Brian E. O'Donnell and Maura C. Smith of Riker Danzig recently prevailed in a noteworthy COVID-19 insurance coverage litigation in Los Angeles Superior Court for client Mitsui Sumitomo Insurance USA Inc. Plaintiff, iconic Hollywood-based restaurant Musso & Frank Grill Co., sought insurance for the financial losses it sustained due to public safety measures adopted in LA to prevent the spread of COVID-19. Judge Monica Bachner found that the plaintiff was not entitled to coverage and dismissed its complaint without leave to amend, which had claimed breach of contract and bad faith against Mitsui Sumitomo.
Musso & Frank had contended that, because Los Angeles’ COVID-19 stay-at-home orders had barred it from operating since mid-March, causing it to suffer substantial losses, its “all-risk” policy with Mitsui Sumitomo should cover its losses. Arguing the case before Judge Bachner, Brian maintained that the restaurant had not suffered the requisite direct physical loss of property necessary to trigger coverage, and, even if it had, the policy's exclusion for virus-related losses would apply.
Judge Bachner agreed the policy's direct physical loss or damage requirement could not be satisfied by a mere loss of use of the ability to use a property for its intended purpose. In her decision, Judge Bachner wrote, “Losses from inability to use property do not amount to direct physical loss of or damage to property; 'there must be a "distinct, demonstrable, physical alteration" of the property.'" She further noted, "Plaintiff has not alleged facts suggesting the policy's virus exclusion does not apply to plaintiff's submitted claim.”
Law360 covered this significant decision extensively, available at Famed Hollywood Restaurant Loses COVID-19 Coverage Bid.
Riker Danzig serves as National Counsel to Mitsui Sumitomo with respect to its COVID-19 business interruption disputes. Riker Danzig was assisted in this matter by local counsel, Kent Keller and Larry Golub of Hinshaw & Culbertson LLP, while Joseph Campos of Lewis Brisbois Bisgaard & Smith LLP represents codefendant Hub International.