36 | November/December 2021 | BAEC Bulletin interest is best protected by allowing the government to bring “its considerable expertise and resources to bear against those alleged to have defrauded it.” Next, the Court found that the government’s identification of post-declination disclosures made by defendants also weighed in favor of intervention, since the previously undisclosed documents were material to the scope of the alleged fraud. Finally, because the relator consented to intervention, and because defendants would suffer no prejudice (since they have been on notice of the government’s continuing investigation and because no formal discovery had been undertaken during the 9 year pendency of the action), the government met its burden to establish good cause for its untimely intervention. Insurance Coverage (Criminal Investigation) In Rochester Drug Cooperative, Inc. v. Hiscox Ins. Co., Inc. , 20-cv- 6025-EAW (June 25, 2021), an action for coverage under a Private Company Management Liability Insurance Policy, plaintiff sought leave to add a claim seeking coverage for a criminal investigation following service of a grand jury subpoena. Defendant opposed the motion, arguing plaintiff improperly delayed in making it and the proposed amendment was futile in any event. The Court granted the motion, holding first that plaintiff had not unduly delayed in bringing its motion because the case was awaiting a Rule 16 scheduling conference and, therefore, was still in its earliest stages, and because defendant had not demonstrated that any meaningful prejudice would result if leave to amend were granted. Turning to whether the new claim to be added would be futile, the Court concluded it was plausible that defendant was estopped from denying coverage based on its own conduct, in which case the new claim would not be futile. Accepting as true the allegations in the proposed amended complaint, the Court ruled that defendant did not assert policy defenses or reserve the privilege to do so when notified initially of the criminal investigation, but instead acted in a way that led plaintiff to believe that coverage would be provided. At this early stage in the proceeding, before discovery and without a more fulsome record, the Court also declined to consider the merits of various exclusions in the policy that Defendants had raised in opposition to the motion to dismiss. Insurance Coverage (COVID 19) In Salvatore’s Italian Gardens, Inc., et al. v. Hartford Fire Insurance Co. Ins. , 20-cv-659-GWC (July 7, 2021)—an action seeking a declaration that New York State Executive Orders in response to the COVID-19 pandemic triggered coverage under the Civil Authority and Business Income provisions of a Special Multi- Flex Business Insurance Policy—defendant moved to dismiss the complaint. Plaintiff argued that the policy afforded specific coverage for any mandated suspension of business operations at the insured’s location by order of government authority. The Court, however, found that coverage under the policy was afforded only when a government order was issued in response to direct physical loss or damage in the vicinity of plaintiffs’ premises and prevented plaintiffs’ access to those premises. In the complaint, plaintiff did not plausibly allege either that the New York Executive Orders were issued in response to direct physical loss or damage in the vicinity of plaintiffs’ premises, or that those Orders prevented plaintiffs from accessing their premises. The Court noted that several courts applying New York law have determined that the Coronavirus did not constitute a direct physical loss or damage to property, and that the Executive Orders were not issued in response to specific instances of physical loss and damage but rather in response to the spread
of the coronavirus. In addition, the complaint lacked non- conclusory allegations regarding a physical loss or damage to the subject premises, or that the Executive Orders specifically prohibited plaintiffs’ access. For similar reasons, the Court also held that plaintiffs had not demonstrated an entitlement to coverage under the policy’s Special Business Income Coverage, and the motion to dismiss was granted. •
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