California Supreme Court Watch

#23-36 Another Planet Entertainment, LLC v. Vigilant Insurance Company, S277893. (9th Cir. No. 21-16093; 56 F.4th 730; Northern District of California; D.C. No. 3:20-cv07476-VC.) Request under California Rules of Court, rule 8.548, that this court decide a question of California law presented in a matter pending in the United States Court of Appeals for the Ninth Circuit. The question presented is: “Can the actual or potential presence of the COVID-19 virus on an insured’s premises constitute ‘direct physical loss or damage to property’ for purposes of coverage under a commercial property insurance policy?”

Request for certification granted: 3/01/2023

Case fully briefed: 7/03/2023

Cause argued and submitted: 3/05/2024

Opinion filed: 5/23/2024

See the Order Certifying Question to the California Supreme Court.

See the Oral Argument.

See the California Supreme Court Opinion.  (Another Planet Entertainment, LLC v. Vigilant Insurance Company (2024) __ Cal.5th __.)

“We conclude, consistent with the vast majority of courts nationwide, that allegations of the actual or potential presence of COVID-19 on an insured’s premises do not, without more, establish direct physical loss or damage to property within the meaning of a commercial property insurance policy. Under California law, direct physical loss or damage to property requires a distinct, demonstrable, physical alteration to property. The physical alteration need not be visible to the naked eye, nor must it be structural, but it must result in some injury to or impairment of the property as property.

The factual allegations of Another Planet’s complaint, which we accept as true for purposes of this proceeding, do not satisfy this standard. 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. Its relevant physical characteristics are unaffected by the presence of the COVID-19 virus.

…

While we conclude Another Planet’s allegations are insufficient, and it appears that such allegations represent the most common allegations in support of pandemic-related property insurance coverage, we cannot and do not in this proceeding determine that the COVID-19 virus can never cause direct physical loss or damage to property. Our contemplation of the virus and the affected property is necessarily limited by Another Planet’s factual allegations. Nonetheless, given the prevalence of similar circumstances, we answer the Ninth Circuit’s question as follows: No, the actual or potential presence of COVID-19 on an insured’s premises generally does not constitute direct physical loss or damage to property within the meaning of a commercial property insurance policy under California law.”

Chief Justice Guerrero authored the opinion of the Court, in which Justices Corrigan, Liu, Kruger, Groban, Jenkins, and Evans concurred.

In the news: Araullo, Insurers secure victory in COVID-19 BI case in California, Insurance Business Magazine (May 28, 2024).