answer is that
structural change or alteration is required, Bel Air is
not entitled to a reversal, and the District Court should
be affirmed.
B. The certified question is governed by
Maryland law.
Maryland law governs the certified question and
the principal issue in dispute in Bel Air’s appeal. Erie
R. Co. v. Tompkins, 304 U.S. 64, 78 (1938). See also West
v. Am. Tel. & Tel. Co., 311 U.S. 223, 236 Only a state’s
highest court can definitively and conclusively decide
what that state’s law is. A federal court, even a Circuit
Court of Appeals, may not issue binding precedential
rulings on unresolved issues of state law and should
not do so when the question of state law is pending
before a state’s highest court and will be decided
promptly.
The District Court in the decision appealed by Bel
Air, although refusing to certify the question, noted
that “Maryland courts have not directly opined on the
meaning of ‘direct physical loss or damage’ to property
in the context of a commercial property insurance policy.” (JA477). This question is now before the Maryland
Court of Appeals and a direct answer to the question
will be provided by the Maryland Court of Appeals.
That answer will control the issue in federal cases that
are required to apply Maryland law and will answer
the principal question raised by Bel Air in its appeal.
App. 49
While this Court in its decision and judgment has
affirmed the District Court, this Court did not cite, discuss, rely upon, or even allude to any Maryland precedent in arriving at its decision. Instead, this Court
cited and relied upon Uncork & Create LLC v. Cincinnati Ins. Co., a case applying the law of West Virginia,
not Maryland, and that cited no Maryland decisions or
precedent. Uncork & Create LLC v. Cincinnati Ins. Co.,
27 F.4th 926, 931 (4th Cir. 2022) (“In resolving this issue, we consider established principles of West Virginia law addressing the interpretation of insurance
policies.”) In resolving a co-pending appeal also dependent solely on Maryland law in The Cordish Companies, Inc. v. Affiliated FM Insurance Company, Case
No. 21-2055, 2022 WL 1114373 (4th Ci. 2022), this
Court likewise relied solely upon Uncork & Create LLC
v. Cincinnati Ins. Co. and neither cited nor discussed
any Maryland precedent or legal principles of construction of insurance contracts. In neither of these decisions did this Court predict how the Maryland Court
of Appeals would resolve the issue before it under Maryland law.
These decisions in the most basic sense violated
the dictates of Erie R. Co. v. Tompkins, 304 U.S. 64, 78
(1938) and the appellants’ right to have their appeals
decided and resolved based upon Maryland law, not the
law of West Virginia or a general predilection of this
Court not rooted in Maryland law that favors the insurance industry.
App. 50
C. This Court refused to certify the question now before the Maryland Court of
Appeals on certification motions from
Bel Air.
This Court refused Bel Air’s motion to certify the
question of Maryland law to the Maryland Court of Appeals and motions for reconsideration asking that the
question now before the Maryland Court of Appeals be
certified to that Court. (ECF 31 and 33) This Court
likewise refused the certification motion filed in the
Cordish appeal. (2022 WL 1114373) The orders denying Bel Air’s motion and motion for reconsideration
were simply signed by the Clerk on behalf of the Court
and provided no explanation of why certification was
denied or was not necessary. The denials, in one sense,
are now irrelevant because the governing question is
now before and will be decided by the Maryland Court
of Appeals despite the refusal of this Court to certify
the question itself.
D. Bel Air requests only that this Court not
issue a final decision on its appeal until
after the Maryland Court of Appeals has
answered the certified question.
This Court has full discretionary power to vacate
its decision and judgment and stay proceedings in Bel
Air’s appeal until the Maryland Court of Appeals has
answered the certified question in the Tapestry case.
The Supreme Court long ago noted that a federal court
had the power to stay proceedings before it to abide by
proceedings in another case even if the issues in the
App. 51
two cases are not identical. Landis v. N. Am. Co., 299
U.S. 248, 254 (1936). In deciding whether to stay its
proceedings, a federal court should weigh considerations of economy of time and effort for itself and the
litigants, whether the party requesting a stay will incur hardship or inequity if the stay is not granted, and
if the stay will damage the opposing party. Landis v. N.
Am. Co., 299 U.S. at 248. The certified question before
the Maryland Court of Appeals is one of the extreme
public importance in Maryland, if not the entire nation. As the Supreme Court noted, especially in cases
of extraordinary public moment, the individual may be
required to submit to delay not immoderate in extent
and not oppressive in its consequences if the public
welfare or convenience will thereby be promoted.” Landis v. N. Am. Co., 299 U.S. at 256.
These factors clearly show why the decision and
judgment should be vacated and the stay imposed until such time as the Maryland Court of Appeals has answered the certified question.
• Because the decision of the Maryland Court of
Appeals on the certified question will resolve Bel Air’s
appeal definitively, considerations of time and effort on
the part of the Court and the parties strongly argues
for the granting of this relief. See In re President & Fellows of Harvard Coll., 149 F.2d 69, 73 (1st Cir. 1945)
(“[I]t might well be proper for the federal district court,
as an appropriate exercise of discretion, to stay the proceedings before it until the handing down by the state
supreme court of the controlling ruling on the point of
state law.”)
App. 52
• The relief requested will not in any way damage Great Northern, which has not made any payment
on its policy and will not have to make any payment on
its policy until after the Maryland Court of Appeals answers the certified question and then only if the decision of the Maryland Court of Appeals is against Great
Northern’s position in this appeal.
• If the relief requested in this motion is not
granted, Bel Air will be subjected to both inequity and
hardship. Deciding Bel Air’s appeal other than on the
basis of Maryland law alone has violated the precepts
of Erie R. Co. v. Tompkins, 304 U.S. 64, 78 (1938) and
Bel Air’s right to have its contractual claim based on
Maryland law decided under principles of Maryland
law, not principles of West Virginia law. Bel Air’s only
recourse will be either to petition the Supreme Court
for certiorari based on a violation of Erie R. Co. v. Tompkins or to seek relief from the final judgment that was
affirmed based on Fed. R. Civ. P. 60(b)(6), avenues that
should be unnecessary to travel.
• The public interest will be served by the granting of the relief requested because the decision of the
Maryland Court of Appeals will have a definitive impact pending cases in Maryland whose resolution depends on the Maryland Court of Appeals answer to the
certified question.
• Awaiting a decision by the Maryland Court of
Appeals will not involve a lengthy delay. Tapestry has
filed its appellate brief and Factory Mutual’s appellee
brief is due July 12, 2022. The case is scheduled for oral
App. 53
argument in the fall of 2022. A decision can be expected
soon thereafter.
• Bel Air will file an amicus brief with the Maryland Court of Appeals and raise the arguments based
on Maryland law elided by this Court in denying Bel
Air’s appeal. Hence, the arguments based on Maryland
law raised by Bel Air in its appeal ultimately will be
presented to the only Court with final authority to decide the issues raised by these arguments.
• If this Court refuses to vacate the decision and
judgment and stay further proceedings pending the
Maryland Court of Appeals answer to the certified
question and the Maryland Court of Appeals answers
that certified question as argued by Tapestry and Bel
Air, this Court’s denial of Bel Air’s appeal will constitute gross unfairness and inequity and a needless denial of a meritorious appeal.
E. This Court’s refusal to stay a final decision in this appeal until the Maryland
Court of Appeals has answered the certified question conflicts with decisions
of the Ninth and First Circuits.
Two other United States Circuit Court of Appeal
have issued decisions that conflict with the decision of
this Court refusing to defer ruling on Bel Air’s appeal
until after the Maryland Court of Appeals has answered the certified question.
App. 54
In Hillbro LLC v. Oregon Mut. Ins. Co. and Nue
LLC v. Oregon Mutual Ins. Co., Case Nos. 21-35810 and
21-35813, the Ninth Circuit on June 14, 2022, based on
motions of the appellants, stayed further proceedings
in the two appeals “pending the decision of the Washington Supreme Court in Hill and Stout PLLC v. Mutual of Enumclaw Insurance Company, No. 100211-4
(Wash.): 21-35810 DktEntry: 48. See Exhibit A.
Likewise, in an earlier ruling, the First Circuit
stayed proceedings in an appeal pending a decision by
the Massachusetts Supreme Judicial Court. As noted
by the First Circuit in its Order of Court:
Because the issues in this appeal are
sufficiently overlapping with the issues presented in Verveine Corp. v. Strathmore Insurance Co., No. SJC-13172 (Mass. appeal
docketed Sep. 16, 2021), such that resolution
of Verveine may provide useful guidance that
would bear on the resolution of this appeal,
the panel will hold this appeal in abeyance
pending resolution of Verveine by the Massachusetts Supreme Judicial Court.
Legal Sea Foods, LLC, v. Strathmore Insurance Company, No. 21-1202 (December 16, 2021), Document:
00117822574. See Exhibit B.
Each of these cases involved issues similar, if not
identical, to the certified question before the Maryland
Court of Appeals involving whether contamination by
a hazardous virus was sufficient to constitute property
damage or loss without structural change or alteration in the property. There exists no reason why the
App. 55
appellants in these two cases receive the benefit of a
definitive decision from their states’ highest courts, but
Bel Air has been refused this benefit without any explanation of why.
F. A stay should be granted by a federal
court when the dispositive issue is before a state’s highest court on a certification of the issue.
When a dispositive issue in an appeal before the
United States Circuit Court of Appeals is governed entirely by state law and the dispositive issue has been
certified to the state’s highest court by a federal court
even though in another case, the Circuit Court of Appeals should stay proceedings in the appeal before it
until such time as the state’s highest court has answered the certified question. Cf. AFA Distrib. Co. v.
Pearl Brewing Co., 470 F.2d 1210, 1213 (4th Cir. 1973)
(“Thus, the state law issues crucial to decision of this
case are now actually pending in a state court. The
well-settled doctrine that a federal court will not anticipate a question of constitutional law and the special
weight that doctrine carries in the maintenance of harmonious federal-state relations requires that a district
court stay its proceedings until a potentially controlling state-law issue is authoritatively put to rest.”);
Finch v. Mississippi State Med. Ass’n, Inc., 585 F.2d
765, 778 (5th Cir. 1978).
App. 56
III.
Conclusion
This Court should vacate the decision and judgment issued on June 14, 2022 and stay further proceedings in this appeal until such time as the
Maryland Court of Appeals has answered the certified
question in Tapestry Inc. v. Factory Mutual Insurance
Company. Doing so will further fundamental fairness
and insure a correct ultimate decision on the merits in
Bel Air’s appeal.
/s/ Lawrence J. Gebhardt
Lawrence J. Gebhardt,
Bar No. 00584
Gregory L. Arbogast,
Bar No. 29590
Robert T. Nanovsky,
Bar No. 21757
GEBHARDT & SMITH LLP
One South St., Suite 2200
Baltimore, MD 21202
410-385-5100
lgebh@gebsmith.com
garbogast@gebsmith.com
rnanovsky@gebsmith.com
Attorneys for Plaintiff,
Bel Air Auto Auction, Inc.
App. 57
CERTIFICATE OF COMPLIANCE
I HEREBY CERTIFY that:
1. This document complies with the word limit of
Fed. R. App. P. 40(b)(1) because, excluding parts of the
documents exempted by Fed. R. App. P. 32(f ) this document contains 2,613 words.
2. This document complies with the typeface requirements of Fed. R. App. P. 32(a)(5) and the typestyle requirements of Fed. R. App. P. 32(a)(6) because
this document has been prepared in a proportionally
spaced type face using Microsoft Word 2016 in Century
Schoolbook, Size 14.
3. The text of the electronic petition submitted
via CM/ECF is identical to the text of any paper petition which is being filed with the clerk of the Court.
4. The undersigned caused FortiClient Endpoint
Management v 6.2.8, a virus detection program, to run
a virus scan on the electronic version of the Brief and
the Joint Appendix. No virus was detected.
5. The attorneys whose names appear on the
brief are members of the bar of the United States Court
of Appeals for the Fourth Circuit.
/s/ Lawrence J. Gebhardt
Lawrence J. Gebhardt
Attorneys for Appellant,
Bel Air Auto Auction, Inc.
App. 58
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on this 24th day of
June, 2022, a copy of Plaintiff ’s Petition for Rehearing
or Rehearing En Banc was sent via CM/ECF to: Gabriela Richeimer, Esq., M. Addison Draper, Esq., Clyde
& Co. US LLP, 1775 Pennsylvania Avenue, NW, Suite
400, Washington, DC 20006, attorneys for Defendant,
Great Northern Insurance Company; and Jonathan D.
Hacker, Esq., Bradley N. Garcia, Esq., O’Melveny &
Myers LLP, 1625 Eye Street, NW, Washington, DC
20006, attorneys for Defendant, Great Northern Insurance Company; Wystan M. Ackerman, Esq., Robinson
& Cole, LLP, 280 Trumbull Street, Hartford, CT 06103;
George E. Reede, Jr., Zelle LLP, 1775 Pennsylvania
Avenue, NW, Suite 375, Washington, DC 20006; and
Laura A. Foggan, Esq., Crowell & Moring LLP, 1001
Pennsylvania Avenue, NW, Washington, DC 200042595, attorneys for American Property Casualty Insurance Association and National Association of Mutual
Insurance Companies.
/s/ Lawrence J. Gebhardt
Lawrence J. Gebhardt
App. 59
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
Bel Air Auto Auction, Inc., *
Appellant,
Great Northern
Insurance Company,
*
Appellee.
*
*
*
*
*
Appeal No.:
21-1493
*
v.
*
*
*
*
*
*
*
*
* *
*
*
*
Motion To Defer Ruling
Appellant, Bel Air Auto Auction, Inc., moves for
the Court to defer ruling on the issues presented in
this appeal until the Maryland Court of Appeals has
ruled on the issue certified to it by the United States
District Court for the District of Maryland in Tapestry,
Inc. v. Factory Mutual Insurance Company, No. CV
GLR-21-1941, 2022 WL 1227058, at *1 (D. Md. Apr. 25,
2022).
Bel Air further states that it has informed counsel
for the Appellant, Great Northern Insurance Company,
of its intention to file this Motion to Defer Ruling and
that Great Northern will oppose the motion.
App. 60
I.
Grounds for the Relief Sought
and Legal Argument in Support
A. The issues on appeal raised by Bel Air.
In this appeal, Bel Air has presented three issues
for review by this Court. These issues as stated in Bel
Air’s brief are:
1. Is the “direct physical loss or damage” requirement in the Business Income
With Extra Expense and the Civil Authority
coverage provisions of the Great Northern
policy satisfied by a loss of full use of property
caused by contamination from SARSCov-2 and Covid-19 or is a structural alteration and change in property necessary for
coverage to exist? (Emphasis added).
2. Is the prohibition of access requirement in the Civil Authority coverage provision of the Great Northern policy satisfied by
a substantial prohibition of access or is a total
prohibition of all access necessary?
3. Does the Acts and Decisions exclusion in the Great Northern policy exclude all
coverage under the in the Business Income
and Extra Expense and Civil Authority portions of the policy?
Appellants Brief (Doc. 12-1 at 13-14).
These issues must be decided under principles of
Maryland law as pronounced by the Maryland Court
of Appeals. Erie R. Co. v. Tompkins, 304 U.S. 64, 78
App. 61
(1938). See also West v. Am. Tel. & Tel. Co., 311 U.S. 223,
236 (“the highest court of the state is the final arbiter
of what is state law.”) The law of other states or the
decisions of federal courts applying the law of other
states is not controlling when a decision on Maryland
law has been issued by the Maryland Court of Appeals.
B. The issue certified to the Maryland
Court of Appeals.
In Tapestry, Inc. v. Factory Mutual Insurance Company, No. CV GLR-21-1941, 2022 WL 1227058, at *1
(D. Md. Apr. 25, 2022), the District Court on April 25,
2022, certified to the Maryland Court of Appeals the
following issue:
When a first-party, all-risk property insurance policy covers “all risks of physical loss
or damage” to insured property from any
cause unless excluded, is coverage triggered
when a toxic, noxious, or hazardous substance—such as Coronavirus or COVID-19—
that is physically present in the indoor air of
that property damages the property or causes
loss, either in whole or in part, of the functional use of the property?
Tapestry, Inc. v. Factory Mutual Insurance Company,
2022 WL 1227058, at *2.
This issue is, for all intents and purposes, the identical first issue raised in this appeal by Bel Air.1 A
1
The District Court in Tapestry, Inc. v. Factory Mutual Insurance Company attempted to distinguish the District Court’s
App. 62
decision by the Maryland Court of Appeals will establish binding Maryland precedent on this issue, precedent which must be applied by this Court in resolving
the first issue presented by Bel Air in this appeal. A
decision on this issue will, moreover, set the context for
a decision on the two other issues raised by Bel Air in
its appeal.
In its present procedural context, this appeal
has been fully briefed by the parties, although oral
argument has not yet been set and no decision has
been rendered by this Court. Neither party will be
decision on appeal in this case and its refusal to certify the issue
to the Maryland Court of Appeals by stating “Second, unlike this
case, the previous case being appealed in in which the Court addressed this issue did not include specific allegations that the
plaintiffs’ properties had in fact been contaminated by the Coronavirus.” 2022 WL 1227058, at *3. This statement is entirely and
demonstrably incorrect. Bel Air alleged pervasive contamination
in its Amended Complaint, included the fact of the pervasive contamination throughout its “Statement of Material Facts Not In
Genuine Dispute,” and supported its pervasive contamination
contention with the affidavit of Charles Nichols, Bel Air’s president and a person with personal knowledge. Bel Air has argued
in its brief that its facility was contaminated by SARS-Cov-2 and
COVID-19. Even the District Court acknowledged that Bel Air
had raised contamination of its property in its motion for summary judgment. Bel Air Auto Auction, Inc. v. Great N. Ins. Co.,
534 F. Supp. 3d 492, 507 (D. Md. 2021) (“Bel Air claims that
COVID-19 did in fact physically “damage” its property, as well as
surrounding properties, by “contaminating” the property with the
virus. (ECF No. 18-9 at 11-29.)”) While Bel Air in its Amended
Complaint did not use the word “contamination,” it physically described the contamination of its facility to the same extent, but
not in as exhaustive detail, as did Tapestry in its First Amended
Complaint. See Tapestry, Inc. v. Factory Mutual Insurance Company, First Amended Complaint, at ECF Doc. 15.
App. 63
prejudiced by this Court deferring its decision pending
a ruling by the Maryland Court of Appeals. Conversely,
if this Court rules and the Maryland Court of Appeals
decides the issue contrary to this Court’s ruling, the
losing party in this appeal will be unfairly and unjustly
prejudiced.2
Maryland statutory law permits the Maryland
Court of Appeals to respond to and answer the certified
question. Md. Code Ann., Cts. & Jud. Proc. § 12-603.
See also Proctor v. Washington Metro. Area Transit
Auth., 412 Md. 691, 705, 990 A.2d 1048, 1056 (2010)
(“The purpose of the Maryland Uniform Certification
of Questions Act is “to promote the widest possible use
of the certification process in order to promote judicial
economy and the proper application of [Maryland]’s
law in a foreign forum.”) While the statute uses the
term “may,” there can be little doubt that the Maryland Court of Appeals will address the certified issue,
2
This unfortunate situation has already occurred very recently in another case before the Fourth Circuit. In the unpublished, per curiam opinion issued in Cordish Companies, Inc.
v. Affiliated FM Insurance Co., No. 21-2055, (4th Cir. Apr. 14,
2022), the Court ruled in favor of Affiliated FM Insurance Co under Maryland law on what is essentially the same issue certified
to the Maryland Court of Appeals in Tapestry, Inc. v. Factory Mutual Insurance Company. The decision in Cordish relied primarily
on Uncork & Create LLC v. Cincinnati Ins. Co., 27 F.4th 926 (4th
Cir. 2022), which relied solely on West Virginia law and did not
in any respect apply or even allude to Maryland law. If the Maryland Court of Appeals decides the certified issue in favor of Tapestry, the ruling in the Cordish appeal will be unfair and unjust,
a result that can be avoided in Bel Air’s appeal if this Court defers
deciding the appeal until the Maryland Court of Appeals has issued its decision on the certified question.
App. 64
particularly in the context of the numerous pending
Maryland state and federal cases turning on a resolution of this issue. A decision will, for this reason, be
rendered by the Maryland Court of Appeals. Once that
decision has been rendered, this Court may then with
clear guidance from the Maryland Court of Appeals as
to Maryland law correctly rule on and apply Maryland
law to the appealed issue in this case.
III.
Conclusion.
Bel Air’s appeal presents for resolution a singularly important issue of Maryland law pertaining to
property insurance contracts and the SARS-Cov-2 and
Covid-19 pandemic. The Maryland Court of Appeals
should decide how this issue is to be resolved under
Maryland law. This Court should defer deciding the
subject legal question until the Maryland Court of Appeals has issued a decision that answers the question
under Maryland law.
/s/ Lawrence J. Gebhardt
Lawrence J. Gebhardt,
Bar No. 00584
Gregory L. Arbogast,
Bar No. 29590
Robert T. Nanovsky
(Admission Pending)
GEBHARDT & SMITH LLP
One South St., Suite 2200
Baltimore, MD 21202
410-385-5100
lgebh@gebsmith.com
App. 65
garbogast@gebsmith.com
rnanovsky@gebsmith.com
Attorneys for Appellant,
Bel Air Auto Auction, Inc.
CERTIFICATE OF COMPLIANCE
I HEREBY CERTIFY that:
1. This document complies with the word limit of
Fed. R. App. P. 32(a)(7)(B)(i) because, excluding parts
of the documents exempted by Fed. R. App. P. 32(f ) this
document contains 1,781 words.
2. This document complies with the typeface requirements of Fed. R. App. P. 32(a)(5) and the typestyle requirements of Fed. R. App. P. 32(a)(6) because
this document has been prepared in a proportionally
spaced type fact using Microsoft Word 2016 in Century
Schoolbook, Size 14.
3. The text of the electronic brief submitted via
CM/ECF is identical to the text of the paper briefs
which are being filed with the clerk of the Court.
4. The undersigned caused FortiClient Endpoint
Management v 6.2.8, a virus detection program, to run
a virus scan on the electronic version of the Brief and
the Joint Appendix. No virus was detected.
App. 66
5. The attorneys whose names appear on the
brief are members of the bar of the United States Court
of Appeals for the Fourth Circuit.
/s/ Lawrence J. Gebhardt
Lawrence J. Gebhardt
Attorney for Appellant,
Bel Air Auto Auction, Inc.
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on this 2nd day of May,
2022, a copy of Plaintiff ’s Motion to Defer Ruling was
sent via CM/ECF and via first class mail, postage prepaid, to: Gabriela Richeimer, Esq., M. Addison Draper,
Esq., Clyde & Co. US LLP, 1775 Pennsylvania Avenue,
NW, Suite 400, Washington, DC 20006, attorneys for
Defendant, Great Northern Insurance Company; and
Jonathan D. Hacker, Esq., Bradley N. Garcia, Esq.,
O’Melveny & Myers LLP, 1625 Eye Street, NW, Washington, DC 20006, attorneys for Defendant, Great
Northern Insurance Company; Wystan M. Ackerman,
Esq., Robinson & Cole, LLP, 280 Trumbull Street,
Hartford, CT 06103; George E. Reede, Jr., Zelle LLP,
1775 Pennsylvania Avenue, NW, Suite 375, Washington, DC 20006; and Laura A. Foggan, Esq., Crowell
& Moring LLP, 1001 Pennsylvania Avenue, NW,
Washington, DC 20004-2595, attorneys for American
App. 67
Property Casualty Insurance Association and National
Association of Mutual Insurance Companies.
/s/ Lawrence J. Gebhardt
Lawrence J. Gebhardt
App. 68
United States Court of Appeals
For the First Circuit
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No. 21-1202
LEGAL SEA FOODS, LLC,
Plaintiff - Appellant,
v.
STRATHMORE INSURANCE COMPANY,
Defendant - Appellee.
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Before
Howard, Chief Judge,
Barron, Circuit Judge,
and Singal, District Judge.*
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ORDER OF COURT
Entered: December 16, 2021
Because the issues in this appeal are sufficiently
overlapping with the issues presented in Verveine Corp.
v. Strathmore Insurance Co., No. SJC-13172 (Mass. appeal docketed Sep. 16, 2021), such that resolution of
Verveine may provide useful guidance that would bear
on the resolution of this appeal, the panel will hold this
* Of the District of Maine, sitting by designation.
App. 69
appeal in abeyance pending resolution of Verveine by
the Massachusetts Supreme Judicial Court.
By the Court:
Maria R. Hamilton, Clerk
cc:
Harry L. Manion III, Nicholas D. Stellakis, Christopher Michael Pardo, Michael S. Levine, Rachel E.
Hudgins, Gregory P. Varga, Linda Louise Morkan, Jonathan Edward Small, John N. Ellison, William Gerald
McElroy Jr.
App. 70
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
HILLBRO LLC, DBA Hills
Restaurant, individually
and on behalf of all others
similarly situated,
Plaintiff-Appellant,
No. 21-35810
D.C. No.
3:21-cv-00382-HZ
District of Oregon,
Portland
v.
ORDER
OREGON MUTUAL
INSURANCE COMPANY,
(Filed Jun. 14, 2022)
Defendant-Appellee.
NUE LLC, doing business
as Nue Seattle,
Plaintiff-Appellant,
v.
No. 21-35813
D.C. No.
3:20-cv-01449-HZ
District of Oregon,
Portland
OREGON MUTUAL
INSURANCE COMPANY,
Defendant-Appellee.
Appellants’ motions to stay proceedings in these
appeals (Dkt. No. 45 in 21-35810 and Dkt. No. 43 in 2135813) are granted. Proceedings in these appeals are
stayed pending the decision of the Washington Supreme Court in Hill and Stout PLLC v. Mutual of
Enumclaw Insurance Company, No. 100211-4 (Wash.),
or until further order of the court.
App. 71
Within 90 days after the date of this order, and
every 90 days thereafter until the Washington Supreme Court issues its decision in Hill and Stout, appellants shall jointly file a report on the status of those
proceedings. Within 14 days after the Washington Supreme Court’s decision, the parties shall file a status
report and may request appropriate relief.
FOR THE COURT:
MOLLY C. DWYER
CLERK OF COURT
By: Wendy Lam
Deputy Clerk
Ninth Circuit Rule 27-7
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