Ruling affirmed against ‘gentlemen’s clubs’ in COVID case

A federal appeals court on Wednesday affirmed a lower court ruling against a group of “gentlemen’s clubs” in COVID-19 business interruption litigation filed against a Beazley PLC unit and Lloyd’s of London underwriters.

The 9th U.S. Circuit Court of Appeals in San Francisco said the plaintiffs in the case are 24 affiliated companies “who operate 23 so-called ‘gentlemen’s clubs and a retail store” under a single policy issued by Beazley Underwriting Ltd. to a non-party affiliate, Norco, California-based The Spearmint Rhino Cos. Worldwide Inc., according to the ruling in Rialto Pockets Inc. v. Beazley Underwriting Ltd. and certain underwriters at Lloyds London, including Beazley Furlonge Ltd.

In affirming a ruling by the U.S. District Court in Los Angeles, the 9th Circuit, which issued its ruling without holding oral argument, cited last year’s ruling by a California state appeals court in Inns by the Sea v. California Mutual Insurance Co.

That ruling held that “under well-settled California insurance law, the ‘mere loss of use of physical property to generate business income, without any other physical impact on the property, does not give coverage for direct physical loss. … So too here.”

Attorneys in the case did not respond to requests for comment.

Last Friday, the 9th Circuit also ruled against Las Vegas casino Circus Circus in similar litigation.