1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 HEALTHNOW MEDICAL CENTER, INC, Case No. 20-cv-04340-HSG

8 Plaintiff, ORDER GRANTING MOTION TO

DISMISS

9 v. Re: Dkt. No. 28 10 STATE FARM GENERAL INSURANCE

CO.,

11 Defendant. 12 13 Pending before the Court is Defendant State Farm General Insurance Co.’s motion to 14 dismiss. Dkt. No. 28. The Court finds this matter appropriate for disposition without oral 15 argument and the matter is deemed submitted. See Civil L.R. 7-1(b). For the reasons detailed 16 below, the Court GRANTS the motion to dismiss. 17 I. BACKGROUND 18 Plaintiff HealthNOW Medical Center, Inc. brings this insurance action against Defendant 19 based on the denial of Plaintiff’s claim for business income loss coverage under the State Farm 20 business insurance policy (the “Policy”). See Dkt. No. 25 (“SAC”) at ¶¶ 2, 12–20. Plaintiff 21 alleges that its medical clinic was “shutdown or severely reduced in operations” due to stay-at- 22 home ordinances instituted in Santa Clara County during and as a result of the COVID-19 23 pandemic. See id. at ¶¶ 2, 21–33. Plaintiff further alleges that Defendant failed to conduct “[a] 24 fair evaluation” and investigation before denying Plaintiff’s claim. See id. at ¶¶ 43–45, 47–48. 25 Plaintiff acknowledges that the Policy contains a “virus exclusion,” see id. at ¶¶ 19, 88, but urges 26 that the stay-at-home orders were promulgated because of the risk posed by “droplets” from 27 people coughing, sneezing, or talking, and not because of the virus itself, id. at ¶¶ 34–46. On the 1 covenant of good faith and fair dealing, bad faith denial, declaratory relief, unjust enrichment, and 2 a violation of the California Unfair Competition Law (“UCL”), Cal. Bus. & Prof. Code §§ 17200 3 et seq. See id. at ¶¶ 49–98. 4 II. LEGAL STANDARD 5 Federal Rule of Civil Procedure 8(a) requires that a complaint contain “a short and plain 6 statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). A 7 defendant may move to dismiss a complaint for failing to state a claim upon which relief can be 8 granted under Rule 12(b)(6). “Dismissal under Rule 12(b)(6) is appropriate only where the 9 complaint lacks a cognizable legal theory or sufficient facts to support a cognizable legal theory.” 10 Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1104 (9th Cir. 2008). To survive a Rule 11 12(b)(6) motion, a plaintiff need only plead “enough facts to state a claim to relief that is plausible 12 on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). A claim is facially plausible 13 when a plaintiff pleads “factual content that allows the court to draw the reasonable inference that 14 the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). 15 In reviewing the plausibility of a complaint, courts “accept factual allegations in the 16 complaint as true and construe the pleadings in the light most favorable to the nonmoving party.” 17 Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008). Nevertheless, 18 courts do not “accept as true allegations that are merely conclusory, unwarranted deductions of 19 fact, or unreasonable inferences.” In re Gilead Scis. Secs. Litig., 536 F.3d 1049, 1055 (9th Cir. 20 2008) (quoting Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001)). 21 III. DISCUSSION 22 It is undisputed that the Policy preludes coverage for “any loss caused by . . . [v]irus, 23 bacteria or other microorganism that induces or is capable of inducing physical distress, illness, or 24 disease . . . .” See Dkt. No. 25-1, Ex. A at A-16–A-17 (the “Virus Exclusion”). The key dispute 25 in this action is the meaning of this provision as it applies to the COVID-19 pandemic and the 26 local stay-at-home orders. Plaintiff contends that its claim for coverage is premised on “the role of 27 human droplets as distinct and separate from virus particles.” See Dkt. No. 29 at 1, 3–4, 7, 12–17. 1 “thus have their own physical presence, and they alter and damage surfaces where they are 2 present.” Id. at 3; see also id. at 12–17. Plaintiff further suggests that the local ordinances 3 “target[] the physical presence of human droplets, not just the virus itself.” Id. at 4. Plaintiff thus 4 urges that the Virus Exclusion does not apply. In so doing, Plaintiff urges the Court to reject the 5 analysis adopted by courts throughout the Ninth Circuit, and indeed across the country. See, e.g., 6 Founder Inst. Inc. v. Hartford Fire Ins. Co., No. 20-CV-04466-VC, 2020 WL 6268539, at *1 7 (N.D. Cal. Oct. 22, 2020) (collecting cases); see also Boxed Foods Co., LLC v. California Capital 8 Ins. Co., No. 20-CV-04571-CRB, 2020 WL 6271021, at *3–7 (N.D. Cal. Oct. 26, 2020), as 9 amended (Oct. 27, 2020); Franklin EWC, Inc. v. Hartford Financial Services Group, Inc., 2020 10 WL 5642483 (N.D. Cal. Sept. 22, 2020). The Court is not persuaded and adopts the reasoning 11 detailed by the court in Founder, 2020 WL 6268539, at *1. 12 That Plaintiff characterizes the stay-at-home orders as related to respiratory droplets is 13 simply inapposite, because the stay-at-home ordinances plainly sought to prevent COVID-19—a 14 virus—from spreading. Respiratory droplets are simply one mechanism through which the virus 15 can spread. See SAC at ¶ 36; see also id. at ¶ 24 (recognizing that “droplets are not viruses, but a 16 virus or other pathogen can sometimes travel in said droplets”); see also id. at ¶ 25 (“When the 17 pandemic hit, the human droplets became a focus of concern because they can possibly carry the 18 virus.”). The SAC recognizes that the ordinances were “aimed at eliminating the possible spread 19 of virus through various transmission methods and community spread.” Id. at ¶ 34 (emphasis 20 added); see also id. at ¶ 29 (explaining that it “was well recognized” that the stay-at-home orders 21 were issued “to reduce the person to person transmission of the virus and reduce the contamination 22 of frequently contacted surfaces with the virus.”). “By reducing the spread of the droplets in the 23 environment, the goal [of the ordinances] is to reduce the transmission of the virus that may travel 24 in some of the droplets dispersed by infected individuals as they talk, breath, sneeze, cough, etc.” 25 Id. at ¶ 24. Even Plaintiff’s opposition notes that “[t]he droplets were targeted by the civil 26 ordinances because governments believed that reducing exposure to the droplets would reduce the 27 rate of virus transmission because some of the droplets, whether on surfaces or aerosolized, may 1 meaningful distinction under the ordinances, and thus under the Policy, between “droplets” that 2 || may or may not contain the virus and the virus itself defies common sense and Plaintiff's own 3 allegations. Because all Plaintiffs claims against Defendant turn on the existence of coverage 4 || under the Policy, they are all dismissed. 5 IV. CONCLUSION 6 Accordingly, the Court GRANTS the motion to dismiss. The Court is skeptical that, given 7 || the nature of the dispute and the Court’s legal findings, it is possible for Plaintiff to amend the 8 complaint to address these deficiencies. Nevertheless, in an abundance of caution, the Court will 9 || grant Plaintiff an opportunity to amend if it may do so consistent with its Rule 11 obligations. 10 || Any amended complaint must be filed within 21 days of this order. 11 IT IS SO ORDERED. 12 || Dated: 12/10/2020

4 HAYWOOD S. GILLIAM, JR. United States District Judge

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