Another Planet Entertainment, LLC v. Vigilant Insurance Co.

Opinion of the Court by Guerrero, C. J.

At the outset of the COVID-19 pandemic, and for some time thereafter, many businesses were forced to curtail their operations or close entirely. Some of these businesses sought coverage for their financial losses from their commercial property insurers under conventional first-party “all risk” or “open peril” insurance policies. These policies generally predicate coverage on “direct physical loss or damage” to the insured property or nearby property. State and federal courts across the country have considered whether conventional property insurance policies provide coverage for pandemic- related losses, including whether the COVID-19 virus satisfies the threshold requirement of direct physical loss or damage to property. California courts have reached different conclusions on this issue, and in this case we accepted a request by the United States Court of Appeals for the Ninth Circuit to clarify California law in this area. (Cal. Rules of Court, rule 8.548.) The Ninth Circuit posed the following question: “Can the actual or potential presence of the COVID-19 virus on an insured’s premises constitute ‘direct physical loss or damage to…