On March 16, 2022, the Ninth Circuit joined other appellate courts in finding that restaurants were not entitled to insurance coverage for losses due to the COVID-19 pandemic shutdowns.  A panel of judges issued an unpublished opinion affirming a district court opinion that the pandemic and pandemic-related shutdown orders did not cause direct physical loss or damage within the meaning of the insurance policy at issue.

The case, Steven Baker v. Oregon Mutual Insurance Co., 21-51097, came upon appeal from the San Francisco District Court. Plaintiff was a San Francisco café seeking insurance coverage from its commercial property insurance provider, Oregon Mutual Insurance. The district court granted Rule 12(b)(6) motion to dismiss the complaint, finding that there was no coverage because there was no direct physical loss or damage within the meaning of the insurance policy.

The Ninth Circuit panel reviewed the lower court’s order de novo. The panel found that a California state court of appeal case, Inns by the Sea v. California Mutual Insurance Co., 286 Cal. Rptr. 3d 576 (Cal. Ct. App. 2021) was controlling authority.  In that case, the court held that the commercial property insurance policy language at issue did not cover loss of business income caused by COVID-related closure orders.  Applying the state court’s interpretation of California law, the panel found that the losses at issue were not physical loss or damage and were not covered by the café’s insurance policy.

Other appellate courts to decide similar coverage disputes have also found no coverage on similar grounds, leaving restaurants to bear the cost of pandemic-related losses and shutdowns with no help from commercial insurance policies.