Musso & Frank Grill v. Mitsui Sumitomo Ins. USA

FACTS

Musso & Frank’s MSI policy was effective from June 30, 2019 to June 30, 2020. Under the heading “Coverage,” the policy promised to pay for “the actual loss of Business Income [Musso & Frank] sustain[ed] due to the necessary ‘suspension’ of [its] ‘operations’ during the ‘period of restoration.’ The ‘suspension’ [had to] be caused by direct physical loss of or damage to property at [the covered] premises. . . . The loss or damage must be caused by or result from a Covered Cause of Loss.” (Italics added.)

Under the heading “Exclusion of Loss Due to Virus or Bacteria,” the policy included two relevant exclusions, one for losses arising from governmental action, the other for losses sustained by reason of a virus or bacteria. The exclusion for “Governmental Action” is defined as the “Seizure or destruction of property by order of governmental authority.” The virus exclusion provided: “We will not pay for loss or damage caused by or resulting from any virus, bacterium or other micro-organism that includes or is capable of inducing physical distress, illness or disease.”

2 On March 15, 2020, in response to the COVID-19 pandemic, the Mayor of the City of Los Angeles issued an…