FILED: NEW YORK COUNTY CLERK 08/25/2020 06:26 PM
`NYSCEF DOC. NO. 1
`
`INDEX NO. 654042/2020
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`RECEIVED NYSCEF: 08/25/2020
`
`SUPREME
`COUNTY
`-------
`
`OF THE STATE
`COURT
`OF NEW YORK
`--------------------------------
`
`632ONHUDSON,
`
`LLC,
`
`OF NEW YORK
`
`X
`
`Index
`
`No.:
`
`Date
`
`Filed:
`
`Plaintiff,
`
`-against-
`
`COMPANY
`ASPEN
`INSURANCE
`AMERICAN
`UNDERWRITING
`and WKFC
`MANAGERS,
`
`Defendants.
`-------------------------------------X
`
`TO THE ABOVE NAMED
`
`DEFENDANTS:
`
`Plaintiff
`
`County
`
`designates
`as the place
`
`New York
`trial.
`of
`
`SUMMONS
`
`Venue
`events
`took
`
`is based
`
`giving
`place
`
`the
`on where
`rise to the claim
`
`of
`
`SUMMONED
`YOU ARE HEREBY
`the complaint
`to answer
`is not
`with
`this
`served
`complaint
`the
`your
`if
`summons,
`answer,
`or,
`copy
`of
`this
`the service
`20 days after
`Attorneys
`within
`on the Plaintiffs
`summons,
`appearance,
`summons
`is not
`if
`this
`30 days
`after
`the service
`is complete
`(or within
`the day of service
`of New York);
`to appear
`of
`to you within
`in
`case
`your
`failure
`delivered
`the State
`and
`laint.
`will
`for
`demanded
`in the co
`judgment
`be taken
`against
`you
`by default
`the relief
`
`and to serve
`in this action
`a notice
`to
`serve
`exclusive
`
`a
`of
`of
`
`personally
`or answer,
`
`Dated:
`
`New York
`New York,
`August
`14, 2020
`
`k, Esq.
`Jeff S.
`Esq.
`Anth
`Makarov,
`LIBO
`WITZ
`GER
`s for Plaintiff
`Attor
`12th F1OOr
`111 B
`adway,
`New York, NY 10006
`385-4410
`(212)
`
`& KOREK,
`
`P.C.
`
`Esq. NY ID#725677
`Allan
`Kanner,
`(Pro hac vice to be submitted)
`Esq.
`St. Almant,
`Cynthia
`KANNER
`& WHITELEY,
`LLC
`Attorngs
`for Plaintry
`701 Camp
`Street
`New Orleans,
`LA 70130
`524-5777
`(504)
`
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`FILED: NEW YORK COUNTY CLERK 08/25/2020 06:26 PM
`NYSCEF DOC. NO. 1
`
`INDEX NO. 654042/2020
`
`RECEIVED NYSCEF: 08/25/2020
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`_________________________
`Andrew Finkelstein, Esq.
`FINKELSTEIN & PARTNERS, LLP
`Attorneys for Plaintiff
`39 Broadway, Suite 1910
`New York, NY 10006
`1-877-472-3061
`
`
`
`Defendants’ Addresses:
`
`ASPEN AMERICAN INSURANCE COMPANY
`175 Capital Blvd, Suite 300
`Rocky Hill, Connecticut 06067
`
`
`WKFC UNDERWRITING MANAGERS
`1 Huntington Quadrangle
`Melville, New York 11747
`
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`FILED: NEW YORK COUNTY CLERK 08/25/2020 06:26 PM
`NYSCEF DOC. NO. 1
`
`INDEX NO. 654042/2020
`
`RECEIVED NYSCEF: 08/25/2020
`
`OF THE
`SUPREME
`COURT
`OF NEW YORK
`COUNTY
`____________________________________________________________________________X
`632ONHUDSON,
`
`STATE
`
`OF NEW YORK
`
`LLC,
`
`Index
`
`No.:
`
`Plaintiff,
`
`VERIFIED
`
`COMPLAINT
`
`-against-
`
`INSURANCE
`AMERICAN
`ASPEN
`and WKFC UNDERWRITING
`
`COMPANY
`MANAGERS,
`
`Defendants.
`___________________________________________________________________________X
`
`Plaintiff,
`
`632ONHUDSON
`
`("632"
`
`or
`
`"Plaintiff"),
`
`by and
`
`through
`
`its undersigned
`
`attorneys,
`
`as
`
`and
`
`for
`
`its
`
`Verified
`
`Complaint
`
`against
`
`ASPEN
`
`AMERICAN
`
`INSURANCE
`
`COMPANY
`
`("ASPEN"),
`
`and WKFC
`
`UNDERWRITING
`
`MANAGERS
`
`("WKFC"),
`
`upon
`
`information
`
`and
`
`belief,
`
`alleges
`
`as follows:
`
`INTRODUCTION
`
`1.
`
`This
`
`action
`
`for
`
`breach
`
`of contract
`
`arises
`
`out
`
`of
`
`Defendants'
`
`denial
`
`of 632's
`
`claim for
`
`insurance
`
`coverage
`
`under
`
`its
`
`"all
`
`risk"
`
`policy
`
`for
`
`its
`
`significant
`
`business
`
`interruption
`
`losses
`
`and
`
`extra
`
`of
`
`shutdown
`
`expenses
`
`suffered
`
`as a direct
`
`result
`
`the
`
`city
`
`and
`
`statewide
`
`government
`
`orders
`
`designed
`
`to mitigate
`
`the COVID-19
`
`pandemic
`
`by,
`
`in part,
`
`closing
`
`the
`
`insured
`
`premises
`
`and
`
`eliminating
`
`all or part
`
`of
`
`the
`
`insured's
`
`business
`
`at
`
`the
`
`insured
`
`premises
`
`in order
`
`to save
`
`lives
`
`and
`
`protect
`
`property.
`
`2.
`
`The
`
`losses,
`
`including
`
`the
`
`loss
`
`of
`
`use
`
`of
`
`the
`
`insured
`
`premises
`
`and
`
`loss
`
`of
`
`business
`
`income
`
`therefrom,
`
`were
`
`caused
`
`by
`
`these
`
`Executive
`
`Orders
`
`designed
`
`to mitigate
`
`the
`
`imminent
`
`threat
`
`to person
`
`and
`
`property
`
`posed
`
`by COVID-19,
`
`which
`
`is an unexcluded
`
`covered
`
`cause
`
`of
`
`loss
`
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`FILED: NEW YORK COUNTY CLERK 08/25/2020 06:26 PM
`NYSCEF DOC. NO. 1
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`INDEX NO. 654042/2020
`
`RECEIVED NYSCEF: 08/25/2020
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`under the subject “all risk” policy, which defines “covered cause of loss” as “direct physical
`
`loss” unless excluded or otherwise limited.
`
`632 also purchased with the policy coverage for business income and extra expense losses.
`
`632 purchased commercial property insurance from ASPEN, produced, underwritten, and
`
`sold by WKFC, namely policy No. WKA FT00375-07 (the “Policy” attached as Exhibit A),
`
`for which it paid significant monthly premiums, and was in effect from April 24, 2019 to April
`
`24, 2020. The Policy was renewed (“Renewed Policy” and together “Policies”) for another
`
`year in effect from April 25, 2020 to April 25, 2021, under policy No. WKA FT00375-08.
`
`(Renewed Policy attached as Exhibit B). For the convenience of the Court and easier
`
`reference, the pages of the Policies have been numbered.
`
`The Policies are identical in their terms, the only difference being that the Renewed Policy has
`
`extra coverage for equipment breakdown.
`
`The Policies cover business income and extra expenses losses for up to 12 months, with an
`
`annual limit of $720,000; they provide coverage for business income losses due to the
`
`necessary suspension of the business operations at the insured premises and the loss of
`
`business income due to civil authority actions that prohibit access to the premises.
`
`By way of brief introduction, 632 owns a building known as 632 on Hudson, which was a
`
`dilapidated sausage factory that 632’s sole proprietor, Karen Lashinsky, adoringly labored to
`
`convert into what has grown, over the last twenty years, to become one of the most prominent
`
`event spaces in New York City. The building comprises six floors available for rent for private
`
`events or residential leasing (with the ground floor available for commercial leasing and floors
`
`three through five forming a triplex available for residential leasing as well as events), and has
`
`hosted a myriad of events, including weddings, photoshoots, product launches, productions,
`
`and chef demonstrations for all types of guests and groups, such as MTV and Netflix. The
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`4 of 29
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`3.
`
`4.
`
`5.
`
`6.
`
`7.
`
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`FILED: NEW YORK COUNTY CLERK 08/25/2020 06:26 PM
`NYSCEF DOC. NO. 1
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`INDEX NO. 654042/2020
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`RECEIVED NYSCEF: 08/25/2020
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`venue is marked by artistically themed dining rooms, lounges, dens, bars, suites, decks,
`
`kitchens, a garden, and even a speakeasy scattered throughout the floors; all designed by Karen
`
`Lashinsky and exuding the vision she had for the space when she first walked into a building
`
`that to others was just a weary factory. One could argue the most prominent feature of the
`
`venue is the three story central atrium of the triplex anchored by a wraparound staircase from
`
`which guests can watch demonstrations, participate in ceremonies, or listen to music and
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`dance. What sets 632’s venue apart from many others, and what Karen Lashinsky takes pride
`
`in achieving, is that 632’s venue is able to transform large, dynamic in-door gatherings and
`
`events into an intimate experience in a grand but beautiful and imaginative setting. The venue
`
`and many of the events it has hosted have been frequently featured in the New York Times,
`
`New York Space, Weddings, and New York Living. 632 maintains a website with photographs and
`
`descriptions of the property and the events it hosts at http://632onhudson.com/, which may
`
`help in visualizing the venue and imagining its experiences.
`
`8.
`
`The thrust of the executive shutdown orders that closed non-essential businesses in New York
`
`City and prohibited non-essential gatherings of more than ten people has been to completely
`
`deprive Plaintiff the ability to use the covered property for its primary business purpose, which
`
`is renting the floors in the building for large events. Plaintiff has attempted to mitigate its
`
`damages by listing the upstairs triplex for a residential lease but the triplex remains unfilled
`
`due in part to the prohibition of conducting in-person showings of residences that remained
`
`in effect until June 22, 2020, when New York City entered phase two of reopening. See
`
`https://www.governor.ny.gov/sites/governor.ny.gov/files/atoms/files/RealEstateSummary
`
`Guidance.pdf. Further, 632 plans to offer “take out” food and alcohol from its ground floor,
`
`but this will likely also be unsuccessful and any profits marginal because 632 is not a restaurant
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`FILED: NEW YORK COUNTY CLERK 08/25/2020 06:26 PM
`NYSCEF DOC. NO. 1
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`INDEX NO. 654042/2020
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`RECEIVED NYSCEF: 08/25/2020
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`and is unable to offer outdoor seating, whereas many proximate establishments can and do
`
`offer such services.
`
`9.
`
`Based on preliminary information available, 632 has already suffered hundreds of thousands
`
`of dollars in lost proceeds, as well as other costs in connection with the emergency government
`
`shutdown orders responding to the coronavirus outbreak. Depending on how long these
`
`conditions and government orders last, and how many “waves” occur, those losses could
`
`10.
`
`11.
`
`
`
`increase substantially.
`
`Regardless of what one may think about the efficacy or necessity of the emergency government
`
`shutdown orders, it was reasonable and necessary for 632 to comply with the emergency
`
`government shutdown orders in order to mitigate the effects of a pandemic disaster and
`
`imminent risks of danger that COVID-19 posed to person and property.
`
`632 promptly made a claim for coverage of these losses under the Policy and was notified by
`
`third-party claims adjuster, US Adjustment Corp (“Adjuster”), on behalf of WKFC and
`
`ASPEN via letter dated May 13, 2020, that its claim was denied. Denial letter attached as
`
`Exhibit C. Adjuster, on behalf of ASPEN and WKFC, presented portions of the policy and
`
`said there was no coverage without attempting to integrate all policy terms; judicial or
`
`regulatory interpretations of relevant language, without presenting the facts correctly, without
`
`adhering to well settled rules of construction, including reading the policy as a whole, and
`
`without investigating the property or investigating properly in general. 632 also made a claim
`
`for business income loss and extra expenses incurred under the Renewed Policy, given the
`
`separate executive shutdown orders issued during the renewed policy period (namely the New
`
`York on Pause order issued by Governor Cuomo on May 14, 2020) which Adjuster via
`
`telephone call to the first-undersigned’s office on July 16, 2020 summarily denied on the same
`
`basis as the denial of the first claim.
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`FILED: NEW YORK COUNTY CLERK 08/25/2020 06:26 PM
`NYSCEF DOC. NO. 1
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`INDEX NO. 654042/2020
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`RECEIVED NYSCEF: 08/25/2020
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`12.
`
`Specifically, Adjuster in the denial letter stated there was no “property damage” at the premises
`
`and therefore ASPEN was denying coverage. See Exhibit C, page 2. However, the Policy
`
`specifically provides coverage for “direct physical loss of or damage” to the property, loss of
`
`business income due to the suspension of business operations, and specifically requires the
`
`insured to take mitigation measures, such as closing and shutting down the premises and
`
`business operations, in the face of an imminent risk of danger to person and property. It is
`
`unjust and a source of even further hardship to Plaintiff for Defendants to pretend that the
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`policy only provides coverage for physical damage, and to ignore that the Policy uses the
`
`disjunctive “or” in the phrase “direct physical loss of or damage,” when Plaintiff is suffering
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`substantial and increasing losses in the wake of government shutdown orders designed to
`
`mitigate the risk to person and property posed by the virus. 632 has been harmed by
`
`Defendants’ failure to meet their obligations under the Policy as 632 has substantial and
`
`required property tax, mortgage and interest, and building expense payments that continue to
`
`accrue during the shutdown.
`
`13.
`
`Further, Adjuster, on ASPEN’s behalf, claimed the statement in Mayor de Blasio’s Emergency
`
`Executive Order No. 100, that COVID-19 is a source of physical property loss,
`
`“contradict[ed] generally understood facts about the effect, or lack thereof, of the virus on
`
`tangible property…” and even went on to state that ASPEN is not aware of “any property
`
`loss and damage” caused by the virus. See Exhibit C, page 1 (emphasis added). Adjuster did
`
`not go on to specify what these generally understood facts were, but as described below, the
`
`virus is recognized as a danger to person and property throughout the nation. Further, it was
`
`not explained why there needed to be a finding that the virus was a source of loss and damage,
`
`instead of loss or damage as required by the Policy. The denial letter failed to at all mention
`
`these separate coverages and factors in denying 632’s claim and construing the Policy language.
`
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`FILED: NEW YORK COUNTY CLERK 08/25/2020 06:26 PM
`NYSCEF DOC. NO. 1
`
`INDEX NO. 654042/2020
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`RECEIVED NYSCEF: 08/25/2020
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`14.
`
`Importantly, in the weeks and days before the first government shutdown order was issued,
`
`632 hosted two large events. First, a catered event with food and alcohol, which had
`
`approximately 300 people enter the premises over a three day span throughout the building
`
`from February 4 to February 6, 2020. Then, from March 4 to March 9, 2020, 632 had rented
`
`the ground floor to a retail “pop-up” shop, where upwards of 100 people could enter per day.
`
`Before summarily denying Plaintiff’s claim, Defendants and Adjuster failed to inquire as to
`
`what events took place at the premises before the shutdown orders.
`
`THE PARTIES
`
`15.
`
`16.
`
`632 is a domestic corporation formed under the laws of New York, with its principal place of
`
`business in New York, New York.
`
`Upon information and belief, ASPEN is company formed under the laws of Bermuda with its
`
`principal place of business in Connecticut. Upon information and belief, at all relevant times
`
`hereto, ASPEN was authorized to underwrite insurance policies covering risks in the State of
`
`New York. Upon information and belief, ASPEN has, at all relevant times, conducted business
`
`in the State of New York, including engaging in the business of selling insurance and issuing
`
`policies, including the Policies, and investigating claims dealing with policyholders, property,
`
`or activities located in the State of New York.
`
`17.
`
`Upon information and belief, WKFC is a domestic corporation formed under the laws of New
`
`York with its principal place of business and headquarters in Melville, New York. Upon
`
`information and belief, WKFC is the managing general agent and underwriter for Aspen, and
`
`is involved in risk selection, pricing, and determination of coverage terms and conditions, as
`
`well as loss control to reduce the severity and magnitude of claims relative to insured claims
`
`arising from various government orders in the City and State of New York. Upon information
`
`and belief, WKFC is an insurance producer and was authorized to underwrite and issue
`
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`FILED: NEW YORK COUNTY CLERK 08/25/2020 06:26 PM
`NYSCEF DOC. NO. 1
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`INDEX NO. 654042/2020
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`RECEIVED NYSCEF: 08/25/2020
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`insurance policies covering risks in the State of New York. Upon information and belief,
`
`WKFC has, at all relevant times, conducted business in the State of New York, including
`
`engaging in the business of producing, selling, underwriting , and issuing insurance policies,
`
`with and on behalf of ASPEN, including the Policies, and investigating claims dealing with
`
`policyholders, property, or activities located in the State of New York.
`
`18.
`
`Upon information and belief, ASPEN and WKFC issued the Policies to 632 together, shared
`
`and assumed the risks and liabilities accruable under the Policies together with each Defendant
`
`having a certain percentage of the total risk of the Policies, shared the premiums paid by 632
`
`for the insurance provided by the Policies, and both profited directly from the premiums paid
`
`by 632 for the insurance provided by the Policies.
`
`JURISDICTION AND VENUE
`
`Plaintiff repeats, realleges, and reiterates paragraphs “1” through “18” with the same force and
`
`effect as if more fully set forth herein at length.
`
`That at all times herein mentioned, Defendant ASPEN was and still is a foreign limited liability
`
`company duly authorized to do business in the State of New York.
`
`That at all times herein mentioned, Defendant ASPEN transacted business within the State of
`
`New York.
`
`That at all times herein mentioned, Defendant ASPEN contracted to do business within the
`
`State of New York.
`
`That at all times herein mentioned, Defendant ASPEN regularly did or solicited business, or
`
`engaged in any other persistent course of conduct, or derived substantial revenue from services
`
`rendered, in the State of New York.
`
`That at all times herein mentioned, Defendant ASPEN had sold insurance policies, namely
`
`the Policies, to Plaintiff.
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`9 of 29
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`19.
`
`20.
`
`21.
`
`22.
`
`23.
`
`24.
`
`
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`FILED: NEW YORK COUNTY CLERK 08/25/2020 06:26 PM
`NYSCEF DOC. NO. 1
`
`INDEX NO. 654042/2020
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`RECEIVED NYSCEF: 08/25/2020
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`25.
`
`26.
`
`27.
`
`28.
`
`29.
`
`30.
`
`31.
`
`32.
`
`33.
`
`
`
`At all relevant times, City and State executive emergency orders permeated every aspect of the
`
`use of the insured property located at 632 Hudson Street.
`
`That at all times herein mentioned, Defendant ASPEN and Plaintiff entered into valid
`
`insurance contracts, namely the Policies, for the insurance of Plaintiff’s premises located at
`
`632 Hudson Street, and the business income, including rental income, derived therefrom.
`
`That at all times herein mentioned, Defendant WKFC was and still is a domestic limited
`
`liability company duly authorized to do business in the State of New York.
`
`That at all times herein mentioned, Defendant WKFC transacted business within the State of
`
`New York.
`
`That at all times herein mentioned, Defendant WKFC contracted to do business within the
`
`State of New York.
`
`That at all times herein mentioned, Defendant WKFC regularly did or solicited business, or
`
`engaged in any other persistent course of conduct, or derived substantial revenue from services
`
`rendered, in the State of New York.
`
`That at all times herein mentioned, Defendant WKFC had underwritten, produced, sold, and
`
`issued insurance policies namely the Policies to Plaintiff with and on behalf of ASPEN.
`
`That at all times herein mentioned, Defendant WKFC and Plaintiff entered into valid
`
`insurance contracts, namely the Policies, for the insurance of Plaintiff’s premises located at
`
`632 Hudson Street, and the business income, including rental income, derived therefrom.
`
`Defendants committed breach of contract of these insurance contracts, namely the Policies,
`
`and caused Plaintiff 632 to suffer damages when Defendants wrongfully declined to provide
`
`coverage for 632’s losses, for which Defendants were contractually obligated to pay pursuant
`
`to the Policies.
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`FILED: NEW YORK COUNTY CLERK 08/25/2020 06:26 PM
`NYSCEF DOC. NO. 1
`
`INDEX NO. 654042/2020
`
`RECEIVED NYSCEF: 08/25/2020
`
`A.
`
`34.
`
`35.
`
`36.
`
`37.
`
`38.
`
`39.
`
`40.
`
`41.
`
`42.
`
`
`
`FACTUAL ALLEGATIONS
`
`Introduction
`
`This case is about whether Plaintiff’s insurance policy provides coverage for the damages
`
`sustained and expenses incurred by Plaintiff as a result of unprecedented emergency orders by
`
`state and local officials restricting Plaintiff’s on-premises business activities.
`
`Plaintiff, like other people and businesses, bought insurance to help when disaster occurs.
`
`During such times, individuals and businesses (including Plaintiff) are at their most vulnerable
`
`and desperate, a fact of which insurance companies (including Defendants) are keenly aware.
`
`Essentially, insurance companies promise, warrant and sell “peace of mind” that in the unlikely
`
`event of a catastrophe or disaster the policyholder will be fully and promptly indemnified.
`
`The contract of insurance carried with it a duty of utmost good faith on the part of the insurer,
`
`because of the vulnerability of policyholders during and following a disaster.
`
`This duty includes Defendants’ obligation to fairly and quickly adjust Plaintiff’s insurance
`
`claims, determining coverage and amount of loss, and providing prompt payment.
`
`Here no such good faith investigation or adjustment occurred because Defendants reached a
`
`pre-determined conclusion to deny coverage.
`
`Indeed, Defendants have apparently adopted a ‘company line’ to deny all business interruption
`
`claims similar to Plaintiff’s, despite different circumstances, different executive orders, and
`
`differences in policies that can make or break coverage.
`
`This one size fits all approach to policy interpretation and claims adjustment has led to the
`
`improper denial of countless business interruption claims including Plaintiff’s.
`
`
`
`
`
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`FILED: NEW YORK COUNTY CLERK 08/25/2020 06:26 PM
`NYSCEF DOC. NO. 1
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`INDEX NO. 654042/2020
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`RECEIVED NYSCEF: 08/25/2020
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`B.
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`43.
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`44.
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`45.
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`46.
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`47.
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`48.
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`Plaintiff’s Business
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`Plaintiff owns a building located at 632 Hudson Street, New York, New York. This building
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`comprises five floors and a basement. The basement is a speakeasy that serves alcohol and is
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`available for rent for private events. The ground/entrance floor is designated a catering hall
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`and is also available for rent for events as well as commercial leasing to separate businesses
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`such as retailers. The second floor is available for residential leasing. The third, fourth, and
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`fifth floors form a triplex that is available for rent for private events or residential leasing.
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`In 1992 Karen Lashinsky, 632’s sole proprietor, and her mother bought the building, which
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`was a vacant sausage factory. After two years of gut renovations and Ms. Lashinsky’s dedicated
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`design and decoration, the 8,000 square foot building was transformed into one of the most
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`prominent and versatile event spaces in New York City.
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`For example, in 2000, the building was rented to MTV for the filming of MTV’s Real World:
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`Back to New York, a show which filmed a group of seven diverse strangers living together in
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`632’s building for several months.
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`The versatility, beauty, and sheer size of the space makes it a desirable venue for many large
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`and dynamic events, including weddings, holiday parties, and celebrations of any kind.
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`Accordingly, the closing of the Plaintiff’s insured premises due to the government shutdown
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`orders declaring 632 a non-essential business in addition to prohibiting events with anticipated
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`attendance of over 10 people, compliance with CDC and Health guidelines, and reasonable
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`and necessary mitigation practices, made both renting for private events and in-person
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`showing for residential or commercial leasing impossible.
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`Because the profits derived from these two types of operations is what determines 632’s
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`business success or failure, insuring against the slowdown or cessation of these operations due
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`FILED: NEW YORK COUNTY CLERK 08/25/2020 06:26 PM
`NYSCEF DOC. NO. 1
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`INDEX NO. 654042/2020
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`RECEIVED NYSCEF: 08/25/2020
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`to unforeseen perils and risks is of critical importance. This concept is nothing new, as
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`business interruption insurance has been around for hundreds of years.
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`C. History of BI Insurance
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`49.
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`At its core, business interruption insurance (or ‘business income’ insurance as it is known
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`today) (“BI”) is meant to return an insured’s business; the amount of profit it would have
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`earned had there been no interruption of business or suspension of operations. To better
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`understand its context and role in Plaintiff’s overall Policy, what follows is some background
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`information as to BI.
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`50.
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`BI was developed in the United Kingdom in the early 19th century as a supplement to fire
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`insurance, whereby insurers would compensate commercial building owners not only for the
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`physical damage but for the insured’s inability to utilize the building to collect rent (the primary
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`business of the insured). The first loss of ‘rent’ coverage was offered by the English Hamburg
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`Fire Office in 1817.
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`51.
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`BI continued to evolve, and by the mid-19th century insurers in Europe began offering
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`‘stoppage or cessation’ insurance, that provided coverage for lost business income due to the
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`inability to utilize property, typically a fixed percentage of what the company’s stock on hand
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`would have generated for the business during that time.
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`52.
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`By the late 19th century, BI had come to the United States. In 1880, Boston-based insurer
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`Dalton introduced ‘Use and Occupancy’ insurance, which insured the loss of production
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`following a covered peril. Typically, these insurance policies provided for a set dollar amount
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`or recovery for each day the insured was prevented from conducting operations. ‘Use and
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`Occupancy’ continued to be the nomenclature adopted by American insurers up until the
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`1940s.
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`FILED: NEW YORK COUNTY CLERK 08/25/2020 06:26 PM
`NYSCEF DOC. NO. 1
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`INDEX NO. 654042/2020
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`RECEIVED NYSCEF: 08/25/2020
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`53.
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`54.
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`55.
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`56.
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`D.
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`57.
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`58.
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`59.
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`60.
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`In the late 1930s, insurers began offering “Gross Earnings” insurance. This was an iteration
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`of BI which compensated insureds for the reduction in gross earnings due to a business
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`interruption caused by a covered peril.
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`In 1986, the Insurance Services Office (“ISO”) recommended replacing the ‘Gross Earnings’
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`policy form with the ‘Business Income Coverage’ form, which although modified and varied
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`in particular policies is still frequently used today.
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`The emergence of coverage in certain policies, such as Plaintiff’s, tied to the insured’s interest
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`in its income stream in many policies gave protection to business losses tied to a particular
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`policy’s language and covered causes of loss.
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`Though it has evolved over centuries, and varies between policies, the crux of BI insurance
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`has always been to return to insureds (such as Plaintiff) the losses of business income resulting
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`from the slowdown or cessation of their business.
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`The Policy Provide Coverage for Business Income Separate and Apart from the
`Property and Building
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`In order to protect its property, businesses, and income from losses, 632 obtained the Policies
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`issued by ASPEN and WKFC.
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`At all relevant times, the Policy was in full effect as 632 faithfully paid the premiums which
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`Defendants accepted.
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`The premiums Plaintiff paid included coverages for, inter alia, buildings and personal property,
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`business income and extra expense, and commercial liability. It also included additional
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`coverage for ‘extended’ business income, and actions of a civil authority that prohibited access
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`to the premises due to physical loss of or damage at another property within 1 mile.
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`The Policy is an all risk commercial policy, which means that it provides coverage for all risks
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`unless expressly excluded by language in the body of the policy or through a separate exclusion
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`or endorsement. There is no exclusion in Plaintiff’s Policy for lost business income caused by
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`FILED: NEW YORK COUNTY CLERK 08/25/2020 06:26 PM
`NYSCEF DOC. NO. 1
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`INDEX NO. 654042/2020
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`RECEIVED NYSCEF: 08/25/2020
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`emergency orders restricting the services (i.e., business activities) it could provide at its
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`property. Further, there are no virus or pandemic exclusions of any kind.
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`61.
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`The Policy provides a limit for business income and rental value separately from building and
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`personal property. See Policy, Exhibit A, at page 5 of 90:
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`A.
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`62.
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`63.
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`
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`THE DEVASTATING SLOWDOWN AND/OR CESSATION
`OF PLAINTIFF’S BUSINESS ACTIVITIES
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`Pandemic Dangers
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`From the first reported case in the United States in January 2020 to the present, the impact of
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`the coronavirus has been devastating. More than 5,000,000 Americans have had confirmed
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`cases of COVID-19, and more than 150,000 have died.
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`Notably, the City and State of New York has suffered more confirmed COVID-19 cases and
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`deaths than any other city and state, respectively. In New York State there have been more
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`than 400,000 cases and over 25,000 deaths. There have been more than 230,000 cases and
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`23,000 deaths in New York City alone. In New York City, the evidence indicates pervasive
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`presence of the virus.
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`64.
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`Severe acute respiratory syndrome coronavirus 2 (“COVID-19”) has spread, and continues to
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`spread, rapidly across the United States and has been declared a pandemic by the World Health
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`Organization. See https://www.health.harvard.edu/diseases-and-conditions/coronavirus-
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`resource-center.
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`FILED: NEW YORK COUNTY CLERK 08/25/2020 06:26 PM
`NYSCEF DOC. NO. 1
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`INDEX NO. 654042/2020
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`RECEIVED NYSCEF: 08/25/2020
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`65.
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`The global COVID-19 pandemic is exacerbated by the fact that the deadly virus physically
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`infects and stays on surfaces of objects or materials for many days, and its airborne component
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`permeates the insured property and premises. Studies indicate that COVID-19’s spreads is, in
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`part, because of its aerosol transport in and throughout buildings and their airways. See
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`https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7293495/
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`Notably, the virus manifests differently in different people. Some infected persons display
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`symptoms, ranging from minor to severe, while others are asymptomatic and never show
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`symptoms of the disease. Symptoms may appear 2-14 days after exposure to the virus. See
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`https://www.cdc.gov/coronavirus/2019-ncov/symptoms-testing/symptoms.html.
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`According to a study published in The New England Journal of Medicine, COVID-19 is widely
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`accepted as a cause of real physical loss and damage. It remains stable and transmittable in
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`aerosols for at least three hours, up to four hours on copper, up to 24 hours on cardboard and
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`up to two to three days on plastic and stainless steel. See https://www.nih.gov/news-
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`events/news-releases/new-coronavirus-stable-hours-surfaces
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`According to a study conducted by Tulane National Primate Research Center, the virus was
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`able to survive in air for 16 hours.
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`See https://www.medrxiv.org/content/10.1101/2020.04.13.20063784v1.full.pdf
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`Business establishments like the Plaintiff’s Covered Property are highly susceptible to being
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`or becoming contaminated, as both respiratory droplets and fomites are likely to be retained
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`on the Covered Property and remain viable for an extended period of time.
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`Plaintiff’s business is also highly susceptible to rapid person-to-property transmission of the
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`virus, and vice-versa, because the nature of an events venue business necessarily places large
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`numbers of people in a highly social context in close proximity to the property, to one another,
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`66.
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`67.
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`68.
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`69.
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`70.
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`FILED: NEW YORK COUNTY CLERK 08/25/2020 06:26 PM
`NYSCEF DOC. NO. 1
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`INDEX NO. 654042/2020
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`RECEIVED NYSCEF: 08/25/2020
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`and to the existing load of COVID-19 presence at surfaces or aerosol. This imminent risk to
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`person and property is what the emergency executive orders aimed to mitigate.
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`71.
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`It is well recognized that a pandemic is a disaster. In upholding the Governor of Pennsylvania’s
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`Proclamation of a state-wide disaster and the Executive Orders mandating the closure of
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`businesses within Pennsylvania, the Pennsylvania Supreme Court noted the significant risk of
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`the spread of the COVID-19 virus, even in locations where the disease has not been detected,
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`based on the virus’ ability to attach onto surfaces and survive in the air:
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`B.
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`72.
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` COVID-19 does not spread because the virus is “at” a particular location. Instead it
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`spreads because of person-to-person contact, as it has an incubation period of up to
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`fourteen days and that one in four carriers of the virus are asymptomatic.
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` Respondents’ Brief at 4 (citing Coronavirus Disease 2019, “Symptoms,” CDC,
` https://www.cdc.gov/coronavirus/2019-ncov/symptoms-testing/symptoms.html
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`(last accessed 4/9/2020)). The virus can live on surfaces for up to four days and can
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`remain in the air within confined areas and structures. Id. (citing National
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`Institutes of Health, “Study suggests new coronavirus may remain on surfaces
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`for days,” (Mar. 27, 2020) https://www.nih.gov/news-events/nih-research-
` matters/study-suggests