Facts

The City of Los Angeles Department of Airports, also known as Los Angeles World Airports (LAWA), owns and operates multiple airports and surrounding commercial property in the Los Angeles area. LAWA held an all-risk commercial property insurance policy with American Home Assurance Company (AHAC). The policy covered LAWA for "all risks of direct physical loss or damage" other than those expressly excluded within the policy.

LAWA tendered a claim to AHAC for COVID related losses and sought coverage under the policy's Property Damage and Time Element (i.e. business interruption) provisions. AHAC denied the claim, LAWA filed suit in Los Angeles Superior Court, and AHAC removed the action to federal court and then moved to dismiss.

PLAINTIFF'S CONTENTIONS: LAWA alleged that AHAC wrongfully denied coverage by refusing to cover its COVID related losses. It claimed that the actual presence of COVID-19 at its airport properties caused physical damage, rendered various areas of the airports unusable for their intended purposes, and required LAWA to adopt physical alterations, building systems, and safety and cleaning protocols. Thus, the presence of COVID at the airport properties had caused "direct physical loss or damage" covered under the policy. LAWA brought claims for breach of the insurance policy, declaratory relief, insurance bad faith, and unfair business practices under Business & Professions Code Section 17200, et seq.

DEFENDANT'S CONTENTIONS: AHAC denied liability, asserting that LAWA's losses were not covered by the insurance policy because COVID-19 did not cause "direct physical loss or damage" to the airport properties and because a Pollutants and Contaminants exclusion in the policy precluded coverage for losses caused by viruses, like COVID-19.

Result

The court granted AHA's motion to dismiss with prejudice, finding the claims were not covered by the policy.