The insured's suit for business interruption survived a motion for partial judgment on the pleadings due to the policy's coverage for contamination. Live Nation Entertainment, Inc. v. Factory Mutual Ins. Co., No. LA CV 21-00862, Order (Feb. 3, 2022, C.D. Calif.). The minute order is here.
Live Nation alleged that the outbreak of COVID-19 and government shut down orders forced all of it properties in the United States to close by the end of the third quarter of 2020, it had cancelled more than 5000 concerts. The complaint alleged that the loss of use of the property was "'physical' because Live Nation has been deprived of the use and function of its buildings." The complaint further alleged that the physical presence of COVID-19 in its properties caused physical damage. A claim was presented to Factory Mutual, but a decision was never made on coverage. Live Nation alleged, on information and belief, that Factory Mutual had taken the position that it would deny nearly all coverage sought by its policyholders for COVID-19 losses.
Based on the Ninth Circuit decision in Mudpie, Inc. v. Travelers Can. Ins. Co. of Am., 15 F.4th 885, 892 (9th Cir. 2021), the court found that neither the presence of COVID-19 on the property nor the government closure orders constituted physical loss or damage to property.
The policy also covered "Communicable Disease Response" for "reasonable and necessary costs" incurred for "cleanup, removal and disposal" and for "public relations services" related to a communicable disease. But an exclusion for "contamination and any cost due to contamination including the inability to use or occupy property or any cost of making property safe or suitable for use or occupancy" was included in the policy. An exception to the exclusion stated, "If contamination . . . directly results from other physical damage not excluded by the Policy, then only physical damage caused by such contamination may be insured."
The Communicable Disease Provisions provided coverage for non-physical loss caused by COVID-19 that did not appear elsewhere in the Policy. For example, Ingress/Egress coverage would cover losses incurred due to the prevention of entry into the property because the physical presence of COVID-19 had been detected on the property, causing physical damage. However, once the physical presence of COVID-19 was eliminated,, e.g., by cleaning and disinfection, the property could still remain closed to prevent reinfection. Any losses incurred because of the continued closure of the property would not be covered by the Ingress/Egress provision because there would be no actual physical damage causing the closure. The losses from the continued closure could only be covered as non-physical, virus-related damage under the Communicable Disease Provisions. Whether the claims qualified for coverage under either type of coverage was a question of fact that could not be resolved on a motion based on the pleadings,.
Therefore, Factory Mutual's motion was denied,
