21-1502
Buffalo Xerographix v. Hartford Fire Ins.
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 15th day of September, two thousand twenty-two.
PRESENT: Pierre N. Leval,
Barrington D. Parker,
Steven J. Menashi,
Circuit Judges.
____________________________________________
BUFFALO XEROGRAPHIX, INC., SHATKIN F.I.R.S.T.
LLC, and TODD E. SHATKIN DDS PLLC, for themselves
and on behalf of a class of similarly situated
policyholders,
Plaintiffs-Appellants,
v. No. 21-1502
SENTINEL INSURANCE COMPANY, LIMITED,
HARTFORD CASUALTY INSURANCE COMPANY,
HARTFORD INSURANCE COMPANY OF THE
MIDWEST, THE HARTFORD INSURANCE GROUP
a.k.a. THE HARTFORD FINANCIAL SERVICES
GROUP, INC.,
Defendants-Appellees,
HARTFORD FIRE INSURANCE COMPANY,
HARTFORD ACCIDENT & INDEMNITY COMPANY,
HARTFORD INSURANCE COMPANY OF ILLINOIS,
HARTFORD UNDERWRITERS INSURANCE
COMPANY, NEW ENGLAND INSURANCE
COMPANY, NEW ENGLAND REINSURANCE
CORPORATION, PACIFIC INSURANCE COMPANY,
LIMITED, PROPERTY AND CASUALTY INSURANCE
COMPANY OF HARTFORD, TRUMBULL
INSURANCE COMPANY, and TWIN CITY FIRE
INSURANCE COMPANY,
Defendants. *
____________________________________________
For Plaintiffs-Appellants: CHRISTOPHER M. BERLOTH (Charles C. Ritter,
Jr., Steven W. Klutkowski, and Thomas D.
Lyons, on the brief), Duke Holzman
Photiadis & Gresens LLP, Buffalo, NY.
For Defendants-Appellees: ANJALI S. DALAL, Wiggin & Dana LLP, New
York, NY (Jonathan M. Freiman, Wiggin &
Dana LLP, New Haven, CT, and Charles A.
* The Clerk of Court is directed to amend the caption as set forth above.
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Michael, Steptoe & Johnson LLP, New York,
NY, on the brief).
Appeal from a judgment of the United States District Court for the Western
District of New York (Crawford, J.).
Upon due consideration, it is hereby ORDERED, ADJUDGED, and
DECREED that the judgment of the district court is AFFIRMED.
The plaintiffs-appellants are New York businesses representing a putative
class of similarly situated businesses affected by Governor Andrew Cuomo’s order
of business closures in response to the COVID-19 pandemic. The businesses
appeal the district court’s dismissal, for failure to state a claim, of a putative class
action complaint against various insurers who denied coverage for losses that
resulted from those closures. In the proceedings before the district court, the
businesses claimed to be entitled to insurance coverage because the closures in
response to COVID-19 were “direct physical losses” under the insurers’ policies.
The businesses sought relief for breach of contract and for violation of New York’s
General Business Law § 349.
The district court dismissed the complaint in two separate orders. First, the
district court held that the Hartford Insurance Group (“HIG”) was not responsible
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for insurance policies that its subsidiaries issued to the businesses. The district
court therefore granted the Hartford Insurance Group’s motion to dismiss. Buffalo
Xerographix, Inc. v. Hartford Ins. Grp., 540 F. Supp. 3d 382, 392-93 (W.D.N.Y. 2021).
Second, the district court held that the businesses failed to state a claim against the
subsidiary insurers because the state-mandated closures did not qualify as a
“direct physical loss” eligible for insurance coverage.
We affirm the judgment of the district court. HIG cannot be held liable for
the insurance policies issued by its subsidiaries because it was not a signatory to
those policies, and it neither authorized its subsidiaries to act as its agents in
issuing the policies nor created appearances of authority in the subsidiaries to
issue policies for it. The businesses also cannot state a claim against the subsidiary
insurers because the closures due to COVID-19 do not qualify as a direct physical
loss under the policies. We assume the parties’ familiarity with the remaining facts,
procedural history, and arguments on appeal.
I
The businesses argue that HIG evinced an intent to be bound by the
insurance policies of its subsidiaries because each of the insurance policies
displayed the HIG logo and corporate officers of HIG signed the policies and are
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referenced throughout the contract. As the district court observed, however, the
use of a parent company’s logo is not enough to make the parent company a
signatory to a contract. The insurance policies define the counterparty as “the
Company providing this insurance,” namely the subsidiary insurers, and the
policy language does not contradict that definition. Buffalo Xerographix, 540
F. Supp. 3d at 392.
The businesses also argue that HIG may be liable for the policies under an
agency theory. A principal may be bound by the representations of its agent if the
principal’s words or conduct addressed to the agent sustain a reasonable express
or implied inference “that the principal has consented to the agent’s performance
of a particular act” or if the principal creates appearances that reasonably cause a
third person to believe that “the principal consents to have [an] act done on his
behalf by the person purporting to act for him.” Minskoff v. Am. Exp. Travel Related
Servs. Co., 98 F.3d 703, 708 (2d Cir. 1996).
As the district court correctly noted, a reasonable observer would not infer
that HIG intended to be bound by the insurance policies issued by its subsidiaries.
The policies clearly indicate that each contract was between the insured party and
the subsidiary insurer. Each subsidiary insurer maintained its own pool of risk, for
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which the other subsidiaries and affiliates were not responsible. HIG did not,
either expressly or impliedly, authorize its subsidiary insurers to issue policies on
its behalf, and it did not create appearances that would reasonably lead third
persons to believe that the subsidiaries were so authorized.
II
The businesses argue that the losses associated with the closure of
businesses due to COVID-19 qualify as “direct physical loss” under the insurance
policies and therefore should be covered by the subsidiary insurers. The
businesses point to a Virus Exclusion Clause and a Virus Limitation Clause that
the subsidiary insurers have included in other policies but did not include the
policies at issue here. Those clauses, introduced in response to the SARS epidemic
of 2006, limit or exclude coverage for direct physical loss or damage “caused by”
a virus. The businesses argue that these clauses indicate that “direct physical loss”
may be caused by a virus and that the closures due to COVID-19 are such a direct
physical loss.
We need not decide whether direct physical loss may be caused by viruses
in other circumstances. Our court has already held that closures of businesses due
to the presence of COVID-19 do not qualify as a “direct physical loss.” 10012
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Holdings v. Sentinel Ins. Co., 21 F.4th 216, 220-21 (2d Cir. 2021). In 10012 Holdings,
we noted that in Roundabout Theatre Co. v. Cont’l Cas. Co., the Appellate Division
refused to treat a street closure following a construction accident as a “loss of …
property” under an insurance contract. 302 A.D.2d 1, 5-6 (N.Y. App. Div. 1st Dep’t
2002). Although the plaintiff theater company lost access to its building—and
consequently lost income—there was no direct physical loss or damage eligible for
coverage under the contract because the building was not physically affected. Id.
at 8. Based on the New York case law, we concluded that “under New York law
the terms ‘direct physical loss’ and ‘physical damage’ … do not extend to mere
loss of use of a premises.” 10012 Holdings, 21 F.4th at 222. Instead, there must be
“actual physical loss of or damage to the insured’s property” to qualify for
coverage. Id. Neither the availability of a Virus Exclusion or Limitation Clause nor
the businesses’ allegation that COVID-19 was present at their properties leads to a
different conclusion in this case. Even if there are circumstances in which a virus
might cause the actual physical loss of or damage to property, the presence of
COVID-19 on surfaces at a retail store or office would not cause the store or office
to be physically lost or damaged. See Kim-Chee LLC v. Philadelphia Indem. Ins. Co.,
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No. 21-1082-CV, 2022 WL 258569, at *2 (2d Cir. Jan. 28, 2022). Accordingly, the
businesses cannot state a claim, and we affirm the judgment of the district court.
* * *
We have considered appellants’ 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
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