Court Opinion

ID: 9889439
Source: CourtListenerOpinion
Date Created: 2023-10-10 15:00:37.653575+00
Date Added: 2024-06-11T12:37:48.629636
License: Public Domain

22-0380-cv
Mario Badescu Skin Care v. Sentinel

                        UNITED STATES COURT OF APPEALS
                            FOR THE SECOND CIRCUIT
                                      SUMMARY ORDER
Rulings by summary order do not have precedential effect. Citation to a summary order
filed on or after January 1, 2007, is permitted and is governed by Federal Rule of Appellate
Procedure 32.1 and this court’s Local Rule 32.1.1. When citing a summary order in a
document filed with this court, a party must cite either the Federal Appendix or an
electronic database (with the notation “summary order”). A party citing a summary order
must serve a copy of it on any party not represented by counsel.

       At a stated term of the United States Court of Appeals for the Second Circuit,
held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the
City of New York, on the 10th day of October, two thousand twenty-three.

       PRESENT:          Guido Calabresi,
                         Steven J. Menashi,
                         Beth Robinson,
                                  Circuit Judges.
____________________________________________

MARIO BADESCU SKIN CARE, INC.,

                 Plaintiff-Appellant,

          v.                                                   No. 22-0380-cv

SENTINEL INSURANCE COMPANY, LIMITED,

                 Defendant-Appellee.
____________________________________________
For Plaintiff-Appellant:                Dennis T. D’Antonio and Joshua L. Mallin,
                                        Weg & Myers, P.C., Rye Brook, NY.

For Defendant-Appellee:                 Charles A. Michael, Steptoe & Johnson LLP,
                                        New York, NY; Jonathan M. Freiman and
                                        Anjali S. Dalal, Wiggin and Dana LLP, New
                                        Haven, CT, and New York, NY.

      Appeal from a judgment of the United States District Court for the Southern
District of New York (Torres, J.).

      Upon due consideration, it is hereby ORDERED, ADJUDGED, and
DECREED that the judgment of the district court is AFFIRMED.

      Plaintiff-Appellant Mario Badescu Skin Care, Inc. (“MBSC”), a New York
corporation with its headquarters and principal business in New York, appeals
from the district court’s Rule 12(b)(6) dismissal without leave to amend of its
complaint    against       Defendant-Appellee   Sentinel   Insurance    Company,     a
Connecticut corporation with its headquarters in Connecticut. We assume the
parties’ familiarity with the facts, procedural history, and issues on appeal.

                                           I

      “We review a district court’s grant of a motion to dismiss de novo, accepting
as true all factual claims in the complaint and drawing all reasonable inferences in
the plaintiff’s favor.” Henry v. County of Nassau, 6 F.4th 324, 328 (2d Cir. 2021)
(internal quotation marks omitted).

      This court and the state courts of New York have consistently and
repeatedly held that, under New York law, 1 COVID-19 does not trigger insurance

1 New York substantive law applies to the underlying insurance dispute because the
forum state is New York and therefore New York choice-of-law rules govern. Statek Corp.

                                           2
policy provisions that provide coverage for losses arising from “direct physical
loss” of or “physical damage” to covered property. See 10012 Holdings, Inc. v.
Sentinel Ins. Co., 21 F.4th 216 (2d Cir. 2021); Rye Ridge Corp. v. Cincinnati Ins. Co.,
No. 21-1323, 2022 WL 120782 (2d Cir. Jan. 13, 2022); Kim-Chee LLC v. Philadelphia
Indem. Ins. Co., No. 21-1082, 2022 WL 258569 (2d Cir. Jan. 28, 2022); Deer Mountain
Inn LLC v. Union Ins. Co., No. 21-1513, 2022 WL 598976 (2d Cir. Mar. 1, 2022); SA
Hosp. Grp., LLC v. Hartford Fire Ins. Co., No. 21-1523, 2022 WL 815683 (2d Cir. Mar.
18, 2022); BR Rest. Corp. v. Nationwide Mut. Ins. Co., No. 21-2100, 2022 WL 1052061
(2d Cir. Apr. 8, 2022); Consol. Rest. Operations, Inc. v. Westport Ins. Corp., 205 A.D.3d
76 (N.Y. App. Div. 1st Dep’t 2022).

       MBSC attempts to distinguish this case from other cases in which the
allegations were less specific. Appellant’s Br. 14-15. But, as the Appellate Division,
First Department, recently held, to trigger coverage for “‘direct’ ‘physical’ damage
or loss to property,” “[t]he property must be changed, damaged or affected in some
tangible way, making it different from what it was before the claimed event
occurred.” Consol. Rest., 205 A.D.3d at 82 (emphasis added). Here, that did not
happen. As the district court explained, “COVID-19 is harmful to people—not
buildings. … [E]ven if the virus was physically present at the premises, its
presence is short-lived and easily remediated, and thus ‘does not alter the covered
property.’” Mario Badescu Skin Care Inc. v. Sentinel Ins. Co., No. 20-CV-6699, 2022
WL 253678, at *5 (S.D.N.Y. Jan. 27, 2022) (quoting Kim-Chee LLC v. Philadelphia
Indem. Ins. Co., 535 F. Supp. 3d 152, 159 (W.D.N.Y. 2021)).

v. Dev. Specialists, Inc. (In re Coudert Bros. LLP), 673 F.3d 180, 186 (2d Cir. 2012) (“[A]
federal court sitting in diversity must generally apply the choice of law rules of the state
in which it sits.”). In contract disputes, New York “appl[ies] ‘the law of the place which
has the most significant contacts with the matter in dispute,’” Md. Cas. Co. v. Continental
Cas. Co., 332 F.3d 145, 151 (2d Cir. 2003) (quoting Auten v. Auten, 308 N.Y. 155, 160 (1954)),
and here New York has the most significant contacts.

                                              3
         MBSC provides no reason to depart from “the unbroken line of precedent
in the COVID-19 context that [has] interpreted identical provisions [of insurance
contracts] to find that physical damage to the premises is a prerequisite to
coverage.” Id. at *4.

         MBSC argues that Sentinel should cover its losses because the applicable
policy contained many explicit exclusions but none for COVID-19. The district
court rejected that argument because “New York law makes clear that exclusions
may only ‘subtract from coverage’ and ‘cannot create coverage’ through negative
inferences.” Id. at *5 (quoting Raymond Corp. v. Nat’l Union Fire Ins. Co. of Pittsburgh,
5 N.Y.3d 157, 163 (2005)). We adhere to our prior holding that “the absence of the
virus exclusion does not alter th[e] conclusion” that an insured “has not shown it
suffered a covered loss under its insurance policy.” Kim-Chee LLC, 2022 WL 258569,
at *2.

         MBSC also argues that it should be covered under the civil authority
provision. But to secure coverage under that provision, the insured must show
that an order of a civil authority “‘prohibited access’ to the covered premises” and
that the order was the direct result of physical loss of or damage to property
nearby. Sharde Harvey, DDS, PLLC v. Sentinel Ins. Co., No. 20-CV-3350, 2021 WL
1034259, at *16 (S.D.N.Y. Mar. 18, 2021), report and recommendation adopted, 2022 WL
558145 (S.D.N.Y. Feb. 24, 2022); see also Food for Thought Caterers Corp. v. Sentinel
Ins. Co., 524 F. Supp. 3d 242, 250-51 (S.D.N.Y. 2021) (dismissing a civil authority
claim “because no civil authority order denied complete access to the plaintiff’s
premises” and because the plaintiff “failed to plead specific facts showing that the
COVID restrictions that applied to the property at issue were the direct result of a
risk of direct physical loss to other property in the immediate area”); Visconti Bus
Serv., LLC v. Utica Nat’l Ins. Grp., 142 N.Y.S.3d 903, 917 (N.Y. Sup. Ct. 2021) (“[T]he
gist of Civil Authority coverage is that physical harm to someone else’s premises
has caused the civil authorities to prohibit access to the insured’s premises. Here,
in contrast, both premises are restricted for the same reason: to limit the risk of

                                           4
spreading the Covid-19 virus. This simply does not implicate Civil Authority
coverage.”). We agree with the district court that MBSC failed to allege facts
sufficient to establish either element.2

                                             II

       “We review the denial of leave to amend a complaint under an abuse of
discretion standard.” Jin v. Metro. Life Ins. Co., 310 F.3d 84, 101 (2d Cir. 2002). “The
court should freely give leave [to amend a complaint] when justice so requires.”
Fed. R. Civ. P. 15(a)(2). Still, leave to amend is futile if the proposed amendment
“could not withstand a motion to dismiss.” Balintulo v. Ford Motor Co., 796 F.3d
160, 164-65 (2d Cir. 2015) (quoting Lucente v. IBM Corp., 310 F.3d 243, 258 (2d Cir.
2002)). “[I]n the absence of any indication that [the plaintiff] could—or would—
provide additional allegations that might lead to a different result, the District
Court [does] not err in dismissing [the] claim with prejudice.” Gallop v. Cheney, 642
F.3d 364, 369 (2d Cir. 2011).

       Here, no amount of additional discovery or re-pleading would change the
fact that the COVID-19 virus “injures people, not property.” Santo’s Italian Café

2 Procedurally, MBSC argues that, when it evaluated Sentinel’s Rule 12(b)(6) motion, the
district court erred by refusing to consider two expert reports that had been produced in
discovery. In MBSC’s view, the district court should have evaluated Sentinel’s Rule
12(b)(6) motion as a motion for summary judgment, which would have allowed the
district court to consider the expert reports. Appellant’s Br. 18-19. But because the district
court evaluated the complaint under Rule 12(b)(6), it assumed that all the facts MBSC
alleged were true. For that reason, it would not have made a difference if the district court
had considered MBSC’s expert reports by construing Sentinel’s Rule 12(b)(6) motion as a
motion for summary judgment. As the district court explained, “[e]ven if the Court takes
these facts as true and concludes that the COVID-19 virus was present in the air or on the
surfaces of the premises, courts in this Circuit have been unanimous in concluding that
the presence of the COVID-19 virus does not qualify as damage to the property itself,
given the virus’s short lifespan.” Mario Badescu Skin Care, 2022 WL 253678, at *5 (emphasis
added) (internal quotation marks and alteration omitted).

                                              5
LLC v. Acuity Ins. Co., 15 F.4th 398, 403 (6th Cir. 2021); see also Ascent Hosp. Mgmt.
Co., LLC v. Emps. Ins. Co. of Wausau, No. 21-11924, 2022 WL 130722, at *3 (11th Cir.
Jan. 14, 2022) (“[D]irect physical loss or damage requires an actual physical change
to property that COVID-19 particles cannot cause.”). Under these circumstances,
the district court did not abuse its discretion in deciding that further attempts to
amend would be futile.

                                   *      *      *

         We have considered MBSC’s remaining arguments, which we conclude are
without merit. For the foregoing reasons, we AFFIRM the judgment of the district
court.

                                        FOR THE COURT:
                                        Catherine O’Hagan Wolfe, Clerk of Court

                                          6