Calif. high court asked to consider virus exclusion in COVID casePosted On: Feb. 7, 2023 1:15 PM CST
A federal appeals court is asking the California Supreme Court to consider whether a virus exclusion in renowned Napa Valley restaurant The French Laundry’s coverage is unenforceable.
In one of the first COVID-19 business interruption cases filed, the Yountville-based restaurant, its sister restaurant Bouchon Bistro, and its chef and owner Tom Keller filed suit in state court in March 2020 against a Hartford Financial Services Inc. unit in connection with its pandemic-related closures.
The case, French Laundry Partners et al. v Hartford Fire Insurance Co., was later transferred to federal court. The U.S. District Court in San Francisco granted the insurer’s motion to dismiss the case in April 2021 on the basis of the coverage’s virus exclusion.
In its filing Monday, the 9th U.S. Circuit Court of Appeals in San Francisco said the virus exclusion does not apply to coverage otherwise provided by a “Fungus, Wet Rot, Dry Rot, Bacteria and Virus-Limited Coverage” provision in the policy.
In its filing, the three-judge appeals court panel noted that two California Courts of Appeal have addressed policies containing virus exclusion terms, and one of them, in a Dec. 27 ruling in John’s Grill Inc. v. Hartford Financial Services Group Inc., concluded that the virus exclusion could not be enforced because “it would render the limited virus coverage illusory.”
“While both state and federal courts have published opinions providing some guidance, there remains much uncertainty as to how California law applies in many scenarios (such as the scenario presented in this case),” the panel said in asking the state’s high court to consider the issue.
The California Supreme Court has not yet ruled on whether policyholders are entitled to COVID-19-related business interruption coverage.
Attorneys in the case did not respond to requests for comment.