Palomar Health v. American Guarantee and Liability Insurance Company (9th Cir. July 28, 2022, No. 21-56073) 2022 WL 3006356 [mem. disp.]

A California-based healthcare facility operator sued its insurance carrier after the carrier denied coverage for the facility’s alleged Covid-19-related losses.  Like dozens of other unsuccessful Covid-19-era lawsuits against insurance carriers, it alleged “direct physical loss of or damage” to its property from the presence of virus particles at its facilities.  The district court dismissed the complaint for failure to state a claim.

In plaintiff’s appeal to the Ninth Circuit, GMSR’s briefing offered a menu of reasons to affirm.  The Court of Appeals affirmed the district court’s no-coverage decision based solely on the parties’ briefs without oral argument.  In contrast to other Covid-19 coverage lawsuits that have focused on the “direct physical loss” coverage requirement, the court affirmed based on two policy exclusions.  It held that (1) the Contamination exclusion barred coverage for losses caused by “[a]ny condition of property due to the actual presence of any … virus …,” and (2) the government-order exclusions barred losses caused by the “[l]oss or damage arising from the enforcement of any law, ordinance, regulation or rule regulating or restricting … occupancy, operation, or other use ….”

To read the Court of Appeals’ memorandum disposition, click HERE.