Reckless Enterprises Inc v. First Mercury Insurance Company

The Honorable Barbara J. Rothstein [4] 5 IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF WASHINGTON [6] AT SEATTLE [7] RECKLESS ENTERPRISES, INC. d/b/a 8 RECKLESS NOODLE HOUSE, 9 Plaintiff, [10] v. Civil Action No. 2:22-cv-00471-BJR [11] 12 FIRST MERCURY INSURANCE ORDER GRANTING MOTION TO STAY COMPANY, [13] 14 Defendant. [16] 17 I. INTRODUCTION 18 Plaintiff Reckless Enterprises filed this breach of contract action against Defendant First [19] Mercury Insurance Company in April 2022. Currently before the Court is Plaintiff’s motion to [20] stay this case pending the Washington Supreme Court’s ruling in Hill & Stout. Having reviewed [21] the motion, the opposition thereto, the record of the case, and the relevant legal authorities, the [22] 23 Court will grant Plaintiff’s motion to stay. The reasoning for the Court’s decision follows. 24 II. BACKGROUND 25 Plaintiff owns and operates a restaurant that lost income during the height of the COVID1 19 pandemic after Governor Jay Inslee issued proclamations covering a wide range of businesses, [1] including indoor restaurants. Dkt. 1-2 ¶¶ 19-25. Defendant is an insurance company that issued [2] 3 Plaintiff an insurance policy covering “direct physical loss of or to damage to covered property.” 4 Dkt. 14 at 10. Plaintiff filed an insurance claim under this policy for income it lost while its 5 business was restricted by Governor Inslee’s orders, but Defendant denied coverage on the grounds [6] that COVID-19-related losses did not constitute direct physical loss or damage. Id. at 10, 19. [7] This is one of many cases that have come before this Court with very similar facts and [8] identical policy language. In the consolidated action Nguyen v. Travelers Casualty Ins. Co. of Am, [9] the Court held that COVID-19-related business losses do not constitute “direct physical loss of or [10] 11 damage to property.” 2021 WL 2184878 (W. D. Wash. May 28, 2021). When the Court decided 12 Nguyen, the Washington Supreme Court had not interpreted this language in a COVID-19 [13] insurance case. Since then, several Washington trial and appellate courts have ruled on the [14] question, and the Washington Supreme Court has granted review of Hill & Stout, which involves [15] identical policy language. See Dkt. 15 at 4 (collecting trial court cases); Hill & Stout PLLC v. [16] Mutual of Enumclaw Ins. Co., No. 100211-4 (Wash. Jan. 24, 2022); see also Seattle Tunnel [17] 18 Partners v. Great Lakes Reinsurance (UK) PLC, 18 Wn. App. 2d 600 , 492 P.3d 843 (2021), review 19 granted, 198 Wn.2d 1032 , 501 P.3d 133 (Wash. 2022) (consider the meaning of “direct physical 20 loss” outside of the COVID-19 context). The Washington Supreme Court held oral argument in [21] the case on June 28, 2022. See Hill & Stout PLLC v. Mutual of Enumclaw Ins. Co., No. 10021122 4 (Wash. June 28, 2022). [23] Plaintiff moves the Court to stay this case until the Washington Supreme Court has ruled [24] in Hill & Stout. Dkt. 15. Defendant opposes the motion, claiming it is “based on the remote [2] possibility that the Washington Supreme Court could issue a decision diametrically opposed to the [1] prior decision of this Court, the Ninth Circuit, every other state and federal appellate court, [2] 3 hundreds of state and federal courts across the country, and the basic tenets of contract 4 interpretation.” Dkt. 22 at 2 (citations omitted). 5 III. DISCUSSION [6] In considering whether to grant a stay, courts consider several factors, including potential [7] prejudice to either party and whether a stay would promote judicial economy. See CMAX, Inc. v. 8 Hall, 300 F.2d 265, 268 (9th Cir. 1962); Lockyer v. Mirant Corp., 398 F.3d 1098, 1109 (9th Cir. [9] 2005) (citing Landis v. N. Am. Co., 299 U.S. 248, 255 (1936)). [10] 11 The Court will grant Plaintiff’s motion to stay. As Plaintiff notes, this Court and others 12 have stayed numerous COVID-19 insurance cases since the Washington Supreme Court granted 13 review in Hill & Stout. Dkt. 15 at 2-3 (citing cases). When this Court decided Nguyen, it had to [14] predict how the Washington Supreme Court would interpret the relevant policy language. Now, [15] the Washington Supreme Court has heard argument on identical language. It would not be in the [16] interest of judicial economy for this Court to predict how the Washington Supreme Court would [17] rule when very soon the court will in fact rule. [18] 19 Contrary to Defendant’s characterization, it is not a “remote” possibility that the 20 Washington Supreme Court will disagree with this Court’s ruling in Nguyen. Although most 21 federal courts that have considered the relevant policy language have granted dismissal for [22] insurance companies, some have not. See id. (“The ‘score’ for COVID-19 Business Interruption [23] cases decided by federal courts is in favor of dismissal, 596 to 27.”). Furthermore, what federal [24] courts have done is not necessarily an indication of what a particular state’s supreme court will do, [3] and Defendant does not dispute Plaintiff’s claim that two out of the five Washington state courts [1] to have considered similar COVID-19 insurance cases sided with the plaintiffs. See Dkt. 15 at 4. [2] 3 Defendant also argues that Hill & Stout is factually distinguishable from this case. 4 However, Defendant fails to elaborate on its claim that “there is the distinct likelihood that the 5 ruling in Hill & Stout will be averse [sic] to [Plaintiff] or too narrow to resolve the legal issues [6] presented here.” Dkt. 22 at 3. The court in Hill & Stout is considering whether the loss of the [7] ability to use business property due to COVID-19 closures constitutes “direct physical loss of or [8] damage to property.” Dkt. 15, App’x A at 11. Defendant cannot reasonably dispute that the [9] meaning of this phrase is a necessary part of any ruling in the instant case. Whether minor factual [10] 11 discrepancies will be enough to distinguish this case is a question that can be better answered once 12 the Washington Supreme Court has ruled on the overarching question of law. [13] Defendant will not be prejudiced by a stay. The Washington Supreme Court has already [14] held oral argument in Hill & Stout and presumably will issue a ruling in the coming weeks. [15] Defendant’s motion for summary judgment in this case ripened very recently, on June 23, 2022. [16] It is unlikely that a stay will cause any significant delay in this Court’s decision on that motion. [17] 18 IV. CONCLUSION 19 For the foregoing reasons, the Court hereby GRANTS Plaintiff’s motion to stay (Dkt. 15) 20 this case pending the Washington Supreme Court’s ruling in Hill & Stout PLLC v. Mutual of 21 Enumclaw Ins. Co., No. 100211-4. The parties are directed to file a joint status report no later than [22] 30 days after a final ruling is issued in that case. [4] DATED this 8th day of July, 2022. ° frcsne Lloederrinn 3 BARBARA J. ROTHSTEIN 4 UNITED STATES DISTRICT JUDGE [10] 1]