Another Planet Ent., LLC v. Vigilant Ins.
Co.
--- P.3d ----, No. S277893, 2024 WL 2339132 (Cal. May 23, 2024)
The California Supreme Court, answering a certified question from the U.S. Court of Appeals for the Ninth Circuit, found that a commercial insurance policy issued to a live entertainment venue operator did not provide coverage for losses sustained by the company's venues following the outbreak of COVID-19.
Another Planet Entertainment, LLC (Another Planet) operates a group of live entertainment venues in California and Nevada. Vigilant Insurance Company (Vigilant) issued a commercial property insurance policy to Another Planet that provided coverage for, among other things, “direct physical loss or damage to [a building or personal property] caused by or resulting from a peril not otherwise excluded,” and “reasonable and necessary costs you incur to protect [building and personal property] at the premises shown in the Declarations from imminent direct physical loss or damage caused by or resulting from a peril not otherwise excluded ....”
Another Planet was forced to temporarily close its venues due to the outbreak of COVID-19 in March 2020, and sought insurance coverage for its losses under the policy issued by Vigilant. Vigilant denied coverage on the basis that Another Planet could not show “‘physical loss or damage that would implicate coverage in this matter.'” Another Planet filed a lawsuit against Vigilant in federal court.
Vigilant moved to dismiss the complaint, which motion the trial court granted. Upon appeal, the appellate court certified a question of law to the Supreme Court, citing conflicting opinions among lower state courts as to whether allegations like those contained in Another Planet's complaint constituted direct physical loss or damage as required by the policy issued by Vigilant.
The Supreme Court held that Another Planet had not adequately alleged that the actual or alleged presence of the COVID-19 virus constituted direct physical loss or damage sufficient to trigger coverage under its policy with Vigilant. Rejecting Another Planet's chief argument, the Supreme Court concluded that "while Another Planet alleges that the COVID-19 virus alters property by bonding or interacting with it on a microscopic level, Another Planet does not allege that any such alteration results in injury to or impairment of the property itself." The Supreme Court further resolved the conflict between the lower state courts, holding that “to the extent the Ninth Circuit's question is premised on the split in authority represented on one side by United Talent, which held that the actual or potential presence of the virus generally could not cause direct physical loss or damage to property, and on the other by Marina Pacific, which held that it could, we further conclude that United Talent was correct."
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