Case 3:20-cv-03750-WHO Document 52 Filed 11/09/20 Page 1 of 14
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`UNITED STATES DISTRICT COURT
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`NORTHERN DISTRICT OF CALIFORNIA
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`WATER SPORTS KAUAI, INC.,
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`Plaintiff,
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`v.
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`FIREMAN'S FUND INSURANCE
`COMPANY, et al.,
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`Case No. 20-cv-03750-WHO
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`ORDER GRANTING THE MOTION
`TO DISMISS
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`Re: Dkt. No. 39
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`Defendants.
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`Plaintiff Water Sports Kauai, Inc., a Hawaii corporation, dba Sand People (“Sand People”),
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`shut down its businesses (twelve stores on three islands that sell gifts, artwork, décor, jewelry,
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`glassware, coastal furnishing, apparel, soaps, lotions, candles, and books) six months ago due both
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`to the spread of the coronavirus and to directives from Hawaii’s Governor limiting the operation
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`of non-essential businesses, including Sand People’s stores. Amended Complaint (“AC”), Dkt.
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`No. 38, ¶ 56. It submitted a claim for coverage under an insurance policy (Policy) issued by
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`defendants Fireman’s Fund Insurance Company, National Surety Corporation, and Allianz Global
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`Risks US Insurance Co (collectively, “defendants”) under the “Lost Business Income” and “Civil
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`Authority” provisions. AC ¶ 4. That claim was denied, and Sand People filed suit.
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`I agree with the vast majority of cases that have addressed materially similar policy
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`provisions and facts. Sand People has failed to plausibly plead Business Income or Civil
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`Authority coverage. Its claims are dismissed with limited leave to amend.
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`BACKGROUND
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`The Policy provides that the defendants will “pay for direct physical loss of or damage
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`to Covered Property at the premises described in the Declarations caused by or resulting from any
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`Covered Cause of Loss.” AC, Ex. 9 at 30. In relevant part, the Policy states:
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`United States District Court
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`Case 3:20-cv-03750-WHO Document 52 Filed 11/09/20 Page 2 of 14
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`Id. at 31.
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`Id. at 33.
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`Id. at 34.
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`Id. at 35.
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`Id. at 63.
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`3. Covered Causes of Loss
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`RISKS OF DIRECT PHYSICAL LOSS unless the loss is [excluded].
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`g. Business Income
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`We will pay for the actual loss of Business Income you sustain due to
`the necessary suspension of your operations during the period of
`restoration.
`. . .
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`The suspension must be caused by direct physical loss of or damage
`to property at the described premises, including personal property in
`the open (or in a vehicle) within 100 feet, caused by or resulting from
`any Covered Causes of Loss.
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`h. Extra Expense
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`We will pay necessary Extra Expense you incur during the period of
`restoration that you would not have incurred if there had been no
`direct physical loss or damage to property at the described premises,
`including personal property in the open (or in a vehicle) within 100
`feet of the described premises, caused by or resulting from a Covered
`Cause of Loss
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`i. Civil Authority
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`We will pay for the actual loss of Business Income you sustain and
`necessary Extra Expense caused by action of civil authority that
`prohibits access to the described premises due to direct physical loss
`of or damage to property, other than at the described premises, caused
`by or resulting from any Covered Cause of Loss. This coverage will
`apply for a period of up to two consecutive weeks from the date of
`that action.
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`15. Period of Restoration means the period of time that:
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`a. Begins with the date of direct physical loss or damage caused by or
`resulting from any Covered Cause of Loss at the described premises;
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`b. Ends on the date when the property at the described premises
`should be repaired, rebuilt or replaced with reasonable speed and
`similar quality.
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`Based on the spread of the coronavirus, directives from Hawaii’s Governor limiting the
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`Case 3:20-cv-03750-WHO Document 52 Filed 11/09/20 Page 3 of 14
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`operation of non-essential businesses, including Sand People’s stores, and government closure
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`orders issued in 49 other states/jurisdictions as a result of the coronavirus pandemic, and
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`defendants’ denial of requests for coronavirus coverage under similarly worded policies, Sand
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`People asserts the following claims on behalf of a class and a subclass: (1) Breach of Contract; (2)
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`Breach of Covenant of Good Faith and Fair Dealing; (3) Unfair or Deceptive Business Practices;
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`and (4) Declaratory Relief.
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`The class and subclass are defined as:
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`Class
`All persons or entities in the United States (including its territories
`and the District of Columbia) who own an interest in a business that
`was insured by Defendants in March 2020 and made (or attempted to
`make) a claim with Defendants arising from lost business income (or
`other losses related to business interruption) at that business related
`to COVID-19, and did not receive coverage for that claim.
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`Hawaii Subclass
`All persons or entities in Hawaii who own an interest in a business
`that was insured by Defendants in March 2020 and made (or
`attempted to make) a claim with Defendants arising from lost business
`income (or other losses related to business interruption) at that
`business related to COVID-19, and did not receive coverage for that
`claim.
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`AC ¶ 123.
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`LEGAL STANDARD
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`In Hawaii, “‘because insurance policies are contracts of adhesion and are premised on
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`standard forms,’” the contracts must be “construed liberally” in favor of the insured and based on
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`the reasonable expectations of a layperson, with any ambiguities being resolved against the
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`insurer. Hart v. Ticor Title Ins. Co., 126 Hawai'i 448, 456 (2012) (quoting Dairy Road Partners v.
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`Island Ins. Co., Ltd., 92 Hawai‘i 398, 411- 414 (2000)); see also Great Divide Ins. Co. v. AOAO
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`Maluna Kai Estates, 492 F. Supp. 2d 1216, 1226–27 (D. Haw. 2007) (“A policy provision is not
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`ambiguous just because the insurer and insured disagree over the interpretation of the terms of a
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`policy. . . . Ambiguity exists only when the policy ‘taken as a whole, is reasonably subject to
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`differing interpretation.’” (quoting Oahu Transit Servs., Inc. v. Northfield Ins. Co., 107 Hawai‘i
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`231, 236 n. 7 (Haw.2005)).
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`Northern District of California
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`Case 3:20-cv-03750-WHO Document 52 Filed 11/09/20 Page 4 of 14
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`Defendants move to dismiss Sand People’s claims because the mere threat of coronavirus
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`DISCUSSION
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`is insufficient to show a “direct physical loss of or damage to” its covered property and the
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`government closures orders are likewise insufficient to show the same. Defendants note that
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`district courts around the country – including ones in this District and throughout the Ninth Circuit
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`– have rejected identical claims under similar policies and that the only two federal cases Sand
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`People identifies in support of their claims – both from the Western District of Missouri – are
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`distinguishable or wrongly decided. Sand People responds that this case is different from the bulk
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`of district court cases relied on by defendants because (i) it specifically alleges that it had to close
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`its properties due directly to the coronavirus’ rapid spread and imminent threat to its businesses,
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`and (ii) the vast majority of district court cases dismissing for lack of coverage also had virus
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`exclusions limitations in their policies.
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`As described below, I will follow the overwhelming majority of courts that have
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`determined that the mere threat of coronavirus cannot cause a “direct physical loss of or damage
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`to” covered property as required under the Policy. That resolves the issue of coverage under the
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`Business Income and Civil Authority provisions as a result of both the spread of coronavirus and
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`the government closure orders.
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`I.
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`LOST BUSINESS INCOME
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`Sand People contends that “lost business income” coverage was triggered by both the
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`“physical” spread of the coronavirus and, independently, the government closure orders. I will
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`address each argument in turn.
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`A.
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`Spread of Coronavirus
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`Sand People asserts that it adequately alleged closure because of the “imminent” threat of
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`coronavirus at their properties. AC ¶ 69 (“The Coronavirus and its pernicious spread created
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`inherently dangerous conditions where the stores and property within them were at immediate and
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`imminent risk of exposure to the Coronavirus. This caused them to suspend operations and lose
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`access to the stores, which rendered them untenantable.”); ¶ 76 (“Because, inter alia, the spread of
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`Coronavirus rendered Sand People’s facilities no longer usable for their intended purpose(s), and
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`Northern District of California
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`Case 3:20-cv-03750-WHO Document 52 Filed 11/09/20 Page 5 of 14
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`in many cases impossible to operate safely, it directly caused them to suffer physical damage and
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`loss.”). It claims that the explosive spread of coronavirus and the imminence of the threat it
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`presented is sufficient to show a “direct physical loss” because the closure is alleged to have
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`resulted from a physical event “the spread of the virus” and potential exposure to a disease.
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`Sand People relies on a series of cases where courts found coverage because asbestos,
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`arsenic, and e-coli contamination were present on covered property. For example, in Port Auth. of
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`New York and New Jersey v. Affiliated FM Ins. Co., 311 F.3d 226 (3d Cir. 2002), the Third Circuit
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`interpreted a “physical loss or damage” policy with respect to asbestos and concluded, “[w]hen the
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`presence of large quantities of asbestos in the air of a building is such as to make the structure
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`uninhabitable and unusable, then there has been a distinct loss to its owner. However, if asbestos
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`is present in components of a structure, but is not in such form or quantity as to make the building
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`unusable, the owner has not suffered a loss.” Id. at 236. The court explained, “‘physical loss or
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`damage’ occurs only if an actual release of asbestos fibers from asbestos containing materials has
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`resulted in contamination of the property such that its function is nearly eliminated or destroyed,
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`or the structure is made useless or uninhabitable, or if there exists an imminent threat of the release
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`of a quantity of asbestos fibers that would cause such loss of utility. The mere presence of
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`asbestos, or the general threat of future damage from that presence, lacks the distinct and
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`demonstrable character necessary for first-party insurance coverage.” Id.
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`That case confirms that there must be sufficient evidence of the presence of the
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`contaminant at the property plus an imminent threat from it. Id. at 236 (“We thus find ourselves in
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`agreement with the District Court’s ruling that plaintiffs’ inability ‘to produce evidence
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`concerning the manifestation of an imminent threat of asbestos contamination’ forecloses the
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`existence of a viable claim. Although the plaintiffs demonstrated that many of its structures used
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`asbestos-containing substances, those buildings had continuous and uninterrupted usage for many
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`years. The mere presence of asbestos or the general threat of its future release is not enough to
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`survive summary judgment or to show a physical loss or damage to trigger coverage under a first-
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`party ‘all risks’ policy.”); see also In Assn. of Apt. Owners of Imperial Plaza v. Fireman’s Fund
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`Ins. Co., 939 F. Supp. 2d 1059, 1069 (D. Haw. 2013) (“direct physical loss or damage” to property
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`Northern District of California
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`United States District Court
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`satisfied where plaintiff demonstrates “that an event had a direct impact and proximately caused a
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`loss related to the physical matter of the Property” and arsenic seeping into the “concrete slab,
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`carpet, and interior objects are physical matter within the ordinary use of those words.”); Motorists
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`Mut. Ins. Co. v. Hardinger, 131 Fed. Appx. 823, 826–27 (3d Cir. 2005) (unpublished) (“we
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`believe there is a genuine issue of fact whether the functionality of the Hardingers’ property was
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`nearly eliminated or destroyed, or whether their property was made useless or uninhabitable” by
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`presence of e-coli in well). For that reason, it does not help Sand People.
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`Defendants do not dispute that actual presence of a contaminant at a covered property
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`might trigger coverage. They argue that what is alleged here – the “mere threat” of exposure – is
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`categorically insufficient to trigger coverage as a direct physical loss of or damage to Sand
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`People’s property. They contend that there must be an incident of a direct physical impact to
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`covered property to trigger coverage and a mere threat does not suffice. That distinction is
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`supported by Port Authority, 311 F.3d at 236, where even though asbestos was in the property –
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`and thus there was some threat of exposure in the future – plaintiff’s claims failed because there
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`was insufficient “evidence concerning the manifestation of an imminent threat of asbestos
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`contamination.” Id. at 236 (emphasis added). Sand People pleads that coronavirus was rapidly
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`spreading and feasibly in Hawaii but fails to allege both its presence in any of its properties and a
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`manifestation of imminent threat of contamination in any of its properties.
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`That manifestation is significant because the Policy requires a “direct physical loss of or
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`damage to” property that has not been alleged. See, e.g., Mudpie, Inc. v. Travelers Cas. Ins. Co. of
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`Am., 20-CV-03213-JST, 2020 WL 5525171, at *5 (N.D. Cal. Sept. 14, 2020) (dismissing claim for
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`failure to allege COVID-19 or any other physical impetus caused the loss of functionality “where
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`plaintiff “does not allege that ‘Covid-19 entered the [property] through any employee or
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`customer” and did not allege that store was closed “because its employees became sick or
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`coronavirus was discovered on the property”). For this reason alone, Sand People’s reliance on
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`Studio 417, Inc. v. Cincinnati Ins. Co., 20-CV-03127-SRB, 2020 WL 4692385, at *2 (W.D. Mo.
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`Aug. 12, 2020) and Blue Springs Dental Care, LLC v. Owners Ins. Co., 20-CV-00383-SRB, 2020
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`WL 5637963, at *6 (W.D. Mo. Sept. 21, 2020), is unhelpful. Unlike in those cases – where a hair
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`Case 3:20-cv-03750-WHO Document 52 Filed 11/09/20 Page 7 of 14
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`salon, restaurant, and dental practice alleged the actual presence of the coronavirus in their
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`establishments – Sand People only pleads an “imminent threat.” See also Mudpie, Inc, 2020 WL
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`5525171 *6 (distinguishing Studio 417 because “Mudpie makes no similar allegation here. It does
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`not allege, for example, that the presence of the COVID-19 virus in its store created a physical
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`loss.”). There are no facts plausibly alleging an actual exposure at one or more Sand People
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`stores, much less that an actual physical exposure caused them to close a particular store or set of
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`stores.1
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`Instead of alleging actual physical exposure, Sand People broadly claims that closing the
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`stores to avoid imminent exposure is “indistinguishable” from actual exposure in the context of an
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`insurance contract because it was under a duty to mitigate losses. Oppo. at 5. But Sand People
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`cites no cases finding that similar coverage provisions were triggered without some physical and
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`direct occurrence on the property in the first instance. See, e.g., Hampton Foods, Inc. v. Aetna
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`Cas. and Sur. Co., 787 F.2d 349, 352 (8th Cir. 1986) (plaintiff suffered “direct, concrete and
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`immediate loss due to extraneous physical damage to the building,” and because of “the
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`unquestioned danger of reentering the building” at risk of collapse, plaintiff was entitled to attempt
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`to mitigate its damages by “removing and salvaging as much property as it could before the
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`building’s destruction.”); see also Armstrong World Industries, Inc. v. Aetna Cas. & Sur. Co., 45
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`Cal. App. 4th 1, 92 (Cal. App. 1st Dist. 1996) (“remedial costs incurred in cleaning up
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`contaminated waste sites are covered by CGL policies, but ‘prophylactic’ costs-costs incurred in
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`advance of any release of hazardous waste, to prevent threatened future pollution-are not incurred
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`because of property damage.”).2
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`1 During the oral argument, Sand People’s counsel admitted that it would not be able to plead facts
`that coronavirus actually entered or was otherwise found in one of the Sand People’s stores. I also
`note that at least one court has dismissed coverage claims despite plaintiff’s allegation that
`coronavirus had entered a property. See, e.g. Uncork and Create LLC v. The Cincinnati Insurance
`Company, et al., No. 2:20-cv-00401, slip op. (S.D.W. Va. November 2, 2020) (granting motion to
`dismiss for lack of “physical loss” and concluding that “even when present, COVID-19 does not
`threaten the inanimate structures covered by property insurance policies, and its presence on
`surfaces can be eliminated with disinfectant. Thus, even actual presence of the virus would not be
`sufficient to trigger coverage for physical damage or physical loss to the property.”).
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` Cases confirming coverage where there was physical contamination of properties, therefore, do
`not aid plaintiff. See Oppo. at 6-7.
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`Case 3:20-cv-03750-WHO Document 52 Filed 11/09/20 Page 8 of 14
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`Sand People also contends that the significant “gravity of the risk” from coronavirus, as
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`confirmed by the March 2020 government closure orders and which they intend to prove through
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`discovery and expert testimony, “will demonstrate how, in the midst of a global pandemic,
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`Plaintiff’s traveler-focused Stores in touristic centers of Hawai‘i would have been exposed to
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`Coronavirus had they not closed down.” Oppo. 8-9. But it cites no case finding coverage based
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`only on a “would have been exposed” allegation because of a contaminant’s rapid spread.
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`Finally, Sand People asserts that coverage is independently required because of “exposure”
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`to coronavirus on other properties in Hawaii that were in the “same tourism and supply chains” as
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`its stores and that third party exposure establishes coverage. Oppo. at 9.3 However, no specific
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`“income support property” in Sand People’s supply chain is identified in the Amended Complaint.
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`Even if one was, Sand People would still need to allege facts showing that the identified income
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`support property itself suffered a direct physical loss, which then caused Sand People a specific
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`loss.
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`B.
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`Government Closure Orders
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`Sand People also contends that the government closure orders independently triggered
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`coverage because (i) it suffered a “loss of” its property and “material alteration” of the property is
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`not required and (ii) deprivation of the functionality of the property triggers coverage. It argues
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`that “loss” broadly includes a deprivation, dispossession, and impairment of property, similar to
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`what it suffered here due to the government orders shutting down non-essential businesses like
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`Sand People’s. It asserts that there is no need, under the “loss” prong, to show a “material
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`alteration” of its property (that might otherwise be required under the “damage to” prong).
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`Sand People relies on Total Intermodal Services Inc. v. Travelers Prop. Cas. Co. of Am.,
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`CV 17-04908 AB (KSX), 2018 WL 3829767 (C.D. Cal. July 11, 2018). There the court
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`3 The Policy provides: “j. Income Support Properties. We will pay for the actual loss of Business
`Income you sustain due to direct physical loss or damage at the premises of an income support
`property not described in the schedule caused by or resulting from any Covered Cause of Loss.
`Income Support Property means property operated by others on whom you depend to: (1) Deliver
`material or services to you, or to others for your account; (2) Accept your products or services; (3)
`Manufacture products for delivery to your customers under contract of sale; or (4) Attract
`customers to your business.” AC, Ex. 9 at 35.
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`Northern District of California
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`United States District Court
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`recognized that the separate “loss of” property clause “contemplates that the property is misplaced
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`and unrecoverable, without regard to whether it was damaged,” but could include the permanent
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`dispossession of something; there the loss of a shipping container. Id. at *3-4. The Total
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`Intermodal court distinguished “loss of” from “loss to” property, where “loss to” suggests an
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`external force acting on property, and “loss of” connotes simple dispossession or similar harm not
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`“localized” on a segment of property. Id. at 3-4; see also Oppo. at 10-11.
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`In the Mudpie case, the Hon. Jon S. Tigar of this District accepted the distinction drawn by
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`Total Intermodal and rejected the alleged requirement – suggested by defendants here – that there
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`be some physical alteration to the covered property. Mudpie, Inc., 2020 WL 5525171 at *4.
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`However, Judge Tigar concluded Total Intermodal did not help plaintiffs because while
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`Mudpie has been dispossessed of its storefront, it will not be a
`“permanent dispossession” as with the lost cargo in Total Intermodal.
`See 2018 WL 3829767, at *4. When the Stay at Home orders are
`lifted, Mudpie can regain possession of its storefront. Mudpie’s
`physical storefront has not been “misplaced” or become
`“unrecoverable,” and neither has its inventory.
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`
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`2020 WL 5525171 at *4.
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`The same is true here. As Judge Tigar noted, applying the broader “loss of” coverage, the
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`surrounding provisions within the policy at issue there “suggest that Mudpie’s inability to occupy
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`its storefront does not fall within the Business Income and Extra Expense coverage of this policy”
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`given the “period of restoration” definition limits the period of coverage to when the property is
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`“repaired, rebuilt or replaced with reasonable speed and similar quality.” Id. He stated that there
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`was “nothing to fix, replace, or even disinfect for Mudpie to regain occupancy of its property”
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`because its loss was “caused by state closure orders and thus will last for however long those
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`restrictions remain.” Id. The period of restoration provisions in this case are materially identical
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`and likewise support a conclusion that there has been no covered disposition or “loss of” property
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`because Sand People identifies nothing it needs to fix or replace at any of its properties.
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`Sand People takes issue with those two conclusions, arguing that a covered “disposition”
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`does not have to be “permanent” and cites to multiple cases where “removeable substances” like
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`asbestos and mold have been found to trigger a “direct physical loss.” But, as noted above, those
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`Case 3:20-cv-03750-WHO Document 52 Filed 11/09/20 Page 10 of 14
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`cases do not help Sand People because it has not alleged any direct physical anything that
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`happened to or at its specific properties. Moreover, it has not been dispossessed or deprived of
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`any specific property; its inventory and equipment remain. Instead, it complains of loss of use,
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`meaning its inability to operate its stores.
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`Numerous courts have found that materially identical allegations do not trigger coverage
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`under similarly worded policies as a result of government closure orders. The cases consistently
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`conclude that there needs to be some physical tangible injury (like a total deprivation of property)
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`to support “loss of property” or a physical alteration or active presence of a contaminant to support
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`“damage to” property. See, e.g., Mudpie, Inc., 2020 WL 5525171, at *4 (“Although Mudpie has
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`been dispossessed of its storefront, it will not be a “permanent dispossession” as with the lost
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`cargo in Total Intermodal. . . . When the Stay at Home orders are lifted, Mudpie can regain
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`possession of its storefront.”); Real Hospitality, LLC d/b/a/ Ed’s Burger Joint v. Travelers
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`Casualty Insurance Company of America, No. 2:20-cv-00087, slip op. (S.W.D.Ms. November 4,
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`2020) (interpreting “loss of” prong in “direct physical loss of or damage to” to mean total
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`dispossession of property); 10E, LLC v. Travelers Indem. Co. of Connecticut, 2:20-CV-04418-
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`SVW-AS, 2020 WL 5359653, at *4 (C.D. Cal. Sept. 2, 2020) (“Under California law, losses from
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`inability to use property do not amount to ‘direct physical loss of or damage to property’ within
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`the ordinary and popular meaning of that phrase. Physical loss or damage occurs only when
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`property undergoes a ‘distinct, demonstrable, physical alteration.’ [] ‘Detrimental economic
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`impact’ does not suffice.” (internal citations omitted)); see also Travelers Cas. Ins. Co. of Am. v.
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`Geragos and Geragos, CV 20-3619 PSG (EX), 2020 WL 6156584, at *4 (C.D. Cal. Oct. 19,
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`2020) (dismissing claim under “loss of or damage to” language where insured “fails to allege that
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`there was physical damage to the property and concedes that Coronavirus ‘has never been detected
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`at [its] property.’”); Henry's Louisiana Grill, Inc. v. Allied Ins. Co. of Am., 1:20-CV-2939-TWT,
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`2020 WL 5938755, at *6 (N.D. Ga. Oct. 6, 2020) (dismissing claims because the “range of
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`contemplated harms aligns with an understanding that ‘loss of’ means total destruction while
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`Case 3:20-cv-03750-WHO Document 52 Filed 11/09/20 Page 11 of 14
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`‘damage to’ means some amount of harm or injury.”).4
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`Sand People’s “deprivation of functionality” argument – namely its inability to operate the
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`stores during the duration of the government closure orders, triggering coverage – fares no better.
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`There is no allegation of any direct physical contact that caused a tangible loss to their property (as
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`in Total Intermodal) or the direct physical presence of a contaminant that creates an inability to
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`use or need for remediation (like the actual presence of coronavirus, asbestos, mold, etc.). See,
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`e.g., Assn. of Apt. Owners of Imperial Plaza v. Fireman's Fund Ins. Co., 939 F. Supp. 2d 1059,
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`1068 (D. Haw. 2013) (“arsenic concentrated and posed a health risk that required abatement”).
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`Finally, as in Mudpie, viewing the language of the Policy as a whole, the “Period of
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`Restoration” language (during which the Policy covers lost business income and extra expenses)
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`shows the strength of defendants’ argument and the weakness of Sand People’s. Mudpie, Inc.,
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`2020 WL 5525171 at *4; AC, Ex. 9 at 63 (defining the restoration period as beginning on the
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`“date of direct physical loss or damage caused by or resulting from any Covered Cause of Loss at
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`the described premises” and ending when “the property at the described premises should be
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`repaired, rebuilt or replaced with reasonable speed and similar quality.”). As in Mudpie, here
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`there is nothing on any of Sand People’s premises that allegedly needs to be repaired, rebuilt or
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`replaced.5
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`4 Sand People argues that these cases (and the dozens of other cases that have been similarly
`decided by district courts) are not persuasive because some of them also addressed virus
`exclusions in the policies at issue. The majority of these courts reasonably determined, first, that
`coverage was not implicated given the lack of a direct physical event causing loss of or damage to
`property. See, e.g., Mudpie, Inc. v. Travelers Cas. Ins. Co. of Am., 20-CV-03213-JST, 2020 WL
`5525171, at *7 n. 9 (N.D. Cal. Sept. 14, 2020) (“Because Mudpie is not entitled to Civil Authority
`coverage, the Court need not consider Travelers’s additional argument that the virus exclusion
`bars such coverage.”); 10E, LLC v. Travelers Indem. Co. of Connecticut, 2:20-CV-04418-SVW-
`AS, 2020 WL 5359653, at *6 (C.D. Cal. Sept. 2, 2020) (“Plaintiff’s FAC does not articulate a
`theory of Civil Authority coverage clearly enough to allow the Court to adjudicate at this stage
`whether and how the Policy’s virus exclusion applies.”); Henry’s Louisiana Grill, Inc. v. Allied
`Ins. Co. of Am., 1:20-CV-2939-TWT, 2020 WL 5938755, at *6 n. 3 (N.D. Ga. Oct. 6, 2020)
`(“Because the Plaintiffs have not pleaded sufficient facts to support a claim for coverage here, this
`Court will not proceed to analyze the parties' arguments regarding the Virus or Bacteria
`exclusion.”). These courts’ initial coverage determinations are persuasive here.
`
` 5
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` In post-briefing submissions, plaintiff submits a pair of North Carolina Superior Court decisions
`from October 9, 2020, granting summary judgment to plaintiffs on policies that require only a
`“direct loss” to Property. Dkt. No. 45. Those decisions are not persuasive. Defendants provide
`four additional district court cases as supplemental authority, including two that are very similar to
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`Case 3:20-cv-03750-WHO Document 52 Filed 11/09/20 Page 12 of 14
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`Therefore, Sand People has failed to allege a plausible basis for Lost Business Income
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`coverage under either of its theories (the threat of rapidly spreading coronavirus or the Hawaii
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`government closure orders). This claim is DISMISSED. Sand People is given limited leave to
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`amend. It is unlikely to be able to allege the physical presence of coronavirus in any of its covered
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`properties, but it may be able to allege the physical presence of coronavirus and additional facts in
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`support of its “supply chain” theory.
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`II.
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`CIVIL AUTHORITY LOSS
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`Sand People also argues that under the plain language of the Policy, it is entitled to
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`coverage under the Civil Authority provision because the closure orders in Hawaii “prohibited”
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`access to its stores and the orders themselves were issued “in response” to physical loss and
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`damage elsewhere. Numerous judges, including Judge Tigar in Mudpie, have addressed and
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`rejected this argument in this identical posture:
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`Mudpie’s allegations establish that the government closure orders
`were intended to prevent the spread of COVID-19. See ECF No. 1 ¶
`24 (California’s Safer at Home Order was issued “to control the
`spread of COVID-19.”). Because the orders were preventative – and
`absent allegations of damage to adjacent property – the complaint
`does not establish the requisite causal link between prior property
`damage and the government’s closure order.
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`Mudpie, Inc., 2020 WL 5525171, at *7.
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`The same result is required here. The preventative closure orders cannot support a causal
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`this case and highly persuasive. In the first, W. Coast Hotel Mgmt., LLC v. Berkshire Hathaway
`Guard Ins. Cos., No. 2:20-cv-05663-VAP-DFMx, slip op. (C.D. Cal. Oct. 27, 2