Court Opinion

ID: 6496499
Source: CourtListenerOpinion
Date Created: 2022-06-29 20:10:39.561682+00
Date Added: 2024-06-11T09:07:57.967964
License: Public Domain

NOT FOR PUBLICATION WITHOUT THE
                               APPROVAL OF THE APPELLATE DIVISION
        This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the
     internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.

                                                        SUPERIOR COURT OF NEW JERSEY
                                                        APPELLATE DIVISION
                                                        DOCKET NO. A-1824-21

AC OCEAN WALK, LLC,

          Plaintiff-Respondent,

v.

AMERICAN GUARANTEE
AND LIABILITY INSURANCE
COMPANY, AIG SPECIALTY
INSURANCE COMPANY,
and INTERSTATE FIRE AND
CASUALTY COMPANY,

          Defendants-Appellants,

and

NATIONAL FIRE & MARINE
INSURANCE COMPANY,

     Defendant.
__________________________

                   Argued May 9, 2022 – Decided June 23, 2022

                   Before Judges Sumners, Vernoia and Firko.
On appeal from an interlocutory order of the Superior
Court of New Jersey, Law Division, Atlantic County,
Docket No. L-0703-21.

David R. Roth (Wiggin & Dana, LLP) of the
Connecticut and New York bars, admitted pro hac
vice, argued the cause for appellant American
Guarantee and Liability Insurance Company (Ford
Marrin Esposito Witmeyer & Gleser, LLP and Wiggin
& Dana, LLP, attorneys; Edward M. Pinter, Jon R.
Grabowski, Caroline McKenna, Jeffrey R. Babbin
(Wiggin & Dana, LLP), of the Connecticut and
District of Columbia bars, admitted pro hac vice, and
David R. Roth, on the briefs).

Keith Moskowitz (Dentons US LLP) of the
Connecticut, New York, and Illinois bars, admitted
pro hac vice, argued the cause for appellant AIG
Specialty Insurance Company (Dentons US LLP,
attorneys; Shawn L. Kelly, on the brief).

DLA Piper LLP (US), attorneys for appellant
Interstate Fire & Casualty Company, join in the brief
of appellant American Guarantee and Liability
Insurance Company.

Justin F. LaVella (Blank Rome, LLP) of the District of
Columbia and Virginia bars, admitted pro hac vice,
argued the cause for respondent AC Ocean Walk, LLC
(Blank Rome, LLP, attorneys; Stephen M. Orlofsky,
Justin F. LaVella, Alexander H. Berman (Blank Rome,
LLP) of the Pennsylvania bar, admitted pro hac vice,
Michael A. Iannucci, and Michael R. Darbee, on the
briefs).

Wystan M. Ackerman (Robinson & Cole, LLP) of the
Connecticut, Massachusetts, and New York bars,
admitted pro hac vice, argued the cause for amicus

                                                         A-1824-21
                         2
           curiae Insurance Council of New Jersey and American
           Property Casualty Insurance Association (Robinson &
           Cole, LLP, attorneys; Daniel E. Bryer, on the brief).

           Paul E. Breene argued the cause for amicus curiae
           United Policyholders (Reed Smith, LLP, Lorelie S.
           Masters (Hunton Andrews Kurth), of the District of
           Columbia, admitted pro hac vice, attorneys; Lorelie
           S. Masters and Kevin V. Small (Hunton Andrews
           Kurth), on the brief).

PER CURIAM

     By way of leave to appeal granted, defendant insurance carriers

American Guarantee and Liability Insurance Company (AGLIC), AIG

Specialty Insurance Company (AIG), and Interstate Fire and Casualty

Company (IFCC) (collectively defendants), appeal from a December 22, 2021

Law Division order denying their motion to dismiss plaintiff AC Ocean Walk

LLC's (Ocean) complaint. 1    Ocean operates the Ocean Casino Resort in

Atlantic City.   In its complaint, Ocean sought property and business

interruption insurance under defendants' policies for losses of income during

1
  We granted defendants' motion for leave to appeal on February 22, 2022. In
addition, we permitted United Policyholders and Insurance Council of New
Jersey to participate as amicus curiae on behalf of plaintiff Ocean and
defendants respectively.

                                                                      A-1824-21
                                     3
closure of its casino pursuant to COVID-19 Executive Orders issued by the

Governor.

      The trial court found Ocean sufficiently pled that COVID-19 caused a

direct physical loss or damage to its casino to surmount defendants' motion to

dismiss and the coverage sought by Ocean under various sections of the issued

policies. The court determined that the contamination exclusion contained in

the policies did not apply because they were ambiguous. 2 For the reasons that

follow, we reverse.

                                      I.

      The following facts are derived from the motion record. Ocean is a

138,000 square foot casino and gaming entertainment enterprise, the largest

gaming suite in the United States. Ocean provides overnight accommodations;

on-site bars, cafes, and restaurants; a nightclub and a beach club; meeting

spaces; pools; a spa; fitness centers; and an on-site concert venue. The record

shows Ocean purchased four separate property insurance policies (the policies)

from defendants and NFMIC "for the express purpose of obtaining broad,

2
    The trial court granted defendant National Fire and Marine Insurance
Company's (NFMIC) motion to dismiss based on an endorsement exclusion in
its policy that was not included in defendants' policies. NFMIC is not
participating in this appeal.

                                                                        A-1824-21
                                     4
multi-risk protection for losses that it might incur due to various causes of loss

or damage to the Ocean."

      Collectively, the policies insure Ocean for a cumulative $50,000,000 on

a "quota share" basis, where several insurers share losses and premiums at

fixed percentages. Thus, defendants and NFMIC issued their own policy and

share in the collective $50,000,000 policy limits at varying percentages. Of

the total $50,000,000 covered, AGLIC agreed to pay fifty percent or up to

$25,000,000; AIG agreed to pay twenty-five percent or up to $12,500,000;

IFCC agreed to pay ten percent or up to $5,000,000; and NFMIC agreed to pay

fifteen percent or up to $7,5000,000. The policy periods ran from January 4,

2020, to January 4, 2021.

      Although defendants and NFMIC issued separate policies, each "were

contemporaneously underwritten and contain identical . . . base policy forms."

Specifically, "the [p]olicies provide numerous independent yet often

overlapping, coverages that each insure different types of eventualities and are

separately triggered by different factual circumstances found in [Ocean]'s

multi-faceted loss." The Insuring Agreement, § 1.01, found in each policy

states: "This Policy [i]nsures against direct physical loss of or damage caused

by a Covered Cause of Loss to Covered Property, at an Insured Location . . .

                                                                           A-1824-21
                                       5
all subject to the terms, conditions and exclusions stated in this Policy."

(Emphasis added). The policies define "Covered Cause of Loss" as "[a]ll risks

of direct physical loss of or damage from any cause unless excluded."

(Emphasis added).      However, the policies do not define the term "direct

physical loss of or damage."

      "The [p]olicies also cover certain Time Element losses, i.e., the loss of

business income resulting from the suspension of [Ocean]'s business activities,

subject to the [p]olicies' terms and conditions." 3 The business interruption

coverage provisions found in each policy, § 4.01.01, states:

            The [Insurer] will pay for the actual Time Element
            loss the Insured sustains, as provided in the Time
            Element Coverages, during the Period of Liability.
            The Time Element loss must result from the necessary
            Suspension of the Insured's business activities at an
            Insured Location. The Suspension must be due to
            direct physical loss of or damage to Property (of the
            type insurable under this Policy other than Finished
            Stock) caused by a Covered Cause of Loss at the
            Location . . . .

            [(Second emphasis added).]

Section 7.56.01 of the policies define "suspension" as "[t]he slowdown or

cessation of the Insured's business activities."

3
  Time Element coverage is frequently referred to as and interchangeable with
"Business Interruption Coverage."

                                                                        A-1824-21
                                        6
      The policies also include various exclusions applicable to all the

coverage parts within the policies. Relevant to this appeal and common to all

four insurers is the "Contamination Exclusion." Section 3.03.01 of the polici es

states in pertinent part:

             This Policy excludes the following unless it results
             from direct physical loss or damage not excluded by
             this Policy:

                            Contamination, and any cost due
                    to . . . Contamination[,] including the
                    inability to use or occupy property or any
                    cost of making property safe or suitable
                    for use or occupancy, except as provided
                    by the Radioactive Contamination
                    Coverage of this Policy.

             [(First and second emphases added).]

      Section 7.09 of the policies defines "contamination" and "contaminated"

as "[a]ny condition of the property due to the actual presence of any foreign

substance, impurity, pollutant, hazardous material, poison, toxin, pathogen or

pathogenic organism, bacteria, virus, disease causing or illness causing agent,

Fungus, mold or mildew."        [(First and second emphases added).]     Under

Section 7.10, contaminants are defined as "[a]ny solid, liquid, gaseous, thermal

or other irritant, pollutant or contaminant, including but not limited to smoke,

vapor, soot, fumes, acids, alkalis, chemicals, waste (including materials to be

                                                                         A-1824-21
                                       7
recycled, reconditioned or reclaimed), asbestos, ammonia, other hazardous

substances, Fungus or Spores."        (Emphases added).      Notably, "virus" and

"pathogen or pathogenic organism" are not included.

       "Each of the [p]olicies also contains a number of amendatory

endorsements, some of which are inconsistent between and among the

[p]olicies."     Unique to NFMIC's policy is its "Biological or Chemical

Substances Exclusion Endorsement." This exclusion added that NFMIC's

               policy does not provide any coverage for any loss,
               cost, expense or damage of any nature, however
               caused, directly or indirectly arising out of, resulting
               from, or in any way related to the actual or suspected
               presence or threat of any pathogenic or poisonous
               biological or chemical substance or material of any
               kind, including, but not limited to, any malicious use
               of such substance or material, whether isolated or
               wide-spread, regardless of any other cause or event
               contributing at the same time or in any sequence.4

      Defendants' policies contain an "Interruption by Communicable Disease"

(ICB) amendatory endorsement that provide business interruption coverage.

The endorsement states in pertinent part:

               The [defendants] will pay for the actual Gross
               Earnings loss sustained by the Insured, as provided by
               this Policy, resulting from the necessary Suspension of

4
  The trial court dismissed NFMCI from the action based on this exclusion,
which is not an issue on appeal.

                                                                           A-1824-21
                                         8
            the Insured's business activities at an Insured Location
            if the Suspension is caused by order of an authorized
            governmental agency enforcing any law or ordinance
            regulating communicable diseases and that such
            portions of the location are declared uninhabitable due
            to the threat of the spread of communicable disease,
            prohibiting access to those portions of the Location.

            [(Emphases added).]

Defendants' potential responsibility for Ocean's losses under the ICB

endorsements is their "respective quota share of the losses not to exceed a

$1,000,000 sublimit of liability."

      Of the defendants, IFCC's policy provides a "Pollution Contamination

Exclusion" endorsement that the trial court found "may not be used to preclude

coverage." The endorsement states IFCC "will not pay for loss, damage, cost

or expense caused directly or indirectly by" the "release, migration, discharge,

escape or dispersal of Contaminants" unless such a peril is affirmatively

covered by the policy. The endorsement continues to read:

            In    this    exclusion . . . , the  capitalized     term
            "Contaminants" means materials that may be harmful
            to human health and include any impurity, pollutant,
            poison, toxin, pathogen or pathogenic organism,
            disease-causing or illness-causing agent, asbestos,
            dioxin, polychlorinated biphenyls, agricultural smoke,
            agricultural soot, vapor, fumes, acids, alkalis, bacteria,
            virus, and hazardous substances as listed in the
            Federal Water Pollution Control Act, Clean Air Act,
            Resource Conservation and Recovery Act of 1976,

                                                                         A-1824-21
                                       9
            Toxic Substances Control Act, or as designated by the
            United States Environmental Protection Agency or
            any other local governmental agency.

            [(Emphases added).]

      And, AGLIC's policy includes an endorsement titled, "Amendatory

Endorsement – Louisiana" (Louisiana Endorsement). Relevant to the matter

under review is the portion of the endorsement that deletes and replaces the

Contamination Exclusion in its entirety with: "Contamination or asbestos, and

any cost due to Contamination or asbestos including the inability to use or

occupy property or any cost of making property safe or suitable for use or

occupancy." The endorsement proceeds to redefine "contamination" as "[a]ny

condition of property due to the actual presence of any Contaminant(s)."

"Contaminants" are redefined as "[a]ny solid, liquid, gaseous, thermal or other

irritant, including but not limited to smoke, vapor, soot, fumes, acids, alkalis,

chemicals, waste (including materials to be recycled, reconditioned or

reclaimed), other hazardous substances, Fungus or Spores."

      A.    COVID-19 Executive Orders

      On March 9, 2020, Governor Murphy issued Executive Order (EO) 103

in response to the outbreak of COVID-19. EO 103 stated COVID-19 was an

imminent public health hazard and declared a state of emergency in New

                                                                          A-1824-21
                                     10
Jersey. EO 103 also stated COVID-19 "is a contagious, and at times fatal,

respiratory disease caused by the SARS-CoV-2 virus."

      On March 11, 2020, the World Health Organization (WHO) declared the

COVID-19 outbreak a global pandemic. As of March 16, 2020, the Centers

for Disease Control and Prevention (CDC) had reported that there were more

than 130,000 cases of COVID-19 worldwide, with more than 4,900 cases in

the United States. There were 178 positive cases in New Jersey. Based on

these facts, on March 16, 2020, Governor Murphy issued EO 104, which

established "social mitigation strategies for combatting COVID-19."

      To mitigate the spread of COVID-19 by limiting person-to-person

interaction, EO 104 designated a subset of businesses within the State as

"essential" and limited the scope of service and hours of operation for

restaurants and some retail establishments, all to limit the spread of the

disease. EO 104 also ordered certain facilities to close and remain closed to

the public for as long as EO 104 remained in effect effective 8:00 p.m. March

16, 2020. Among such facilities were "nightclubs," "[c]asino gaming floors,

including retail sports wagering lounges, and casino concert and entertainment

venues." However, "[o]nline and mobile sports and casino gaming services

                                                                       A-1824-21
                                    11
[were permitted to] continue to be offered notwithstanding the closure of the

physical facility."

      In response to the rising infection rate of COVID-19, the Governor

issued EO 107 on March 21, 2020. To that end, EO 107 "ordered all non-

essential retail businesses in the [S]tate to close and require[ed] individuals in

the [S]tate to stay at home." EO 107 also required that all brick-and-mortar

premises of "non-essential" businesses remain closed to the public for as long

as the order remained in effect. See New Jersey Executive Order No. 107

(Mar. 21, 2020), https://nj.gov/infobank/eo/056murphy/pdf/EO-107.pdf.

      EO 107 also required "[a]ll recreational and entertainment businesses"

closed to the public, if not already closed pursuant to EO 104. Among this

non-exhaustive list of such businesses were casino gaming floors, casino

concert and entertainment venues, and nightclubs.         Restaurants and other

"dining establishments" were "permitted to operate their normal business

hours," but were "limited to offering only food delivery and/or take -out

services." EO 107 closed by stating:

             It shall be the duty of every person or entity in this
             State or doing business in this State and of the
             members of the governing body and every official,
             employee, or agent of every political subdivision in
             this State and of each member of all other
             governmental bodies, agencies, and authorities in this

                                                                           A-1824-21
                                       12
            State of any nature whatsoever, to cooperate fully in
            all matters concerning this [EO].

The order took effect on March 21, 2020, at 9:00 p.m.

      On June 29, 2020, Governor Murphy rescinded the stay-at-home order,

but the restrictions on non-essential businesses—like casinos—remained in

effect. Shortly thereafter, the Governor issued EO 157 on July 2, 2020. EO

157 permitted limited reopening of specific recreational and entertainment

businesses, such as casino gaming floors and retail sports wagering lounges,

subject to restrictions intended to mitigate the spread of COVID-19.         See

Executive    Order    No.     157,    Off.   Governor      (Jul.    2,   2020),

https://www.nj.gov/infobank/eo/056murphy/pdf/EO-157.pdf.

      B.    Coverage Issues

      Because of EO 104 and the growing risk of COVID-19, Ocean

suspended its casino and entertainment operations on March 16, 2020. Ocean

reopened its casino gaming and waging operations in a restricted fashion

according to EO 157 on July 2, 2020. Ocean submitted a timely claim under

the policies to defendants and NFMIC on March 23, 2020.             The parties

corresponded for several months disputing whether coverage was owed or not

under the policies.   On October 2, 2020, defendants agreed to pay their

proportionate share of a total $850,000 in ICB coverage to Ocean. Ultimately,

                                                                         A-1824-21
                                     13
on February 24, 2021, defendants and NFMIC's claims adjuster issued a letter

denying coverage to Ocean under all provision of the policies, excluding the

ICB endorsement.

      Ocean alleged it was entitled to coverage under the following policy

sections: Section 3.01 for Property Damage Coverage; Section 4.01 for Time

Element Coverage; Section 4.02.03 for Extra Expense Coverage; Section

5.02.03 for Civil or Military Authority Coverage; and Section 5.02.25 for

Ingress/Egress Coverage. Each of these sections conditions coverage on there

being direct physical loss or damage.

      On March 3, 2021, Ocean filed a complaint alleging that beginning

March 16, 2020, it incurred "the physical loss of use of its property" and "loss

of business revenue" "as a result of the risks associated with the [COVID-19]

pandemic, including direct physical loss of or damage to covered property, and

in compliance with government guidance and orders." Ocean averred that the

"actual presence" of COVID-19 on the property created "near-certain risk of

danger and harm to its employees and customers" because of "airborne

transmission."

      Furthermore, Ocean asserted the property became unsafe due to

respiratory droplets discharged from infected individuals landing on surfaces

                                                                         A-1824-21
                                     14
and objects, thus "becoming a part of that surface" and physically changing the

property. Consequently, Ocean sought damages for breach of contract based

on the denied coverage following a direct physical loss of or damage t o Ocean

and a declaration of coverage. Defendants moved to dismiss the complaint in

lieu of filing answers under Rule 4:6-2(e).

      First, defendants asserted Ocean failed to and could not allege it

"suffered direct physical loss or damage to the property, and all of the

provisions under which [it] seek[s] coverage require[s] direct physical loss or

damage." The second reason advanced by defendants was "the policies at

issue contain a contamination exclusion" and "[t]he contamination exclusion

clearly and unambiguously uses the word 'virus'" in its definition that

precludes coverage.     NFMIC argued independently that its "Biological or

Chemical Substances Exclusion Endorsement" precluded coverage.               On

December 8, 2021, the trial court heard oral arguments on the motions and

reserved decision.

      On December 22, 2021, the trial court issued a written opinion. The

court granted NFMIC's motion to dismiss but denied defendants' joint motions

to dismiss the complaint. The court found NFMIC's "Biological or Chemical

Substance   Exclusion    Endorsement"     precluded   coverage   because    the

                                                                        A-1824-21
                                     15
endorsement    did   not   contain   language    derived   from    industrial    or

environmental pollution. Instead, "[t]he language substantially mirrors a virus

such as COVID-19" since COVID-19 is a pathogen.

      The court denied defendants' motions on three grounds:

            (1) Ocean's claims constituted fact-based pleadings
            under Rule 4:6-2(e) because the pleadings sufficiently
            demonstrated COVID-19 damaged Ocean;

            (2) the phrase "direct physical loss of or damage" in
            the Insuring Agreement was found by the court to be
            ambiguous and "may be satisfied if the property
            becomes unusable for its intended purpose, whether or
            not the property is altered by the COVID-19 virus."
            The trial court examined several New Jersey state and
            federal cases holding a risk that renders an insured
            property unfit for its intended purpose can constitute a
            "direct physical loss or damage" under a policy
            without a physical alteration to the property. Relying
            largely on Wakefern Food Corp. v. Liberty Mutual
            Fire Insurance Co., 406 N.J. Super. 524 (App. Div.
            2009), the trial court concluded plaintiff sufficiently
            pled "a cause of action as to the insuring agreements
            entitling plaintiff to coverage for COVID-19
            damages;" and

            (3) the court held the Contamination Exclusion found
            in defendants' policies did not preclude coverage here
            because it related to "traditional environmental and
            industrial damages."

Construing the Contamination Exclusion as a traditional pollution exclusion

clause, the trial court cited Nav-Its, Inc. v. Selective Insurance Co. of America,

                                                                           A-1824-21
                                      16
183 N.J. 110 (2005), and concluded "the exclusion remains applicable to more

traditional environmental-related damages[,] and as such will not fulfill

[defendants'] reasonable expectations." Furthermore, noting the ind ependent

definitions of "contamination" and "contaminant," the court held inserting the

term "virus" in the "contamination" definition "does not change the substance

of the exemption."     The court denied defendants' motions and entered a

memorializing order.

                                      II.

      On appeal, defendants argue that the trial court erred by denying their

motions to dismiss. They contend COVID-19 did not cause direct physical

loss of or damage to any of Ocean's covered property as required by the

policies and Ocean's conclusory complaint is insufficient as a matter of law.

Defendants also assert the complaint does not allege causation; the trial court

misapplied the holding in Wakefern and other key decisions; and the

contamination exclusion bars coverage.

      Because this appeal comes to us from the denial of defendants' motion to

dismiss the complaint for failure to state a claim, we treat Ocean's "version of

                                                                         A-1824-21
                                     17
the facts as uncontradicted and accord it all legitimate inferences. We pass no

judgment on the truth of the facts alleged; we accept them as fact only for the

purpose of reviewing the motion to dismiss." Banco Popular N. Am. v. Gandi,

184 N.J. 161, 166 (2005) (citing R. 4:6-2(e)). The critical concern is whether,

upon review of the complaint, exhibits attached thereto and matters of public

record, there exists "the fundament of a cause of action"; "the ability of the

plaintiff to prove its allegations is not at issue." Id. at 183 (citing Printing

Mart-Morristown v. Sharp Elecs. Corp., 116 N.J. 739, 746 (1989)).

      We review a decision denying a motion to dismiss for failure to st ate a

claim de novo applying the same standard as the Law Division judge. MasTec

Renewables Constr. Co. v. SunLight Gen. Mercer Solar, LLC, 462 N.J. Super.

297, 309 (App. Div. 2020) (citing Castello v. Wohler, 446 N.J. Super. 1, 14

(App. Div. 2016)). "Moreover, when analyzing pure questions of law raised in

a dismissal motion, . . . we undertake a de novo review." Smith v. Datla, 451

N.J. Super. 82, 88 (App. Div. 2017) (citing Royster v. N.J. State Police, 227

N.J. 482, 493 (2017); Town of Kearny v. Brandt, 214 N.J. 76, 91 (2013)).

      Because Rule 4:6-2(e) motions to dismiss "are usually brought at the

earliest stages of litigation, they should be granted in 'only the rarest

instances.'" Lieberman v. Port Auth. of N.Y. & N.J., 132 N.J. 76, 79 (1993)

                                                                         A-1824-21
                                     18
(quoting Printing Mart, 116 N.J. at 772). Nevertheless, "dismissal is mandated

where the factual allegations are palpably insufficient to support a claim upon

which relief can be granted," Rieder v. State, Dep't of Transp., 221 N.J. Super.

547, 552 (App. Div. 1987), or if "discovery will not give rise to such a claim ,"

Dimitrakopoulos v. Borrus, Goldin, Foley, Vignuolo, Hyman & Stahl, P.C.,

237 N.J. 91, 107 (2019).

      Where, as in this case, the issue raised on appeal involves the

interpretation of a contract and applying case law to the facts, we review the

trial court's decision de novo. Merrill Lynch, Pierce, Fenner & Smith, Inc. v.

Cantone Rsch., Inc., 427 N.J. Super. 45, 57 (App. Div. 2012). In doing so, we

accord no "special deference" to the "trial court's interpretation of the law" or

its judgment on "the legal consequences that flow from established facts."

Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378

(1995). Here, the trial court found Ocean suffered a "direct physical loss of or

damage to" its property as a result of the EO's issued relative to COVID-19 as

was necessary to trigger coverage for revenue losses under the terms of

defendants' policies. We disagree.

      The insured has the burden "to bring [a] claim within the basic terms of

[an insurance] policy." Reliance Ins. Co. v. Armstrong World Indus., 292 N.J.

                                                                          A-1824-21
                                     19
Super. 365, 377 (App. Div. 1996). There is a "general rule that an insured is

chargeable with knowledge of the contents of an insurance policy in the

absence of fraud or inequitable conduct" by the carrier. Edwards v. Prudential

Prop. & Cas. Co., 357 N.J. Super. 196, 204 (2003). "[I]nsurance purchasers

are expected to read their policies and 'the law may fairly impose upon [them]

such restrictions, conditions and limitations as the average insured would

ascertain from such reading.'" Sears Mortg. Corp. v. Rose, 134 N.J. 326, 348

(1993) (second alteration in original) (quoting Bauman v. Royal Indem. Co.,

36 N.J. 12, 25 (1961)).

      When determining the meaning of an insurance policy provision, a court

must "first look to the plain meaning of the language at issue." Oxford Realty

Grp. Cedar v. Travelers Excess & Surplus Lines Co., 229 N.J. 196, 207 (2017).

As with other types of contracts, the parties' agreement must "be enforced as

written when its terms are clear in order that the expectations of the parties

will be fulfilled." Flomerfelt v. Cardiello, 202 N.J. 432, 441 (2010). Thus, in

the absence of a specific definition in a policy, a word or term "must be

interpreted in accordance with [its] ordinary, plain and usual meaning." Daus

v. Marble, 270 N.J. Super. 241, 251 (App. Div. 1994).

                                                                        A-1824-21
                                    20
      "[A] court should not 'engage in a strained construction to support the

imposition of liability' or write a better policy for the insured than the one

[they] purchased." Chubb Custom Ins. Co. v. Prudential Ins. Co. of Am., 195

N.J. 231, 238 (2008) (quoting Progressive Cas. Ins. Co. v. Hurley, 166 N.J.

260, 272-73 (2001)). Thus, if there is no ambiguity in a policy's terms, those

terms should be enforced "as written." Zacarias v. Allstate Ins. Co., 168 N.J.

590, 597 (2001).

      In contrast, if a policy's language is ambiguous, the court may utilize

rules of construction beyond the four corners of the contract. Oxford Realty,

229 N.J. at 207.    For example, courts will ordinarily "construe insurance

contract ambiguities in favor of the insured via the doctrine of contra

proferentem." Id. at 208. This doctrine takes into consideration "the vast

differences in the bargaining positions between an insured and an insurance

company in the drafting of an insurance policy," allowing a court to interpret a

contract against the drafter.     Villa v. Short, 195 N.J. 15, 23 (2008).

Additionally, a court may consider the insured's "reasonable expectations."

Oxford Realty, 229 N.J. at 208.      That is, if the "policy's language fairly

supports two meanings, one that favors the insurer, and the other that favors

                                                                         A-1824-21
                                     21
the insured, the policy should be construed to sustain coverage." President v.

Jenkins, 180 N.J. 550, 563 (2004).

      Because insurance policies are very often contracts of adhesion, "courts

must assume a particularly vigilant role in ensuring their conformity t o public

policy and principles of fairness." Voorhees v. Preferred Mut. Ins. Co., 128

N.J. 165, 175 (1992). To that end, the above doctrines are intended to protect

members of the public, who "should not be subjected to technical

encumbrances or to hidden pitfalls" in insurance contracts. Kievit v. Loyal

Protective Life Ins. Co., 34 N.J. 475, 482 (1961). The intent is for a policy be

"construed liberally" in the insured's "favor to the end that coverage is

afforded 'to the full extent that any fair interpretation will allow.'"      Ibid.

(quoting Danek v. Hommer, 28 N.J. Super. 68, 76 (App. Div. 1953)).

      However, these doctrines typically should only be utilized by a court to

"read the policy in favor of the insured" if there is a "genuine ambiguity" in the

contract, meaning "the phrasing of the policy is so confusing that the average

policyholder cannot make out the boundaries of coverage." Templo Fuente De

Vida Corp. v. Nat'l Union Fire Ins. Co. of Pittsburgh, 224 N.J. 189, 200 (2016)

(quoting Progressive Cas. Ins., 166 N.J. at 274). A term or phrase in a "policy

is not ambiguous merely because two conflicting interpretations of it are

                                                                           A-1824-21
                                      22
suggested by the litigants." Powell v. Alemaz, Inc., 335 N.J. Super. 33, 44

(App. Div. 2000).

      If the policy's language is "direct and ordinary," can "be understood

without employing subtle or legalistic distinctions," is not "obscured by fine

print," and does not "require[] strenuous study to comprehend," it is not

ambiguous. Zacarias, 168 N.J. at 601; accord Katchen v. Gov't Emps. Ins. Co.,

457 N.J. Super. 600, 606 (App. Div. 2019) (holding while insurer "could have

included a definition of 'motor vehicle' in its policy," the term was not

ambiguous simply because a definition was missing, since "[a]ny ordinary

reasonable person understands" its meaning).

      More rarely, an insurance contract may be read in favor of the insured if

the language at issue is "perhaps not ambiguous," but "nevertheless

insufficiently clear to justify depriving the insured of [his or] her reasonable

expectation that coverage would be provided." Sparks v. St. Paul Ins. Co., 100

N.J. 325, 336 (1985). A court may "examine whether more precise policy

language, if chosen by the insurance company, would have 'put the matter

beyond reasonable question.'" Homesite Ins. Co. v. Hindman, 413 N.J. Super.

41, 46 (App. Div. 2010) (quoting Doto v. Russo, 140 N.J. 544, 557 (1995)).

Nevertheless, in general "the insured's reasonable expectations should not be

                                                                         A-1824-21
                                     23
considered where the policy is plain in its meaning unless the policy is

'inconsistent with public expectations [and] commercially accepted standard s.'"

Nunn v. Franklin Mut. Ins. Co., 274 N.J. Super. 543, 550 (App. Div. 1994)

(alteration in original) (quoting Werner Indus. v. First State Ins. Co., 112 N.J.

30, 36 (1988)).

      Ultimately, the language of an insurance policy "underscores the basic

notion that the premium paid by the insured does not buy coverage for all . . .

damage but only for that type of damage provided for in the policy." Weedo v.

Stone-E-Brick, Inc., 81 N.J. 233, 237 (1979). Thus, a policy may contain

"limitations on coverage" that "are designed 'to restrict and shape the coverage

otherwise afforded.'" Hardy ex rel. Dowdell v. Abdul-Matin, 198 N.J. 95, 102

(2009) (quoting Weedo, 81 N.J. at 237).        The doctrines dictating a court

construe an insurance contract in the insured's favor thus should not be used to

read into the agreement coverage "which is not there," if there is no showing

that the policy somehow did not meet the insured's reasonable expectations at

the time the contract was signed. Werner Indus., 112 N.J. 30 at 38 (quoting

Tomaiuoli v. U.S. Fidelity & Guar. Co., 75 N.J. Super. 192, 207 (App. Div.

1962)).

                                                                          A-1824-21
                                     24
      Here, the policies provide that defendants would pay Ocean for business

income lost because of a suspension in its operations due to a "direct physical

loss of or damage to" the property caused by a "covered cause of loss."

"Direct physical loss of or damage to" was not defined in the property

coverage sections of the policies. Our courts have "adopted a broad notion of

the term 'physical.'" Phibro Animal Health Corp. v. Nat'l Union Fire Ins. Co.,

446 N.J. Super. 419, 437 (App. Div. 2016). However, when "physical" is

paired with another word, such as in "physical injury," courts have found that

the resulting term means a "detrimental alteration," or "damage or harm to the

physical condition of a thing." Id. at 438 (quoting Farm Bureau Mut. Ins. Co.

of Am. v. Earthsoils, Inc., 812 N.W.2d 873, 876 (Minn. Ct. App. 2012)). The

Third Circuit, applying New Jersey law, has also stated that "[i]n ordinary

parlance and widely accepted definition, physical damage to property means "a

distinct, demonstrable, and physical alteration" of its structure." Port Auth. of

N.Y. & N.J. v. Affiliated FM Ins. Co., 311 F.3d 226, 235 (3rd Cir. 2002)

(internal quotation marks omitted) (quoting 10 Couch on Insurance, § 148.46

(3d ed. 1998)).

      While "[f]ire, water, smoke and impact from another object are typical

examples of physical damage" that can "demonstrably alter the components of

                                                                          A-1824-21
                                     25
a building and trigger coverage" under a property insurance policy, damage to

a building as an entity "by sources unnoticeable to the naked eye must meet a

higher threshold." Ibid. For example, in Port Authority, the Third Circuit

found that the presence of "large quantities of asbestos in the air of a building"

would "make the structure uninhabitable and unusable" and would therefore

cause a "physical loss" of property to its owner. Id. at 236. By contrast, if

asbestos was present but "not in such form or quantity as to make the building

unusable," there would be no such physical loss since the structure would

"continue[] to function" without any detrimental change to its "utility." Ibid.

      In Wakefern, the plaintiff, a supermarket, purchased an insurance policy

providing coverage "for consequential loss or damage resulting from

interruption of" electrical power at its premises if the interruption resulted

from "physical damage" to electrical equipment and property located

elsewhere. 406 N.J. Super. at 531-32. Wakefern filed a claim after a power

outage at its store occurred when an "electrical 'cascade'" disrupted a large part

of the nation's power grid. Id. at 532-38. It was determined in some places

throughout the grid, the cascade damaged power generation and transmission

equipment, but in other places, power was automatically shut off to protect

equipment from experiencing power surges that could have caused damage.

                                                                           A-1824-21
                                      26
Ibid. The defendant insurance company argued Wakefern was not entitled to

coverage for economic losses resulting from the power outage, because it had

not shown any of the power lines or other equipment that supplied its

supermarket had been physically damaged. Id. at 537-38.

      But we disagreed, finding "the undefined term 'physical damage'" in

Wakefern's policy was "ambiguous" because it was susceptible to "at least two

different reasonable interpretations":    (1) that the part of the grid serving

Wakefern was not damaged because there was no detrimental alteration to its

structure; and (2) that the grid was damaged because it was shut down due to

the cascade elsewhere, rendering it physically incapable of providing

electricity. Id. at 540-41. We concluded that in the context of the case, the

term "physical damage" should be construed in Wakefern's favor, since "due to

a physical incident or series of incidents" elsewhere, the grid as a whole had

become "physically incapable of performing [its] essential function." Id. at

540. In addition, we explained that the average policyholder should "not be

expected to understand the arcane functioning of the power grid" when

submitting an insurance claim after an outage. Id. at 541. However, we stated

we would have "reach[ed] a different result if, for example, a governmental

                                                                        A-1824-21
                                     27
agency had ordered that the power [to the supermarket] be shut off to conserve

electricity." Id. at 540 n.7.

      In reaching our conclusion in Wakefern, we cited cases from this State

and other states wherein coverage was found for a "physical loss of or damage

to" property based on a "loss of functionality" rather than harm to the

property's structure. Id. at 542-43. For example, in Customized Distribution

Services v. Zurich Insurance Co., 373 N.J. Super. 480, 483-84 (App. Div.

2004), the plaintiff warehouse failed to appropriately store a customer's drink

products before their expiration, rendering the goods unusable. The customer

sued plaintiff, who in turn sued the defendant insurer. Ibid. In our opinion,

we determined "that, for coverage to apply, it was not necessary that the

product's material or chemical composition be altered" because the bottles

could have broken thus damaging the property without a change to its chemical

composition. Id. at 488. Moreover, because the products had expired "as a

result of an undue passage of time" caused by the plaintiff, the end-consumers'

perception of the beverages changed, i.e., consumers would not purchase

expired drinks from the plaintiff's customer.    Id. at 490.   Because of the

expiration dates, and the consumers' new perception of the expired drinks, "the

                                                                        A-1824-21
                                    28
product lost value as much from the outdating as if it had turned sour or gone

bad in some more tangible or material way." Ibid.

      Other cases from various federal and state courts throughout the country

have also found insurance coverage in situations involving intangible physical

damage to property causing a loss of that property's usability. For example, in

Gregory Packaging, Inc. v. Travelers Property Casualty Co. of America, Civ.

No. 12-04418, 2014 U.S. Dist. LEXIS 165232, at *13 (D.N.J. Nov. 25, 2014),

the District Court found that "property can sustain physical loss or damage

without experiencing structural alteration."    In that case, the federal court

concluded the plaintiff suffered such a loss when ammonia was inadvertently

released within its facility, "physically transform[ing] the air" inside and

rendering it unfit for occupancy until the gas could be dissipated. Id. at *16-

17.

      The District Court held the ammonia discharge caused a "direct physical

loss of or damage to" the facility "because the ammonia physically rendered

the facility unusable for a period of time." Id. at *17; accord Essex Ins. Co. v.

BloomSouth Flooring Corp., 562 F.3d 399, 401 (1st Cir. 2009) (physical injury

to property found where unpleasant odor causing "headaches or other ill

effects" rendered building unusable); Motorists Mut. Ins. Co. v. Hardinger,

                                                                          A-1824-21
                                     29
131 Fed. Appx. 823, 825-27 (3rd Cir. 2005) (direct physical loss found where

home rendered uninhabitable by bacterial contamination of water supply);

TRAVCO Ins. Co. v. Ward, 715 F.Supp. 2d 699, 709-10 (E.D. Va. 2010)

(finding direct physical loss where home rendered uninhabitable by toxic gases

released by defective drywall), aff'd. 504 F. Appx. 251 (4th Cir. 2013).

      By contrast, New Jersey courts have found that losses of business

income were not covered where the link between the insured premises and

physical damage to property elsewhere was more attenuated. See, e.g., Arthur

Andersen LLP v. Fed. Ins. Co., 416 N.J. Super. 334, 349 (App. Div. 2010)

(finding plaintiff's losses following September 11th attacks on the World Trade

Center and Pentagon were not covered under its insurance policy because no

evidence supported the property damage at those locations caused any

interruption of plaintiff's business).

      Other federal and state courts throughout the country have reached

similar conclusions. In Newman Myers Kreines Gross Harris, P.C. v. Great N.

Ins. Co., 17 F. Supp. 3d 323, 325 (S.D.N.Y. 2014), a utility provider shut off

power to an area of New York City that included the plaintiff's premises in

advance of Superstorm Sandy's arrival, to prevent greater damage to the

electrical grid and related equipment. The District Court held the plaintiff's

                                                                           A-1824-21
                                         30
loss of income during the outage was not covered by its insurance policy,

finding that the plaintiff did not suffer "physical loss or damage" to its office,

but merely a loss of use. Id. at 331; c.f. Wakefern, 406 N.J. Super. at 540 n.7

(noting the court would not have found a "direct physical loss or damage to"

insured property if "a governmental agency had ordered that the power be shut

off to conserve electricity").

      The District Court stated the words "direct" and "physical," when used

to modify the phrase "loss or damage," "ordinarily connote actual,

demonstrable harm of some form to the premises itself, rather than forced

closure of the premises for reasons exogenous to the premises themselves, or

the adverse business consequences that flow from such closure." Great N. Ins.

Co., 17 F. Supp. 3d at 331. The court found the limitation on coverage in the

plaintiff's policy to a "period of restoration" lent support to this conclusion,

stating that "[t]he words 'repair' and 'replace' contemplate physical damage to

the insured premises as opposed to loss of use of it." Id. at 332.

      Addressing the same COVID-19-related issue before this court and

applying New Jersey law, the United States District Court for the District of

New Jersey has recently granted several insurance companies' motions to

                                                                           A-1824-21
                                      31
dismiss for failure to state a claim under the F.R.C.P. 12(b)(6) standard.5 The

District Court found that insurance policies containing similar, if not identical,

clauses to those in plaintiff's policies here "unambiguously limit[ed]" coverage

to "physical loss or damage to . . . commercial property." 7th Inning Stretch

LLC v. Arch Ins. Co., Civ. No: 20-8161, 2021 U.S. Dist. LEXIS 58477, at *4

(D.N.J. Mar. 26, 2021). And, the District Court has further found this requires

a showing of tangible damage to property, that the functionality of the property

was nearly eliminated or destroyed, or that the property was made useless or

uninhabitable as a result of a covered cause of loss. Id. at *4-5.

      The District Court has found that businesses requesting coverage for lost

income resulting from Governor Murphy's EO's have not made and cannot

make such a showing because there has been no physical loss of or damage to

their property, and the presence of COVID-19 virus in the air or on the

surfaces of their property is insufficient to demonstrate property loss or

damage. Ibid. (holding it is "not enough" to show the EOs limited access to

plaintiff's facility without alleging the property was physically damaged);

5
   The Third Circuit currently has fifty COVID-19 coverage-related appeals
pending but has yet to render a decision. See Covid Coverage Litigation
Tracker: Appeals      in   Business      Interruption    Cases,  PENN LAW,
https://cclt.law.upenn.edu/appeals/ (last visited June 8, 2022).

                                                                           A-1824-21
                                      32
accord Emami v. CNA & Transp. Ins. Co., Civ. No. 20-18792, 2021 U.S. Dist.

LEXIS 60753, at *4 (D.N.J. Mar. 11, 2021); Blvd. Carroll Ent. Grp. v.

Fireman's Fund Ins. Co., Civ. No. 20-11771, 2020 U.S. Dist. LEXIS 234659,

at *4 (D.N.J. Dec. 14, 2020); Ralph Lauren Corp. v. Factory Mut. Ins. Co.,

Civ. No. 20-10167, 2021 U.S. Dist. LEXIS 90526, at *6-9 (D.N.J. May 12,

2021); Child.'s Place, Inc. v. Zurich Am. Ins. Co., Civ. No. 20-7980, 2021 U.S.

Dist. LEXIS 177269, at *12-18 (D.N.J. Sept. 17, 2021); Manhattan Partners,

LLC v. Am. Guar. & Liab. Ins. Co., Civ. No. 20-14342, 2021 U.S. Dist.

LEXIS 50461, *4-6 (D.N.J. Mar. 17, 2021).

      Additionally, an overwhelming majority of federal Circuit Courts have

similarly held that the mere loss of use of business property caused by the

presence of COVID-19, and government restrictions in response to COVID-19,

do not constitute a direct physical loss or damage to property under a

commercial property insurance policy.     See, e.g., 10012 Holdings, Inc. v.

Sentinel Ins. Co,, 21 F.4th 216, 220-23 (2d Cir. 2021); Uncork & Create LLC

v. Cincinnati Ins. Co., 27 F.4th 926, 933-34 (4th Cir. 2022); Q Clothier New

Orleans, L.L.C. v. Twin City Fire Ins. Co., 29 F.4th 252, 259 (5th Cir. 2022);

Santo's Italian Café LLC v. Acuity Ins. Co., 15 F.4th 398, 401 (6th Cir. 2021);

Sandy Point Dental, P.C. v. Cincinnati Ins. Co,, 20 F.4th 327, 335 (7th Cir.

                                                                        A-1824-21
                                    33
2021); Oral Surgeons, P.C. v. Cincinnati Ins. Co., 2 F.4th 1141, 1144-45, 1145

n.3 (8th Cir. 2021); Mudpie, Inc. v. Travelers Cas. Ins. Co. of Am., 15 F.4th

885, 892 (9th Cir. 2021); Goodwill Indus. of Cent. Okla. Inc. v. Phila. Indem.

Ins. Co., 21 F.4th 704, 710 (10th Cir. 2021); Gilreath Fam. & Cosm. Dentistry,

Inc. v. Cincinnati Ins. Co., Civ. No. 21-11046, 2021 U.S. App. LEXIS 26196,

at *2 (11th Cir. Aug. 31, 2021).

      Numerous state appellate courts have reached the same conclusion in

actions involving similar terms and claims.       See, e.g., Verveine Corp. v.

Strathmore Ins. Co., 184 N.E.3d 1266, 1278-79 (Mass. 2022); accord Wakonda

Club v. Selective Ins. Co. of Am., ___ N.W.2d ___, ___ (Iowa Apr. 22, 2022)

(slip op. at 9-21); Inns-by-the-Sea v. Cal. Mut. Ins. Co., 286 Cal. Rptr. 3d 576,

593 (Ct. App. 2021); Ind. Repertory Theatre v. Cincinnati Cas. Co., 180

N.E.3d 403, 410-11 (Ind. Ct. App. 2022); Gavrilides Mgmt. Co., LLC v. Mich.

Ins. Co., No. 354418, 2022 Mich. App. LEXIS 632, at *6 (Mich. Ct. App. Feb.

1, 2022).

      Here, defendants assert that even if the COVID-19 virus was on the

surfaces and in the air at Ocean, the property did not sustain any "direct

physical loss of or damage" sufficient to trigger coverage under the policies.

Instead, defendants maintain Ocean merely suffered a temporary loss of

                                                                          A-1824-21
                                     34
business due to Governor Murphy's EO's without any tangible physical

alteration to the property.

      The term "direct physical loss of or damage to" insured premises was not

defined in the policies. However, as noted, the lack of a definition does not

always mean that a term is ambiguous.        Katchen, 457 N.J. Super. at 606.

"Sophisticated commercial insureds[] [like plaintiff] do not receive the benefit

of having contractual ambiguities construed against the insurer."         Oxford

Realty, 229 N.J. at 208.

      The matter under review clearly differs from Wakefern and the other

cases cited above where insurance coverage was found despite a lack of

damage to the structure of an insured building. In Wakefern, the plaintiff's

policy explicitly covered losses of electrical power due to damage to offsite

equipment owned by others. 406 N.J. Super. at 531-32. We found the policy

included damage anywhere on the greater electrical grid that caused the

plaintiff's power to be shut off. Id. at 540. In that case, unlike here, there was

actual physical damage to property, which caused the plaintiff's losses of

income.    In Wakefern, we contrasted the facts with a situation where a

business's loss of use of its property stemmed from a government order to shut

off electrical power. Id. at 540 n.7; c.f. Newman Myers, 17 F. Supp. 3d at 330

                                                                           A-1824-21
                                      35
(finding loss of income was not a result of direct physical loss or damage to

property because governmental agency ordered shutting down electrical to

conserve energy).

      Moreover, some of these cases involved intangible damage to premises,

such as toxic fumes, a landslide, or a noxious odor, that rendered the premises

physically uninhabitable or unusable for a period of time. Specifically, the

circumstances in Port Authority and Gregory Packaging differ from those here

because the respective courts found such large quantities of asbestos and

ammonia in the air that precluded human occupancy.              Consequently, the

respective properties were stripped of their uses entirely until remediated. Port

Authority, 311 F.3d at 235-36; Gregory Packaging, slip op. at 16-17.

Saliently, none of the cases that found coverage due to "loss of use" involved a

government shutdown in the absence of demonstrable physical damage to

structures or physical unfitness for human use or habitation.

      As defendants argue, and prevalent caselaw maintains, the COVID-19

virus's presence in Ocean's air and on its surfaces did not physically alter the

property's physical structure such that it qualifies as a direct physical loss of or

damage to Ocean's property.        Whereas certain quantities of asbestos and

ammonia in the air require extensive remediation before making a property fit

                                                                             A-1824-21
                                       36
for humans, the COVID-19 virus can be eliminated from surfaces with

household cleaning products and dissipates on its own.      See Sandy Point

Dental, 20 F.4th at 335 (finding COVID-19 "may be wiped off surfaces using

ordinary cleaning materials, and it disintegrates on its own in a matter of

days"); Verveine Corp., 184 N.E. 3d at 1276 ("Evanescent presence of a

harmful airborne substance [like COVID-19] that will quickly dissipate on its

own, or surface-level contamination that can be removed by simple cleaning,

does not physically alter or affect property.").

      Here, the record supports the conclusion there was no damage to

equipment or property on- or off-site that caused Ocean to lose its physical

capacity to operate, and there was no physical alteration that made the casino

resort too dangerous to enter. Instead, Ocean was forced to close its casino

gaming floor, sports wagering lounges, and entertainment venues to the public

in accordance with Governor Murphy's EO's. However, Ocean was able to

continue operating its restaurants, bars, and hotel accommodations in a

restricted manner, as well as its online gambling services, from March 16 to

July 2, 2020.

      Saliently, Ocean would have been able to continue operating its casino

and performance venue without interruption had the EO's not been issued. As

                                                                       A-1824-21
                                      37
Insurance Council argues in its amici brief, COVID-19 did not preclude Ocean

from using its business for all purposes, "and it resumed all activities at its

premises when government orders allowed it do so, even while the COVID-19

virus was still circulating." COVID-19 continued to spread, and the risks it

presented during the government-mandated shutdown remained after EO 107

was superseded by EO 157 on July 2, 2020.

      The trial court and Ocean's reliance on Customized Distribution is also

misplaced. As an initial matter, Customized Distribution involved a third-

party liability insurance policy for beverages whereas the policies here are

first-party property insurance contracts. 373 N.J. Super. at 485-86. We held

the beverages suffered the functional equivalent of a physical alteration

sufficient to constitute a physical loss because they had lost all their value to

the beverage company. Id. at 490-91. The drinks lost their value because they

expired, making them unusable. Ibid. But here, Ocean did not lose its value

and continued to operate some of its services in a limited fashion during the

government shutdown, such as on-line betting.

      Therefore, even applying a "generous and hospitable approach," Printing

Mart, 116 N.J. at 746, Ocean's complaint does not allege facts "which, if

proven, would constitute a valid cause of action" as to afford coverage under

                                                                          A-1824-21
                                     38
defendants' policies. Leon v. Rite Aid Corp., 340 N.J. Super. 462, 472 (App.

Div. 2001).      The COVID-19's presence and/or the government-mandated

shutdown does not constitute a direct physical loss of or damage to Ocean as

required under the policies. Additionally, because Ocean's claims are based

solely upon the language of the policies, further discovery would not render

them viable. Dimitrakopoulos, 237 N.J. at 107-108. Therefore, the trial court

erred in not granting defendants' motion to dismiss Ocean's complaint under

Rule 4:6-2(e).     In our recent opinion in Mattdogg, Inc. v. Philadelphia

Indemnity Insurance Co., we considered and extensively addressed these

identical issues. ___ N.J. Super. ___, ___ (App. Div. 2022) (slip op. at 22-52).

Our reasoning and holdings in Mattdogg, Inc. apply in the matter under

review.

                                      III.

      Even assuming Ocean successfully pled the COVID-19 virus caused an

actual or imminent physical loss or damage to Ocean, the Contamination

Exclusion unambiguously excludes coverage. Defendants assert the trial court

"violated fundamental rules of insurance-policy interpretation by ignoring the

plain language of this exclusion and re-writing it to include only traditional

environmental pollutants." Ocean, however, argues that the court's narrow

                                                                         A-1824-21
                                     39
interpretation was appropriate under Nav-Its. The trial court found "it is not

unreasonable to conclude that pollution exclusions in an all-risk policy that are

substantially directed at traditional environmental and industrial damaged do

not pertain to damages for a virus such as COVID-19, which damages are the

result of naturally occurring communicable diseases." Again, we disagree.

      Exclusionary provisions in insurance contracts "are presumptively valid

and will be given effect if 'specific, plain, clear, prominent, and not contrary to

public policy.'" Princeton Ins. Co. v. Chunmuang, 151 N.J. 80, 95 (1997)

(quoting Doto, 140 N.J. at 559).       However, "exclusions must be narrowly

construed," and "the burden is on the insurer to bring the case within the

exclusion." Ibid. This rule serves the greater doctrine that an "insured is

entitled to protection to the full extent that any reasonable interpretation of

[exclusionary clauses] will permit." S.N. Golden Ests., Inc. v. Cont'l Cas. Co.,

293 N.J. Super. 395, 401 (App. Div. 1996) (quoting Ruvolo v. Am. Cas. Co.,

39 N.J. 490, 498 (1963)).

      Nevertheless, "where the words of an exclusionary clause are clear and

unambiguous, 'a court should not engage in a strained construction to support

the imposition of liability.'" Aviation Charters v. Avemco Ins. Co., 335 N.J.

Super. 591, 594 (App. Div. 2000) (quoting Longobardi v. Chubb Ins. Co. of

                                                                            A-1824-21
                                      40
N.J., 121 N.J. 530, 537 (1990)).          "[W]hile where there are several

interpretations of an exclusion's meaning" a court "would tend to favor the one

for coverage," however, this does not mean "that any far-fetched interpretation

of a policy exclusion will be sufficient to create an ambiguity requiring

coverage."   Id. at 59-95 (second and third alterations in original) (quoting

Stafford v. T.H.E. Ins. Co., 309 N.J. Super. 97, 105 (App. Div. 1998)). This is

because "clear, unambiguous exclusionary clauses . . . . directly affect the risk

the insurer assumes and upon which premiums are established." Id. at 596.

      Here, the Contamination Exclusion unambiguously excludes coverage

for "[c]ontamination, and any cost due to [c]ontamination including the

inability to use or occupy property or any cost of making property safe or

suitable for use or occupancy." The policies further define "contamination"

unambiguously as "[a]ny condition of property due to the actual presence of

any . . . pathogen or pathogenic organism, bacteria, [or] virus."

Unquestionably, this would encompass the COVID-19 virus.              Moreover,

Ocean alleged in its complaint the COVID-19 virus was actually present at

Ocean and caused it to incur losses. And, because Governor Murphy issued

the EO's to mitigate the spread of this highly contagious virus, as pled by

                                                                          A-1824-21
                                     41
Ocean, the relief it seeks is inexplicably intertwined to the presence of the

virus and is excluded under the policy.

      "[W]here the words of an exclusionary clause are clear and

unambiguous," as they are here, "a court should not engage in a strained

construction to support the imposition of liability." Aviation Charters, 335

N.J. Super. at 594 (quoting Longobardi, 121 N.J. at 537).          Furthermore,

Ocean's complaint also confirms COVID-19 "is a highly contagious and easily

transmitted   human    pathogen,"    thus   excluding   coverage    under   the

Contamination Exclusion. 6

      Additionally, the definition of "contaminant" in the policies does not

include the term virus.      However, the term "contaminant" is not used or

referred to in the Contamination Exclusion or definition of "contamination."

Instead, the word "contaminant" is used in the base policies only in special

coverages for environmental cleanup costs unrelated to the Contamination

Exclusion. Nonetheless, the Pollution Contamination Exclusion endorsement

in IFCC's policy, unique to IFCC, states IFCC "will not pay for loss, damage,

6
    "SARS-CoV-2, the coronavirus that causes COVID-19, is a pathogenic
virus." See Coronavirus: What is an emerging viral pathogen claim?, EPA,
https://www.epa.gov/coronavirus/what-emerging-viral-pathogen-claim   (last
updated Apr. 11, 2022).

                                                                        A-1824-21
                                     42
cost or expense caused directly or indirectly by" the "release, migration,

discharge, escape or dispersal of [c]ontaminants." The endorsement continues

to include "virus" in its definition of contaminants.

      In an attempt to reconcile the differences between these definitions, the

trial court erroneously found them ambiguous and confusing. Relying on Nav-

Its, the court held those "pollution exclusions are overly broad[] [and] unfair."

In applying Nav-Its, the court concluded "the contaminants are associated with

traditional environmental pollution damages, not reasonably related to the

damages in this case, which are derived from a communicable disease."

However, the court erred by conflating the applicability of terms used in the

general Contamination Exclusion found in all the policies, and the Pollution

Contamination Exclusion endorsement, along with its specific terms and

definitions, only found in IFCC's policy.

      Nonetheless, grouping viruses with environmental and industrial

pollutants may be unusual, but Ocean does not cite any controlling cases

construing "contamination" in its contractual definition.     A court may not

interpret an insurance contract in a way that leaves part of the contract

meaningless. Cypress Point Condo. Ass'n v. Adria Towers, L.L.C., 226 N.J.

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403, 416 (2016). We conclude it was improper for the trial court to essentially

rewrite the unambiguous and applicable Contamination Exclusion at issue.

      Lastly, although not addressed in the trial court's decision, Ocean argued

in opposition to defendants' motion to leave for appeal, and reiterates again on

appeal, that the Contamination Exclusion does not bar coverage because the

Louisiana Endorsement AGLIC included in its policy "deleted and replaced"

the Contamination Exclusion and contamination definition. The endorsement

defines "contamination" as "the actual presence of any [c]ontaminant(s)" and

removes "pollutants or contaminant" from the definition of "contaminant."

      Defendants argue this is a state-specific endorsement applicable only to

Ocean's property under its contract located in Louisiana. However, Ocean

asserts this endorsement also applies in New Jersey.        As mentioned, the

endorsement is titled "Amendatory Endorsement – Louisiana."              Ocean

highlights the difference in prefatory language in the Louisiana Endorsement,

"THIS ENDORSEMENT CHANGES THE POLICY," versus the language in

the Connecticut Endorsement, 7 which states "THIS ENDORSEMENT

CHANGES THE POLICY AND APPLIES TO THOSE RISKS IN

7
  The relevant endorsement is similarly titled, "Amendatory Endorsement –
Connecticut" (Connecticut Endorsement).

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CONNECTICUT."         Ocean argues this difference in language demonstrates

AGLIC's intent to make the Louisiana endorsement a generally applicable

endorsement. Notably, in addition to the Connecticut Endorsement, the New

York Endorsement 8 is the only other amendatory endorsement to use the same

prefatory language.    The remaining twenty-nine of thirty-one state-titled

amendatory endorsements use the same general prefatory language found in

the Louisiana Endorsement.

      Applying Ocean's analysis, several state-titled endorsements present

conflicting amendments to various sections.         For example, multiple

endorsements delete and replace "SECTION VI-GENERAL POLICY

CONDITIONS,        CANCELLATIONS/NON-RENEWAL"              in   its   entirety,

including the Louisiana Endorsement. However, some endorsements present

different and conflicting replacement terms from each other despite using the

same general prefatory language found in the Louisiana Endorsement that

Ocean relies on.

8
  The relevant endorsement is similarly titled, "Amendatory Endorsement –
New York" (New York Endorsement). The endorsement precedes with "THIS
ENDORSEMENT CHANGES THE POLICY AND APPLIES TO THOSE
RISKS IN NEW YORK."

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      Had AGLIC intended for state-titled endorsements using the general

prefatory language to ignore geographical boundaries, then it would not put

forth geographic identifiers with conflicting terms between endorsements

unless the endorsements were meant to be state-specific.          See Couch on

Insurance § 18:20 ("[T]he policy [and its endorsements] must be considered as

a whole and the caption read in connection with the remainder of the

contents."). Because a court may not interpret an insurance contract in a way

that leaves part of the contract meaningless, we reject plaintiff's claim the

Louisiana Endorsement applies to the Contamination Exclusion because it

would render the geographic identifier of all the state-titled endorsements

meaningless. Cypress Point Condo., 226 N.J. at 416.

      The Federal District Court of New Jersey, among other courts, have

faced the same dilemma in COVID-19 insurance actions involving identical

language   and   have    held   the   Louisiana   Endorsement     amending     the

Contamination Exclusion is state-specific to Louisiana. See, e.g., Manhattan

Partners, slip op. at 6 n.3. ("Had the parties intended to remove 'virus' from the

Contamination provision, they could have done so with a general endorsement

that was not limited to a single state.") We agree and reject Ocean's argument.

We conclude Ocean's remaining arguments—to the extent we have not

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addressed them—lack sufficient merit to warrant any further discussion in a

written opinion. R. 2:11-3(e)(1)(E).

      For these reasons, we reverse the matter under review. The matter is

remanded to the Law Division for entry of an order dismissing Ocean's

complaint as to all defendants.

      Reversed and remanded. We do not retain jurisdiction.

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