Facts

Protege Restaurant Partners LLC owns and operates a Michelin-starred restaurant located in Palo Alto, California. In response to California and Santa Clara County mandates, and COVID-19, Protege's restaurants had been completely shut down since March 17, 2020. Prior to the shutdown, Protege purchased all-risk commercial property insurance policies from Sentinel Insurance Company to cover loss of income caused by business interruption. The successive 1-year policies cover the period from January 2020 to January 2022, and include virus exclusion provisions stating that Sentinel would "not pay for loss or damage caused directly or indirectly by the presence, growth, proliferation, spread or any activity of...virus." Protege filed a class action against Sentinel for breach of contract and declaratory injunctive relief arising from Sentinel's refusal to pay its COVID-19 related claims.

PLAINTIFF'S CONTENTIONS: Plaintiff contended that defendant refused to provide business insurance coverage for plaintiff's losses related to the COVID-19 pandemic and COVID-related county and state stay-at-home orders. Plaintiff further contended that the definition of "loss or damage" in the virus exclusion is direct physical loss or direct physical damage, so that virus exclusion did not apply to non-physical loss like business losses. Plaintiff further contended that the virus exclusion did not apply because there was a factual dispute whether the virus itself or the closure orders constituted efficient proximate cause for its alleged losses. Plaintiff also contended that even if the virus exclusion applies to COVID-related losses, plaintiff was entitled to recover under the time element coverage provision of the limited virus coverage, which carves out coverage for some losses otherwise excluded by the virus exclusion.

DEFENDANT'S CONTENTIONS: Defendant denied all contentions. Defendant contended that the policy's virus exclusion bars coverage for plaintiff's COVID-related losses. Defendant also contended that the time element coverage provision requires a "specified cause of loss" or "equipment breakdown accident," which plaintiff failed to plead. Defendant further contended plaintiff failed to plead either a "loss which resulted...in virus" or a suspension of operations that satisfies all the terms and conditions of the applicable time element coverage.

Result

Defendant's motion to dismiss was granted.