CASE NAME (Plaintiffs) v (Defendants) _Appeal 

Optical Services, USA, et al Franklin Mutual - NonInsurance Co Appeal 

LOWER COURT DOCKET TYPE LOWER COURT NUMBER Transcript Request 

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3681-20 Date: 

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Indictment _ Accusation _ Cornpiaint 8/13/2020 

DOCKET NUMBER . COUNTY COURT Transcript Request 

Bergen County Michael 

Receipt Date 

A- 8/13/2020 Beukas 

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1 8/13/2020 0 30 Hearing 

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Applicant is responsible for filing copies pursuant to Court Rule 2:6-12(a)(d) 

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Reporter 

1QL Transcriber 

REPORTER/TRANSCRIBER NAMER (Name of Agency, if applicable) 

� Phoenix Transcription, LLC 

I 

-<-.:::>' 796 Macopir Rd. 

REP TER/TRANSCRIBER (Signature) West [IJiilford N�.u7480 

TRANSMITTAL 

DATE 

8/14/2020 

White: REQUESTING PARTY Blue: CHIEF, REPORTING SERVICES Green: SUPERVISOR Canary: OTHER 

Pink: MAINTAIN FOR SELF Gold: ATTORNEY and/or PRO SE 
vs. 

Defendant. 

Plaintiffs, 

FRANKLIN MUTUAL 

INSURANCE COMPANY, 

OF 

MOTION 

TRANSCRIPT 

JCl, OPTICAL SERVICES ) 

USA, LLC, OPTICAL ) 

SERVICES USA-WO, RE & LE) 

HOLDINGS, LLC, STONG OD ) 

EWING NJ, LLC, ) 

) ) 

) 

) ) 

) ) ) ) 

Place: Bergen County Justice Center 

10 Main Street 

Hackensack, New Jersey 07601 

Date: August 13, 2020 

BEFORE: 

HONORABLE MICHAEL N. BEUKAS, J.S.C. 

TRANSCRIPT ORDERED BY: 

ERIC L. HARRISON, ESQ. (Methfessel & Werbel) 

APPEARANCES: 

SEAN E. ROSE, ESQ. (Olender Feldman, LLP) 

Attorney for Plaintiffs 

ERIC L. HARRISON, ESQ. (Methfessel & Werbel) 

Attorney for Defendant 

Transcriber: Laura Scicutella 

Phoenix Transcription, LLC 

796 Macopin Rd. 

West Milford, NJ 07480 

(862)248-0670 

Audio Recorded 

Recording Opr: Alexa D'Angelo 
BY: Mr. Harrison 

BY: Mr. Rose 

THE COURT: Decision 

5,7,15 

13 18 
5 caption is Optical Services USA/JCI (sic), Optical 

6 Services USA, LLC, Optical Services USA-WO, and Re and 

7 Le Holdings, LLC, Stong OD Ewing NJ, LLC versus 

8 Franklin Mutual Insurance Company. Judge Michael N. 

9 Beukas, chambers 453. The time is approximately 9:32 

10 a.m. May I have the appearances of counsel for the 11 record, please, starting with the plaintiff? 12 MR. ROSE: Good morning, Your Honor. Sean 

13 Rose from the law firm of Olender Feldman on behalf of 14 plaintiff, Optical Services USA/JCl, Optical Services 15 USA, LLC, Optical Services USA-WO, Re and Le Holdings, 16 LLC, and Stong OD Ewing NJ, LLC, collectively 

17 plaintiffs, Your Honor. 18 19 

20 

THE COURT: Good morning, Counsel. 

MR. ROSE: Good morning. MR. HARRISON: Good morning, Judge. Eric 

21 Harrison, Methfessel and Werbel, on behalf of Franklin 22 Mutual Insurance Company. 23 THE COURT: Good morning, Counsel. Okay, 

24 gentlemen, just a -- a couple of -- 25 RECORDING: (Indiscernible) 
5 Court know I do have a few folks dialing in. They've 

6 all been instructed to keep their phones on mute. 

7 Various FMI representatives and a colleague of mine 

8 will be listening in but will not be participating. 

9 THE COURT: Okay, very good. 

10 For purposes of our established record here 

11 today, gentlemen, when you do speak at oral argument, I 

12 do need you to identify yourself in between oral 13 arguments so that the transcription service can clearly 14 identify which attorney is speaking. 15 When you are referencing an oral argument to 16 any specific controlling case, I need you to identify 17 that case for the record and pursuant to Rule 1:36-3, I 18 need you to identify for the record whether that is a 19 published opinion in the State of New Jersey versus an 

20 unpublished opinion and whether or not you are citing 21 to any law of a0y other jurisdiction including the US 22 Supreme Court so that I can identify for the record as 23 to whether or not any of the law is controlling in this 24 case for purposes of oral argument. 25 In addition, we are on a Polycom speaker 
5 misconstrue me elevating my -- 

6 RECORDING: (Indiscernible) 

7 THE COURT: voice 

8 RECORDING: is now in the conference. 

9 THE COURT: Okay, gentlemen, I -- if I need 

10 to elevate my voice, it's for purposes of the Polycom 

11 picking up my voice so that you can hear it, okay. 

12 So I have before me a Motion to Dismiss the 13 Complaint for failure to state a claim upon which 14 relief can be granted pursuant to Rule 4:6-2(e) filed 15 by the defendant, Franklin Mutual Insurance Company. 16 So, Mr. Harrison, this is your Motion. You may 17 proceed. 18 MR. HARRISON: Yes, sir. Thank you, Your 19 Honor. We are all aware, I know plaintiffs' counsel is 

20 aware, certainly my firm as an insurance defense firm 21 is well aware of the fast-moving nature of developments 

22 in insurance litigation and other litigation over 

23 Covid-19. Two significant events happened yesterday 

24 and they're both worthy of mention. The first is, and 25 this is not within the record, but the Court -- it's 
5 Consolidate these business interruption litigations 

6 that are venued in various Federal Courts around the 

7 country essentially on the basis that the policy 

8 language differs from policy to policy. Even though a 

9 lot of insurers use (indiscernible) income and would 

10 other insurers, there is still significant differences 11 between those forms and the facts of particular cases 12 also can determine whether there would be coverage and 

13 to what extent. 

14 The second significant thing to happen 

15 yesterday was the issuance of the decision that Mr. 16 Rose brought to the Court's attention, and I don't have 17 any objection to his filing it yesterday because it 18 didn't come out until yesterday and I have had ample 19 time to review it. It's the Studio 417 case from U.S. 

20 District Court, Western District of Missouri, Southern 

21 Division. This opinion, which I'm not going to 22 significantly disagree with, demonstrates the wisdom of 

23 the MDO panel in refusing to consolidate because the 

24 denial of the Motion to Dismiss based on the 25 allegations in that complaint bespeaks the importance 
5 Mr. Rose sent yesterday. 

6 THE COURT: What I would like you to do, 

7 Counsel, is argue your Motion to Dismiss. This Court 

8 is bound by the implications of Rule 1:36-3. While the 

9 parties felt compelled to cite to numerous other 

10 jurisdictions with respect to their arguments, their 

11 respective arguments both on the Motion and in the 

12 Opposition, this Court is bound by legal precedent 

13 within the State of New Jersey, namely the Appellate 14 Division, and the New Jersey Supreme Court. With 

15 respect to the US Supreme Court, this -- this Court 

16 also takes precedent from the US Supreme Court for 17 controlling decisions. So this Court will give 18 whatever weight is necessary to whatever arguments 19 reflect in the controlling legal precedent set forth in 

20 this state as opposed to other states. So you may ·21 proceed with the argument. 22 23 I just 

MR. HARRISON: Okay, thank you, Your Honor. 

I just wanted to make sure that the Court 

24 didn't want me to completely disregard this decision. 25 But I'm going to highlight it simply to contrast it 
5 page 2 of the opinion, as follows, "Accidental direct 

6 physical loss or accidental direct physical damage." 

7 It goes on to say on the same page, "The policies do 

8 not include and are not subject to any exclusion for 9 losses caused by viruses or communicable diseases." 

10 Now, I want to be clear about something. I 11 want to be clear about a point of agreement that 12 Franklin Mutual has with the plaintiffs in this case. 13 At paragraph 36 of the Complaint filed in this case, 14 plaintiffs recite as follows, "There is no known 15 instance of Covid-19 transmission or contamination 16 within the premises of plaintiffs' businesses." Now, 17 the declamation of coverage letter that FMI issued 18 prior to the Complaint being filed in this case because 19 the Complaint challenges that declamation of coverage 

20 find it among relevant policy provisions the exclusion 21 of 12(c) for contamination by any virus, et cetera. 22 Because the complaint expressly asserts that there was 23 no contamination and because it is our universal duty 

24 to read as accurate all facts alleged in the complaint 

25 and I agree that the contamination exclusion would not 
5 exclusion. So what we're really focused on is the 

6 policy language. In Studio 417, the definition of loss 

7 there was physical loss or physical damage. 8 THE COURT: Okay, but we're concerned about 

9 New Jersey. We're not concerned about the Western 

10 District of Missouri; correct? 

11 MR. HARRISON: That is true, Your Honor, but 12 we are concerned about policy language defining direct 13 physical loss, -- 14 15 16 take it 

MR. HARRISON: but I'm -- I'm happy to 

THE COURT: Okay, but the 

17 18 19 

THE COURT: definition (indiscernible) 

MR. HARRISON: -- to our policy language. 

THE COURT: definition has not been 

20 established by any court in this state with the 21 exception of the Wakefern case; correct? 

22 

23 correct. 24 

MR. HARRISON: I think that is absolutely 

THE COURT: Okay, I just want to establish 

25 that for purposes of the record. 
5 page 9 of the policy form which expressly defines 

6 direct covered loss as follows, "The fortuitous direct 

7 physical loss as described in Part l(c), General Cause 

8 of Lost Conditions, Coverages A, B, C, which occurs at 9 described premises occupied by you." Now, the 

10 definition is (indiscernible) if it didn't refer -- if 

11 it didn't cross-reference another definition, then we'd 12 be fighting over whether the closure of a business 13 because of a risk of virus spread would constitute a 14 fortuitous direct physical loss. 

15 However, because it cross-references the 

16 description of direct covered loss that's also in the 

17 policy at page 8. We go to the more detailed 

18 definition. Covered loss, "Means fortuitous direct 

19 physical damage to or destruction of covered property 

20 by a covered cause of loss." The requirement of direct 21 physical damage to or destruction of (indiscernible) -- 

22 

23 

RECORDING: (Indiscernible) 

MR. HARRISON: -- requirement of direct 

24 physical damage to or destruction of covered property 25 distinguishes this case from the Studio 417 case in 
5 conference. 

6 MR. HARRISON: -- I apologize -- which also 

7 had the open-ended concept of loss which was not 

8 defined. Our policy defines loss as requiring that 

9 physical impact. 

10 The Court has reviewed Wakefern I know and 11 the the cases -- the New Jersey cases discussed in 12 our brief I agree that there is no case directly on 13 point construing the -- this precise policy language in 14 the context a claim where there was a closure of a 15 business because of the risk of contamination by a 16 virus. But I think that the application of loss that's 17 set forth in New Jersey and in the other jurisdictions 18 we've cited as persuasive, although not binding, 19 compels the conclusion that this did not meet the 

20 policy definition of direct covered loss to satisfy 

21 coverage. 22 THE COURT: Counsel, let me pose -- let me 23 pose one question to you. Why didn't the policy then 24 have specific exclusions for an event such as this? 25 Meaning for virus proliferation. 
5 drafters of the policy other than to say this is an 

6 

7 

unprecedented event. 

my parents and our parents. So, yeah, in 

First in in an 

First in my lifetime. 

8 ideal world all potential cataclysmic risks could be 

9 underwritten and determined in advance as to what we're 

10 going to cover and to what extent or whether there 11 should be any coverage at all, but before we get to the 

12 absence of an exclusion, and I agree there is no 

13 exclusion that would apply on the facts as alleged in 

14 this Complaint, we have to satisfy the coverage 

15 definition first. 16 THE COURT: You can proceed, Counsel. Thank 

17 you. 18 MR. HARRISON: I -- Your Honor, to -- to be 

19 candid, I know you've reviewed the papers. I'm happy 20 to address any further questions the Court may have or 

21 simply reserve an opportunity to respond to my 22 colleague. I -- I think between our papers and what 

23 I've had to say this morning that I've stated our case. 

24 THE COURT: Thank you, Counsel. Okay, Mr. 25 Rose, your response? 
5 So contrary to the insurance industry's well 

6 rehearsed talking points and -- and Mr. Harrison has a 

7 very good brief and very good argument, the simple fact 

8 is that plaintiff and the many other in the -- and 9 (indiscernible) plaintiffs purchased business owners 

10 policies to insure against, among other things, 

11 unexpected business interruptions. And what happened 12 back in March, as we all know because we all lived 13 through it, that's about as unexpected as you get. 14 Plaintiffs were forced to close their businesses 15 because the executive order issued by the State -- 16 well, the State pertinent to here, but issued across 17 the country in emergency response to the pandemic found 18 that there is a dangerous condition on plaintiffs' 19 property. As a result of those orders, the plaintiffs 

20 closed. All residents were told to stay at home and 21 (indiscernible) claims (indiscernible). 22 Now, as Mr. Harrison pointed out, the 23 briefing reflects that there are really two main points 24 of argument that -- that I'll hit quickly because they 25 are recited at length in the brief is the first 
5 America case, which is an unpublished case, but from 

6 the District of New Jersey and cited in both Mr. 

7 Harrison's and our brief, we know that a dangerous 

8 condition on the property can constitute a physical 

9 loss. Now, here, we have an executive order that found 

10 that plaintiffs' businesses were deemed unfit and 11 unsafe because of a dangerous condition. Plaintiffs' 12 loss of income caused by the closure orders concluding 13 that there was a dangerous condition on the property is 14 a direct physical loss. Alternatively, if we wanted to 15 get into the legal standard, at a minimum, it is 16 plausible the plaintiffs have alleged a direct physical 17 loss here which should defeat a (indiscernible) Motion 18 and allow plaintiffs to pursue discovery, among other 19 things, to discern the true intent behind policy terms 

20 which, in some cases, points to coverage but in other 21 cases it may be ambiguous. 22 The second point would be the civil authority 

23 coverage and I -- I think here, the Western District of 

24 Missouri case has instructed, and I'll get to that in a 25 second, here we -- we, again, we know what happened. 
5 but they affected all -- all properties around 

6 

7 

plaintiffs. was an essential business, everything was closed. It's 

It was a stay-at-home order. Unless it 

8 alleged -- it -- it's in the Motion and, you know, 

9 beyond that, Your Honor, we all lived through it. We 

10 were all there. So, again, at a minimum, it is 11 plausible that plaintiffs are entitled to 12 (indiscernible) coverage here. And unless Your Honor 13 has any questions, I know the briefing was fairly 14 detailed. 15 THE COURT: Thank you, Mr. Rose. You know, 

16 at the outset, gentlemen, I do commend the both of you 

17 with respect to a very, very difficult topic and 

18 concept in the State of New Jersey with regard to the 19 interpretation of insurance law. I did find that the 

20 respective briefs were very well drafted. 

21 Mr. Harrison, do you have a reply at this 22 point? 23 MR. HARRISON: Briefly, Your Honor, yes. Mr. 

24 Rose says the executive order for -- forced closure 25 based on a finding that there was a dangerous condition 
5 on the risk that putting people in proximity to each 

6 other indoors could result in transmission of the 

7 virus, could -- it could result in the virus sitting on 

8 a piece of equipment in one of the plaintiffs' 9 examining rooms, but the Complaint in this case 

10 expressly alleges that there has been no known instance 

11 of Covid-19 transmission or contamination. 12 I -- I get it that this is business 13 interruption insurance and to quote one of the judges I 14 appeared before in my first year arguing coverage 15 motion, he said, Mr. Harrison, before we turn to the 16 policy terms, everybody knows that when an insured buys 17 insurance for something, their reasonable expectation 

18 is that they're going to be covered for whatever might 

19 befall them, but then we got to go to the policy 

20 language and if indeed coverage was determined by the 21 name of the coverage, business interruption, well, then 22 the insurance industry loses and FMI loses this case 23 because we're not disputing that there was business 24 interruption. Although if we were to have to dig 25 deeper, we would probably have a dispute over whether 
5 release of ammonia into the air, talking about 

6 something physically occurring and I think it's -- it's 

7 clear from the plain policy language and the meaning of 

8 the terms, which are precisely defined in the policy, 

9 that in this instance under this policy based on these 

10 allegations there is no direct covered loss. 

11 In -- in asking for discovery to determine 

12 the true intent behind policy terms, right, that's 13 something you need to speak about briefly. When policy 14 language is clear, I am not aware of any precedent 

15 which would support denial of a Motion to Dismiss on 16 the basis that the plaintiff is entitled to conduct 17 discovery to see what the drafter of the document, who 

18 I can tell the Court was not -- is not an employee of 

19 FMI, had in mind when defining direct covered loss or 

20 covered loss. 21 There -- there is -- in New Jersey we do have 22 a -- a big case called Morton International which has 

23 to do with pollution exclusions and that's where our 

24 courts created this -- the concept of regulatory 25 estoppel where essentially the insurance industry 
5 Insurance putting forth this policy language suggesting 

6 it would do something and then you went to court and 

7 suggested otherwise. There is no such allegation in 8 this case. I haven't seen any such allegation even 

9 made in the press or -- or by the various 

10 (indiscernible) or -- or in any case that's being 11 litigated that I'm aware of. When the plain policy 12 terms apply plainly and directly to the facts asserted, 13 I'm not aware of any legitimate basis for denying a 14 Motion based on the facts accepted as true in the 15 pleading on the basis that plaintiff wishes to take 

16 discovery to see what the defendant meant by policy 

17 language that somebody else wrote which the defendant 18 adopted if the plain language controls and is 

19 unambiguous and I submit that it does control and it is 

20 unambiguous here. 21 THE COURT: Thank you. Gentlemen, thank you, 22 very much. I'm prepared to rule on this Motion. 23 This matter comes before the Court on a 

24 Motion Seeking Dismissal of the plaintiffs' Complaint 

25 with prejudice pursuant to Rule 4:6-2(e). The Court 
5 reviewing a complaint dismissed under Rule 4:6-2(e), 

6 inquiry is limited to examining the legal 

7 �Ufficiency of the facts alleged on the face of the 

8 complai0t," citing Printing Mart-Morristown versus 

9 Sharp Electronics Corp., 116 N.J. 739 at page 746 

10 (1989)· and Rieder versus Department of Transportation, 11 221 N.J.Super. 547 at page 552 (App. Div. 1987). 12 The essential test as set forth in Green 

13 versus Morgan Properties, 215 N.J. 431 at page 451 14 (Sup. Ct. 2013) is, "Whether a cause of action is 

15 'suggested' by th� facts," citing Printing Mart16 Morrist6wn versus Sharp Electronics Corp., 116 N.J. at 

17 �46 quoting Velantzas versus Colgate-Palmolive Co., 109 18 � 189 at page 192 (1988) . 

19 ... "A reviewing court searches the complaint in 

20 �®pth and with liberality to ascertain whether the 21 fundamental of a cause of action may be gleaned, even 22 from an obscure statement of claim, opportunity being 

23 given to amend if necessary," citing Di Cristofaro 

24 versus Laurel Grove Memorial Park, 43 N.J.Super. 244 at 25 page 252 (App. Div. 1957). 
5 of Education, 198 F.Supp. 732, 734 (Dis. NJ. 1961). 

6 Instead, 

7 "The plaintiffs are entitled to every 

8 reasonable inference of fact and the examination of a 

9 complaint's allegations of fact required by the 

10 aforestated principle should be one that is at once 11 painstaking and undertaken with a generous and 12 hospitable approach," 13 citing Green versus Morgan Properties, 215 14 N.J. 431 at page 452 quoting Printing Mart-Morristown 15 versus Sharp Electronics Corp., 116 N.J. at 746. 16 Notwithstanding this indulgent standard, "A 17 pleading should be dismissed if it states no basis for 18 relief and discovery would not provide one," citing 19 Rezem Family Associates, LP versus Borough of 

20 Millstone, 423 N.J.Super. 103 at page 113 (App. Div. 21 2011), cert. denied and the appeal was dismissed at 208 22 N.J. 366 (2011). See also Sickles versus Cabot Corp. 23 379 N.J.Super. 100 at page 106 (App. Div. 2005) cert. 

24 denied at 185 N.J. 297 (2005). 25 In those rare instances, as cited in Smith 
5 N.J.Super. 105, 116 (App. Div. 2009). 

6 The defendant, Franklin Mutual Insurance 

7 Company, hereinafter FMI, issued a business owners 

8 policy to plaintiff, Optical Services USA/JCl under 

9 policy number SBP2598006 with effective dates of 

10 October 5, 2019 to October 5, 2020. FMI issued the 

11 business owners policy to the plaintiff, Stong OD Ewing 12 NJ, LLC, hereinafter Stong OD, bearing policy number 

13 SBP2613680 with effective dates of April 1, 2020 to 14 April 1, 2021. Optical Services USA/JCl and Stong OD 

15 filed separate claims seeking loss of business income 16 caused by the closure mandated by Governor Murphy's 17 March 21, 2020 Executive Order Number 107 suspending 

18 the operation of non-essential retail businesses on the 19 account of the Covid-19 pandemic. Plaintiffs closed 

20 their businesses on March 20, 2020 and have not 

21 reopened to date. Plaintiffs allege that Executive 22 Order Number 107 mandated the closure of their 

23 businesses. FMI issued letters dated April 6, 2020 and 24 April 14, 2020 to Optical Services USA/JCl and Stong OD 25 denying their claims for business income and related 
5 Business Owners Policy Form. The plaintiffs allege 

6 that the -- the plaintiffs allege that Optical Services 

7 USA/JCl, Optical Services USA, LLC, Optical Services 

8 USA-WO, Re and La -- and Le Holding, LLC and Stong OD 

9 Ewing NJ, LLC purchased business interruption insurance 

10 from insurers to protect their business from an -- an 11 unanticipated crisis. The plaintiffs further allege 12 that the policies issued by FMI provide coverage for 13 loss of income resulting from a necessary interruption 14 of plaintiffs' businesses caused by direct covered 15 losses and temporary closures required by orders of a 16 civil authority. 17 A Complaint for a Declaratory Judgment in 18 this action was filed on June 25, 2020. The Complaint 19 also included a Demand for Trial by Jury. No answer 

20 has been filed by the defendant, FMI. Therefore, the 

21 discovery end date has not been established in this 22 case. 23 On July 15, 2020, the defendant, FMI, filed a 24 Motion Seeking Dismissal of the Complaint pursuant to 25 Rule 4:6-2(e). Within days of filing the Complaint, 
5 and events by respective legal counsel. 

6 Notwithstanding same, the defendants argued three 

7 points before this Court. The first legal argument is 

8 that the Court should dismiss the complaint for failure 9 to state a legally cognizable claim. The second legal 

10 argument is that the plaintiffs did not sustain direct 

11 physical loss or direct physical damage to or 12 destruction of covered property precluding coverage for 13 business income or extra expenses under the FMI policy. 14 Lastly, the defendants argue that the plaintiffs 15 occupancy of their respective properties was not 

16 prohibited by civil authorities because of a loss at a 

17 local premises not owned or occupied by the plaintiffs 

18 precluding civil authority coverage under the FMI 19 policies. 

20 The plaintiffs argue before this Court that 

21 they state claims for coverage under the policies 

22 because they suffered a direct covered loss and were 

23 forced to close their business by order of a civil 24 authority. Plaintiffs further allege that they state 25 claims for loss of income coverage because they 
5 Naturally, each of the respective arguments 

6 advanced by the parties requires a fact-sensitive 

7 analysis wherein the respective parties have failed to 8 present a sufficient record before this Court for a 

9 legal determination of their respective positions. 

10 There has been no discovery produced to the Court for 11 consideration, no affidavits, no certifications, or 12 sworn testimony derived from depositions. In fact, 13 discovery has not been undertaken by the parties with 

14 respect to the declaratory relief sought in the 

15 Complaint. Notwithstanding these deficiencies, the 

16 Court will endeavor to address the legal arguments 17 advanced by the respective parties on the extremely 18 limited record provided to the Court. 19 The defendant, FMI, concedes that the 

20 plaintiffs' business operations were interrupted by an 21 executive order based on the risk of the Covid-19 virus 22 transmission throughout the State of New Jersey. The 23 pivotal issue before this Court is the parties' 24 interpretation of the subject policy language and FMI's 25 claim denial premised on a narrow interpretation of the 
5 The plaintiffs argue that the loss of 

6 physical functionality and the use of their business 

7 constitutes a covered loss under the policies. The 

8 plaintiffs argue that Governor Murphy's executive order 

9 prohibited access to the plaintiffs' premises. 

10 FMI argues that the plaintiffs failed to 11 state a claim for civil authority coverage because the 12 complaint does not allege that property damage occurred 

13 elsewhere leading to the loss of access to plaintiffs' 14 business. The defendant acknowledged in their moving 15 papers that presumably the plaintiffs will argue that 16 while their properties were not physically damaged, 17 they sustained a physical loss by operation of the 

18 Governor's executive order. FMI argues that the 

19 plaintiffs' loss of use of their respective properties 

20 does not constitute a direct physical loss and 21 therefore is not a direct covered loss defined by the 22 policies. 

23 A simple review of the moving papers 

24 indicates that the defendant has not provided this 

25 Court with any controlling legal authority to support 
5 State of New Jersey was recently faced with a historic 

6 event which was unprecedented with respect to the 

7 losses sustained by businesses across the State of New 

8 Jersey due to the proliferation of the Covid-19 9 pandemic. The defendant argues that there is a plain 

10 meaning of "direct physical loss" and the closure of 11 the plaintiffs' business does not qualify for business 12 I'm sorry, qualify for purposes of coverage. This 

13 is a blanket statement unsupported by any common law in 

14 the State of New Jersey or by a blanket review of the 15 policy language. Moreover, there has been no discovery 16 taken in this matter which would provide guidance to 17 the Court with respect to a Motion to Dismiss filed 

18 under Rule 4:6-2(e). 

19 Pursuant to the legal authority recited by 

20 this Court with regard to the standards associated with 21 filing such a motion, the plaintiff should be permitted 22 to engage in issue-oriented discovery and also be 23 permitted to amend its complaint accordingly prior to 24 an adjudication on the merits of any policy language. 25 Such a motion is premature at best. 
5 constitutes a direct covered loss under the policy is 

6 the pivotal issue in the absence of any issue-oriented 

7 discovery on this topic is whether direct physical loss 

8 and direct physical damage encompasses closure for 

9 businesses that bears no specific -- relationship to a 

10 specific condition on the property pursuant to an 11 executive order. The plaintiffs counter that argument 12 by alleging that the executive order of the Governor 

13 deemed all non-essential businesses unsafe given the 14 risk of transmission of Covid-19 thus the closure order 

15 had a specific relationship to a specific condition 16 within the plaintiffs' business. 

17 The plaintiffs provide a citation from 18 Wakefern Food Corp. versus Liberty Mutual Fire 19 Insurance Company, 406 N.J.Super. 524 (App. Div. 2019) 

20 to support their argument. Their argument based on the 

21 holding of Wakefern is that there was a finding of 22 coverage for a grocery store that lost power when an 

23 electrical grid and transmission lines were physically 24 incapable of performing their essential function of 

25 providing electricity even though they were not 
5 insurer to clearly and specifically rule out coverage 

6 in the circumstances where it was not to be provided." 

7 Citing Wakefern versus Liberty Mutual 

8 Insurance Company, 406 N.J.Super. at 542. Also citing 

9 Customized Distribution Services versus Zurich 

10 Insurance Co., 373 N.J.Super. 480 at page 491 (App. 11 Div. 2004), cert. denied at 183 N.J. 214 (2005). 

12 The Court finds such an argument compelling 13 for purposes of surviving a Motion to Dismiss pursuant 14 to Rule 4:6-2(e) in the absence of any complete record 15 for disposition. Again, the Court notes in the absence 

16 of the legal precedent set forth in Wakefern, there is 17 a lack of controlling legal authority presented to the 18 Court for consideration in this regard. 

19 "When interpreting insurance contractp, the 

20 intention of the parties must be determined from the 21 language of the policy," citing Stone v. Royal 22 Insurance Company, 211 N.J.Super. 246 at page 248 (App. 

23 Div. 1986). "When the terms of the contract are clear 24 and unambiguous, the Court must enforce the contract as 25 written." That is an incitation at page 248. 
5 of the language set forth before the Court by the 

6 parties with no other clarity from the record having 

7 been established to date, which the Court notes is 

8 largely non-existent, this Court reaches the inevitable 

9 conclusion solely for purposes of disposition of this 

10 Motion that the plaintiff should be afforded the 

11 opportunity to develop their case and prove before this 12 Court that the event of the Covid-19 closure may be a 13 covered event under the Coverage C, Loss of Income, 14 when occupancy of the described premises is prohibited 15 by civil authorities. There is an interesting argument 16 made before this Court that physical damage occurs 17 where a policy holder loses functionality of their 

18' property and by operation of civil authority such as 19 the entry of an executive order results in a change to 

20 the property. 21 The plaintiffs are offering in advancing in a 22 novel theory of insurance coverage in this matter that 23 warrants a denial of the Motion to Dismiss at this 24 early stage of the litigation. As such, this Court 

�25 must afford the plaintiffs an opportunity to engage in 
5 denied. 

6 Gentlemen, I will have an order prepared and 

7 most likely uploaded by this afternoon. Again, I want 

8 to thank you for your briefs and I thank you for your 9 legal arguments here today. 

10 MR. HARRISON: Thank you, Your Honor. Have a 

11 good weekend. 12 13 14 

15 

16 17 18 19 

20 21 22 23 24 

25 

THE COURT: Thank you, gentlemen. 

(Proceeding concluded at 10:08:29 a.m.) 

* * * * * 
prepared to the best of my ability and in full 

compliance with the current Transcript Format for Judicial Proceedings and is a true and accurate noncompressed transcript of the proceedings, as recorded. 

Laura Scicutella 

Phoenix Transcription LLC 

Agency Name 

AD/T 685 

AOC Number 

8/14/2020 

Date