GMSR notches another appellate win in high-stakes COVID insurance litigation

Plaintiff In-N-Out Burgers sought coverage from its property insurer for losses it argued were sustained as a result of the COVID-19 virus.  Like dozens of other unsuccessful COVID-19-era lawsuits against insurance carriers, it argued there was “direct physical loss of or damage” to its property from the presence of virus particles at its facilities.  The district court dismissed In-N-Out’s consolidated amended complaint for failure to state a claim.

In-N-Out appealed to the Court of Appeals for the Ninth Circuit, and filed multiple requests to stay the case pending resolution of Another Planet Entertainment, LLC v. Vigilant Insurance Co., 56 F.4th 730 (9th Cir. 2022), which the California Supreme Court certified for review on the “direct physical loss or damage” coverage question.  The Ninth Circuit declined to stay the proceedings and did not decide whether the presence of COVID-19 could constitute “direct physical loss of or damage to” property.  Rather, the court held that even if the presence of the COVID-19 virus could constitute “direct physical loss of or damage” to the property, the policy’s “contamination” exclusion precluded coverage.  It bars recovery due to contamination, defined to include “any condition of property due to the actual presence of any foreign substance, impurity, pollutant, hazardous material, poison, toxin, pathogen or pathogenic organism, bacteria, virus, disease causing or illness causing agent, Fungus, mold or mildew.”  The court rejected In-N-Out’s arguments against applying the exclusion.

To read the Court of Appeals’ Opinion, click here:  In-N-Out Burgers v. Zurich Am. Ins. Co., 22-55266, 2023 WL 2445681 (9th Cir. Mar. 10, 2023) (mem. disp.)

To read about the case in Law360: