ITT Inc. v. Factory Mutual Insurance Co. ( 2023 )

22-1245
ITT Inc. v. Factory Mutual Insurance Co.
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUM-
MARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FED-
ERAL 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
31st day of January, two thousand twenty-three.
Present:
DEBRA ANN LIVINGSTON,
Chief Judge,
PIERRE N. LEVAL,
JOSÉ A. CABRANES,
Circuit Judges.
_____________________________________
ITT INC.,
Plaintiff-Appellant,
v. 22-1245
FACTORY MUTUAL INSURANCE COMPANY,
Defendant-Appellee.
_____________________________________
For Plaintiff-Appellant: JEFFREY S. RASKIN (Michael C. D’Agostino, on the
brief), Morgan, Lewis & Bockius LLP, San Francisco,
CA & Hartford, CT.
For Defendant-Appellee: KELLY A. LIBRERA (Harvey Kurzweil, George E. Mas-
toris, Adam P. Moskowitz, on the brief), Winston &
Strawn LLP, New York, NY.
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Appeal from a judgment of the United States District Court for the District of Connecticut
(Merriam, J.).
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND
DECREED that the judgment of the district court is AFFIRMED.
Plaintiff-Appellant ITT Inc. (“ITT”) is a worldwide diversified manufacturing and tech-
nology company serving the aerospace, transportation, energy, communications, and industrial
markets, whose business operations were interrupted by the COVID-19 pandemic. ITT sued De-
fendant-Appellee Factory Mutual Insurance Company (“FM Global”), for breach of contract after
FM Global denied ITT’s claim under an “all-risk” insurance policy (the “Policy”) for the losses it
suffered as a result of the COVID-19 pandemic and related governmental restrictions. The dis-
trict court dismissed the complaint for failure to state a claim pursuant to Federal Rule of Civil
Procedure 12(b)(6) on the ground that ITT’s allegations concerning the impact of COVID-19 on
ITT’s operations did not constitute “physical loss or damage,” as necessary to trigger coverage
under the Policy. See ITT Inc. v. Factory Mut. Ins. Co., No. 21 Civ. 156 (SALM), 2022 WL
1471245 (D. Conn. May 10, 2022). We assume the parties’ familiarity with the underlying facts,
procedural history, and arguments on appeal, which we relay only as necessary to explain our
decision to affirm.
We review de novo a district court’s dismissal under Rule 12(b)(6). Cornelio v. Connect-
icut, 32 F.4th 160, 168 (2d Cir. 2022). At the motion to dismiss stage we must accept all factual
allegations as true and draw all reasonable inferences in the plaintiff’s favor. See Littlejohn v.
City of New York, 795 F.3d 297, 306 (2d Cir. 2015). That said, “[f]actual allegations must be
enough to raise a right to relief above the speculative level,” Bell Atl. Corp. v. Twombly, 550 U.S.
544, 555 (2007) (citation omitted), and a complaint cannot “tender[ ] naked assertions devoid of
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further factual enhancement,” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal alterations,
quotation marks, and citation omitted). In this diversity case, neither party disputes that the issues
are governed by Connecticut law. Because all the Policy provisions ITT cites as bases for cov-
erage require a showing of “physical damage” or “physical loss or damage,” App’x 438–39, 1 the
core interpretative issue on appeal is whether, under Connecticut law, these phrases unambigu-
ously denote a physical alteration to property or, as ITT contends, they may encompass the pres-
ence of a dangerous disease, such as COVID-19, that affects the habitability of property.
In construing the Policy, the district court determined that, consistent with the general con-
sensus of federal and state courts, “the plain, ordinary meaning of the phrase ‘physical loss or
damage’ . . . unambiguously requires physical damage or physical alteration to property.” See
ITT Inc., 2022 WL 1471245, at *6 (internal quotation marks omitted); see also id. at *6–10 (provid-
ing explanation and collecting cases). The Connecticut Supreme Court recently joined this con-
sensus, likewise holding that “in ordinary usage, the phrase ‘direct physical loss of . . . [p]roperty’
clearly and unambiguously means that there must be some physical, tangible alteration to or dep-
rivation of the property that renders it physically unusable or inaccessible.” Conn. Dermatology
Grp., PC v. Twin City Fire Ins. Co., No. SC 20695, slip op. at 8 (Conn. Jan. 27, 2023) (alterations
in original). Under this plain reading, a property insurance policy covering “direct physical loss
of or physical damage to” property “does not include the suspension of business operations on a
physically unaltered property in order to prevent the transmission of the coronavirus.” Id. Be-
cause the Policy is substantively identical in relevant respect to that at issue in Connecticut
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The only provision that ITT contends entitles it to coverage without a variation of this language
is the “Claims Preparation Costs” provision. This does not alter the analysis, however, because the ap-
plicability of this provision hinges on the existence of an “insured loss . . . for which [FM Global] has
accepted liability.” App’x 477.
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Dermatology, we construe the pertinent language in accordance with this precedent.
ITT next argues that even if “physical loss or damage” entails physical alteration to prop-
erty, it has adequately alleged such physical impact to property with its allegations concerning how
COVID-19 interacts with property. The district court’s contrary conclusion, ITT contends, rep-
resents a factual determination on an emerging scientific issue that is inappropriate at the pleading
stage. For the following reasons, we disagree.
ITT offers only conclusory assertions that “COVID-19 causes a tangible, measurable, and
physical change or alteration in property.” App’x 429. In its pleadings, ITT refers to scientific
studies explicating the “interaction between spike proteins and ambient airborne particulate matter
and common property surfaces, such as metals, wood, plastics, fabrics, and glass” to corroborate
its allegations of physical loss or damage. Id. Nowhere, however, does ITT specify a single
object or piece of property that required repair or replacement due to exposure to COVID-19.
The absence of any such allegation renders implausible ITT’s contention that COVID-19, a disease
caused by a virus whose impact on property is indiscernible to the human eye, physically altered
ITT’s property to the point of physical damage or loss. Moreover, that ITT had to “physically
reconfigure” its facilities and “install physical safety features” to restore the use of its premises
does not render plausible its contention that COVID-19 caused “physical loss or damage” to its
property because—as ITT admits—such measures served to “mitigate communicable disease
spread,” not repair damaged property. App’x 430; see also Conn. Dermatology, slip op. at 10
(“[T]he plaintiffs’ activities designed to prevent the transmission of the coronavirus on the prop-
erties were not ‘repairs’ in any ordinary sense of the word.”).
* * *
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We have considered ITT’s remaining arguments and find them to be without merit. Ac-
cordingly, we AFFIRM the judgment of the district court.
FOR THE COURT:
Catherine O’Hagan Wolfe, Clerk of Court
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