OPINION AND ORDER Jujamcyn Theaters LLC (“Jujamcyn” or “Plaintiff”) brings this action against Federal Insurance Company (“Federal”) and Pacific Indemnity Company (“Pacific”) (collectively “Defendants”) alleging breach of contract, breach of the implied covenant of good faith and fair dealing, and declaratory judgment related to insurance coverage allegedly due under two policies issued by Federal and Pacific. (See generally Compl. ECF No. 8.) Both Plaintiff and Defendants move for judgment on the pleadings. For the reasons stated below, Plaintiff’s motion is DENIED and Defendants’ Motion is GRANTED IN PART and DENIED IN PART. BACKGROUND I. Factual Background The following is taken from the Complaint, the parties’ motion papers, and the documents relied upon therein, as well as matters of which the court can take judicial notice. See Roberts v. Babkiewicz, 582 F.3d 418, 419 (2d Cir. 2009). Jujamcyn is one of the largest Broadway theater owners in New York and owns and operates five prominent theaters: the St. James Theatre; the Al Hirschfeld Theatre; the Walter Kerr Theatre; the Eugene O’Neill Theatre; and the August Wilson Theatre. (Compl., ECF No. 8
1, 39.) Defendants Federal and Pacific are members of the Chubb insurance group and issued separate insurance policies to Jujamcyn. (Id. 7.) A. The COVID-19 Pandemic and its Effect on Jujamcyn’s Business After the emergence of the COVID-19 virus in New York, former Governor Andrew Cuomo issued Executive Order 202 on March 7, 2020, declaring a state of emergency. (Id. 26.) On March 12, 2020 Governor Cuomo issued Executive Order 202.1, ordering that “any theater seating five hundred or more attendees for a live performance located in [the City of New York] shall not hold any further performances after 5 pm on March 12, 2020.” (Id. 28.) In addition, on March 16, 2020, former New York City Mayor Bill De Blasio issued Emergency Executive Order No. 100, ordering that “all entertainment venues, including those with seating capacity below 500, are hereby closed effective Monday, March 16, 2020 at 8:00 PM.” (Id. 30.) As part of this announcement De Blasio stated that “the virus physically is causing property loss and damage.” (Id.) Finally, on March 22, 2020, all businesses in New York were subject to the “New York State on PAUSE” order which directed all non-essential businesses to close, including theaters. (Id. 31.)1 As a result of these emergency ordinances, all five of Jujamcyn’s theaters were forced to close and Plaintiff suffered substantial financial losses. (Id. 4.) Plaintiff alleges that two individuals working at Broadway theaters located within 10 miles of Jujamcyn’s theaters tested positive for COVID-19. (Id. 28.) The Complaint also describes how COVID-19 is spread and explains that “[t]he disease can spread from person to person through small droplets from the nose or mouth which are spread when a person with COVID-19 coughs or exhales. These droplets land on objects and surfaces around the person.” (Id. 22.) The Complaint also alleges that “the operation of a Broadway theater involves a large gathering of people within an enclosed space for a prolonged period, increasing the likelihood that [COVID-19] would be in the airspace and on surfaces, and that such theater would be a potential source of exposure.” (Id. 27.) B. The Federal Policy Federal sold Jujamcyn “Customarq Series Entertainment Insurance Program” for the period May 1, 2019 to May 1, 2020 (the “Federal Policy”). (Id. 37.) The Federal Policy is an “all-risk” property insurance policy that insures each of Jujamcyn’s five theaters against property damage. (Id. 39.) The two provisions at issue here — the “Business Income and Extra Expense” and “ Civil Authority” provisions — provide coverage for losses that “ result from direct physical loss or damage” and that are “the direct result of direct physical loss or damage to property”. (Compl., Ex. A, ECF No. 1-3 at 12, 14-15 (emphasis in the original).) The policy does not have an explicit carveout for losses that are the result of virus, communicable diseases or pandemics, as do other policies that have been challenged in the wake of the COVID-19 pandemic. (Compl., ECF No. 8 44.) Plaintiff alleges that “[b]ecause the [COVID-19] virus can adhere to surfaces of property for several days and can linger in the air in buildings for several hours, the presence of the [COVID-19] virus on or around property amounts to ‘direct physical loss or damage’ as that phrase is used in the Federal Policy.” (Id. 52.) Plaintiff maintains that it reasonably expected the Federal Policy to cover its losses resulting from the COVID-19 closures but that Federal has refused to pay Jujamcyn for any losses pursuant to the policy. (Id.
