Appeals Court Dismisses 14 COVID Business Insurance Claims Against Travelers

The Ninth Circuit Court of Appeals has dismissed lawsuits by 14 businesses seeking insurance coverage from Travelers Insurance for business losses stemming from COVID-19 and the related government shutdown orders.

The federal appeals court affirmed the denial of the claims because a virus exclusion clause “clearly and unambiguously” barred the plaintiffs’ claims for losses or damages.

The 14 California businesses were insured under identical provisions of Travelers policies covering “direct physical loss of or damage to property” caused by or resulting from a covered cause of loss.

The policies also contained a virus exclusion clause barring coverage “for loss or damage caused by or resulting from any virus, bacterium or other microorganism that induces or is capable of inducing physical distress, illness or disease.”

The businesses on appeal had argued that COVID-19 government shutdown orders—not the COVID-19 virus itself—caused their losses, so the virus exclusion did not apply.

But the appeals court affirmed its own previous rejection of these arguments, citing a 2021 ruing (Mudpie, Inc. v. Travelers):

“Though Mudpie argues it was the government orders that most directly caused its injury, Mudpie does not plausibly allege that the efficient cause, i.e., the one that set others in motion, was anything other than the spread of the virus throughout California, or that the virus was merely a remote cause of its losses.”

Accordingly, the court affirmed, the virus exclusion bars coverage for the claims.

The plaintiff businesses included an auto repair shop, a chiropractor, a nail spa, a wax salon, and several dentists.

The Ninth Circuit covers Alaska, Arizona, Central District of California, Eastern District of California, Northern District of California, Southern District of California, Guam, Hawaii, Idaho, Montana, Nevada, Northern Mariana Islands, Oregon, Eastern District of Washington and Western District of Washington.