Case 3:20-cv-04571-CRB Document 34 Filed 10/27/20 Page 1 of 12
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`IN THE UNITED STATES DISTRICT COURT
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`FOR THE NORTHERN DISTRICT OF CALIFORNIA
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`BOXED FOODS COMPANY, LLC, et al.,
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`Plaintiffs,
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`v.
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`CALIFORNIA CAPITAL INSURANCE
`COMPANY,
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`Case No. 20-cv-04571-CRB
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`AMENDED ORDER GRANTING
`CALIFORNIA CAPITAL INSURANCE
`COMPANY'S MOTION TO DISMISS
`THE COMPLAINT WITH PREJUDICE
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`Defendant.
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`COVID-19 poses an existential threat to small businesses throughout the United States.
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`Since March, the San Francisco Bay Area alone has seen almost 8,300 businesses close, 4,000 of
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`which shuttered permanently. See Leonardo Castañeda, The Bay Area’s small business closure
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`crisis is already here, The Mercury News (Sept. 22, 2020 7:00 AM),
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`https://www.mercurynews.com/2020/09/22/the-bay-areas-small-business-closure-crisis-is-already-
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`here/. To survive the catastrophic effects of COVID-19, businesses have filed close to 1,300
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`federal lawsuits seeking coverage for business interruption losses. See Covid Coverage Litigation
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`Tracker, University of Pennsylvania Carey School of Law, https://cclt.law.upenn.edu/ (last visited
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`Oct. 23, 2020). Absent government relief or assistance, these small businesses risk permanent
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`closure. Plaintiffs are among those seeking relief through their insurance policy. But while the
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`Court sympathizes with Plaintiffs’ circumstances, the Court cannot ignore that the insurance
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`policy excludes coverage for losses caused by viruses, like COVID-19. Thus, the Court GRANTS
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`Defendant’s motion to dismiss for the reasons outlined below.
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`Case 3:20-cv-04571-CRB Document 34 Filed 10/27/20 Page 2 of 12
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`I.
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`BACKGROUND
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`Boxed Foods Company, LLC and Gourmet Provisions, LLC (collectively, “Plaintiffs”)
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`seek a declaration that they are entitled to business loss coverage under the Business Income,
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`Extra Expense, and Civil Authority coverage provisions of their insurance policy agreement with
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`California Capital Insurance Company (“Defendant”) and Capital Insurance Group.1 Compl. (dkt.
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`1) ¶¶ 1–4, 79. The insurance policy (the “Policy”) provides coverage for business interruption
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`losses that occurred between August 31, 2019 and August 31, 2020. Id. ¶ 11.
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`On March 4, 2020, California declared a State of Emergency in response to the outbreak of
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`COVID-19. Id. ¶ 46. On March 11, California issued an initial order restricting large gatherings,
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`but followed up on March 16 with an order prohibiting large gatherings altogether. Id. ¶ 47. In
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`response to California’s March 11 order, Plaintiffs shuttered their San Francisco restaurants: B
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`Restaurant Bar and the Pin Up All-Star Diner. Compl. ¶ 55. On March 19, California issued
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`another order (collectively, the “Civil Authority Orders”) requiring all businesses to cease non-
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`essential operations. Id. ¶ 48.
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`Plaintiffs allege that they were not able to operate their restaurants as a direct consequence
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`of COVID-19 and the Civil Authority Orders. Id. ¶ 49. Plaintiffs submitted a claim to Defendant
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`on March 7 for the losses associated with not being able to operate their restaurants. Id. ¶ 13.
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`Defendant concluded that the Policy did not encompass COVID-19 as a covered cause of loss, and
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`therefore denied Plaintiffs coverage. See generally, Compl. Ex. 2 (dkt. 1-2).
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`Plaintiffs filed a class action complaint against Defendant seeking declarations that:
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`•
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`the Civil Authority Orders constitute a prohibition of access to Plaintiffs’
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`properties;
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`•
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`the Civil Authority Orders fall within the “prohibited access” coverage as defined
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`in the policy;
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`1 Plaintiffs voluntarily dismissed Capital Insurance Group from the case. See Voluntary Dismissal
`(dkt. 14).
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`Case 3:20-cv-04571-CRB Document 34 Filed 10/27/20 Page 3 of 12
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`19).2
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`•
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`the exclusion of “Loss Due to Virus or Bacteria does not apply to the business
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`losses incurred by Plaintiffs” because the Civil Authority Orders proximately
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`•
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`•
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`caused business losses;
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`the Civil Authority Orders trigger coverage under the Policy;
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`the Policy “provides coverage to Plaintiffs for any current and future civil authority
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`closures of their businesses . . . due to physical loss [sic] or damage directly or
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`indirectly from the COVID-19 pandemic under the Civil Authority coverage
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`parameters;” and
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`•
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`the Policy provides “business income coverage in the event that COVID-19”
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`directly or indirectly caused loss or damage at or within the immediate area of
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`Plaintiffs’ insured properties. Compl. ¶ 79.
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`On August 31, Defendant filed a motion to dismiss Plaintiffs’ complaint. See Mot. (dkt.
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`The Court has jurisdiction over this putative class pursuant to 28 U.S.C. 1332(d)(2)
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`because the amount in controversy exceeds $5 million and at least one member in the proposed
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`class is diverse from Defendant.
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`II.
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`LEGAL STANDARD
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`A.
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`12(b)(6) Motion to Dismiss.
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`Pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, a complaint may be
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`dismissed for failure to state a claim upon which relief may be granted. Dismissal may be based
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`on either “the lack of a cognizable legal theory or the absence of sufficient facts alleged under a
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`cognizable legal theory.” Godecke v. Kinetic Concepts, Inc., 937 F.3d 1201, 1208 (9th Cir. 2019).
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`A complaint must plead “sufficient factual matter, accepted as true, to ‘state a claim to relief that
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`2 Defendant asks the Court to take judicial notice of various government documents, pleadings,
`and hearing transcripts. Def. Requests for Judicial Notice (dkt. 19-2, 26-2). That is appropriate. A
`court can take judicial notice of documents properly submitted with the complaint or upon which
`the complaint necessarily relies if the materials’ “authenticity . . . is not contested” and comprise
`“matters of public record.” Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001)
`overruled on other grounds by Galbraith v. Cnty. of Santa Clara, 307 F.3d 1119 (9th Cir. 2002)
`(citation omitted).
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`Case 3:20-cv-04571-CRB Document 34 Filed 10/27/20 Page 4 of 12
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`is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp.
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`v. Twombly, 550 U.S. 544, 570 (2007)). A claim is plausible “when the plaintiff pleads factual
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`content that allows the court to draw the reasonable inference that the defendant is liable for the
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`misconduct alleged.” Id. When evaluating a motion to dismiss, the Court “must presume all
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`factual allegations of the complaint to be true and draw all reasonable inferences in favor of the
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`nonmoving party.” Usher v. City of Los Angeles, 828 F.2d 556, 561 (9th Cir. 1987). “[C]ourts
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`must consider the complaint in its entirety, as well as other sources courts ordinarily examine
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`when ruling on Rule 12(b)(6) motions to dismiss, in particular, documents incorporated into the
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`complaint by reference, and matters of which a court may take judicial notice.” Tellabs, Inc. v.
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`Makor Issues & Rights, Ltd., 551 U.S. 308, 322 (2007).
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`B.
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`Insurance Policy Interpretation.
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`Under California law, the interpretation of an insurance policy is a question of law for the
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`courts to determine. See Waller v. Trucks Ins. Exch., Inc., 11 Cal. 4th 1, 18 (1995). “The insurer
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`bears the burden of proving . . . the applicability of an exclusion . . . .” State Farm Fire & Cas. Co.
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`v. Martin, 872 F.2d 319, 321 (9th Cir. 1989). The court must “look first to the language of the
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`contract in order to ascertain its plain meaning or the meaning a layperson would ordinarily attach
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`to it.” Waller, 11 Cal. 4th at 18 (citation omitted). The plain language of the insurance policy
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`governs its interpretation. See Bank of the W. v. Superior Ct., 2 Cal. 4th 1254, 1264–65 (1992).
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`A policy provision is ambiguous if it is “capable of two or more constructions, both of which are
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`reasonable.” Waller, 11 Cal. 4th at 18. If the language is ambiguous or unclear, “it must be
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`interpreted in the sense in which the promisor believed, at the time of making it, that the promisee
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`understood it.” Bank of the W., 2 Cal. 4th at 1264–65. Courts should “not strain to create an
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`ambiguity where none exists.” Waller, 11 Cal. 4th at 18–19.
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`III. DISCUSSION
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`Defendant argues that the Pathogenic Organisms Exclusion (hereinafter “Virus
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`Exclusion”)3 excludes coverage for the losses alleged in the complaint, which necessitates
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`3 “‘Pathogenic Organisms’ means any . . . virus . . . .” Policy (dkt. 1-1) at 43.
`4
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`Northern District of California
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`United States District Court
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`Case 3:20-cv-04571-CRB Document 34 Filed 10/27/20 Page 5 of 12
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`dismissing the complaint in its entirety. Mot. at 1–2.4 The Virus Exclusion states:
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`We do not insure for loss or damage caused by, resulting from,
`contributing to or made worse by the actual, alleged or threatened
`presence of any pathogenic organism, all whether direct or indirect,
`proximate or remote, or in whole or in part caused by, contributed to
`or aggravated by any physical damage insured by this policy . . . .
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`Policy at 43.
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`The Court agrees that the Virus Exclusion bars Plaintiffs’ claim. Plaintiffs’ arguments fail
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`to persuade the Court that: (1) the Virus Exclusion does not apply to the Civil Authority coverage
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`provision, Opp. (dkt. 22) at 7–8; (2) the Virus Exclusion is ambiguous and does not apply to
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`pandemics, id. at 8–9; (3) denying coverage under the Virus Exclusion would be contrary to the
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`reasonable expectation of the parties, id. at 10–11; and (4) Defendant’s motion is not ripe because
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`the case requires discovery to ascertain the scope and validity of the Virus Exclusion. Id. at 12–
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`13.
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`A.
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`The Virus Exclusion Precludes Plaintiffs’ Claim under the Civil Authority
`Coverage Provision.
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`An insured entity must allege the following in order to trigger coverage under a
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`policy’s Civil Authority provision: (1) civil authority prohibits access to the insured
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`property, (2) due to physical loss of or damage to other property, and (3) a Covered Cause
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`of Loss, i.e., “a covered risk of physical loss or damage,” caused the loss or damage to the
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`property. Santa Monica Amusements, LLC v. Royal Indem. Co., B155253, 2002 WL
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`31429795, at *2 (Cal. Ct. App. Oct. 31, 2002)).
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`Plaintiffs’ claim collapses under the third requirement because the Policy’s Virus
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`Exclusion excludes viruses as a Covered Cause of Loss, thereby precluding Plaintiffs’
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`claim for business income losses and extra expenses under the Civil Authority provision.
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`Plaintiffs argue that the exclusion does not apply to the Civil Authority provision because
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`“the payout for civil authority coverage comes from business income or extra expense
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`4 Defendant separately argues that the losses in the complaint fall outside the scope of the Policy’s
`Business Income, Extra Expenses, and Civil Authority coverage provisions. See Mot. at 1. The
`Court does not address Defendant’s second argument, because the first argument is sufficient to
`grant dismissal.
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`Case 3:20-cv-04571-CRB Document 34 Filed 10/27/20 Page 6 of 12
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`caused by Civil Authority orders, not solely the property damage caused by the virus.”
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`Opp. at 7 (emphasis included). Plaintiffs also argue that the Virus Exclusion does not
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`apply to business income loss and extra expense covered by the Civil Authority provision
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`because the Civil Authority Orders caused Plaintiffs’ loss of business income and extra
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`expenses, not COVID-19. Id. Both arguments fail.
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`The Civil Authority provision states in pertinent part:
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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.
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`Policy at 57 (emphases added).
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`Plaintiffs attempt to distinguish the Virus Exclusion as only applying to property
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`damage, whereas the Civil Authority provision applies to business income and extra
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`expenses. Opp. at 7. But nothing in the Virus Exclusion suggests that it is limited to
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`property damage. See Policy at 43. To the contrary, the Policy specifically states when an
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`exclusion does not apply to certain provisions, see, e.g., id. at 105 (“This exclusion does
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`not apply to the Business Income coverage or to the Extra Expense coverage.”), and the
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`Virus Exclusion contains no such limitation. The Virus Exclusion precludes coverage for
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`any loss “direct[ly] or indirect[ly]” caused by a virus because the Policy determined that
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`viruses fall outside the scope of the Policy’s Covered Causes of Loss. See id. at 43, 51,
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`104; see Franklin EWC, Inc. v. Hartford Fin. Servs. Grp., Inc., 20-cv-04434 JSC, 2020 WL
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`5642483, at *2–3 (N.D. Cal. Sept. 22, 2020) (concluding that a policy’s civil authority,
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`business income, and extra expense coverage provisions did not cover COVID-19 related
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`civil authority orders because the policy’s virus exclusion precluded such claims).
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`Plaintiffs seek business losses and extra expenses that stem from Civil Authority Orders,
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`but California issued these orders as a direct response to COVID-19, Compl. ¶¶ 33, 61—“a
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`cause of loss that falls squarely within the Virus Exclusion.” Franklin EWC, Inc., 2020
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`WL 5642483, at *2.
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`Case 3:20-cv-04571-CRB Document 34 Filed 10/27/20 Page 7 of 12
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`Plaintiffs also argue that the Civil Authority Orders caused their business losses,
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`“not solely” COVID-19. Opp. at 7–8. They argue that the tenuous connection between the
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`excluded cause of lost—COVID-19—the civil authority orders, and the resulting business
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`income losses and extra expenses, cannot preclude coverage. See id. Yet not only does
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`the Virus Exclusion apply when a virus indirectly causes or contributes to the cause of
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`loss, see Policy at 43, but under California law, COVID-19 is the “efficient proximate
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`cause” of Plaintiffs’ losses. See Garvey v. State Farm Fire & Cas. Co., 48 Cal. 3d 395
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`(1989). An “efficient proximate cause” is a cause of loss that predominates and sets the
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`other cause of loss in motion. See id. at 402–03. When loss can be attributed to two
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`causes—a covered and an excluded cause—coverage only exists if the efficient proximate
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`cause of the damage is covered under the policy. See id. at 403. The Civil Authority
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`Orders would not exist absent the presence of COVID-19; COVID-19 is therefore the
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`efficient proximate of Plaintiffs’ losses. Thus, the Virus Exclusion precludes Plaintiffs’
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`claim for business income losses and extra expenses under the Civil Authority provision.5
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`B.
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`The Virus Exclusion Is Not Ambiguous.
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`Plaintiffs argue that the Virus Exclusion is ambiguous because the absence of the
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`word “pandemic” implicitly creates two reasonable interpretations of the Virus Exclusion:
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`(1) that the exclusion applies to all viruses, no matter how widespread; or (2) that the
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`exclusion applies to stand-alone viruses, but not viruses that escalate into a pandemic. See
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`Opp. at 9–10. However, the second interpretation is unreasonable because the Virus
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`Exclusion lacks any ambiguity.
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`First, Plaintiffs cite no authority supporting their argument that the absence of
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`language makes a policy ambiguous. The California Supreme Court has concluded the
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`5 As discussed above, the Virus Exclusion does not distinguish between property damage and
`business income losses. The Virus Exclusion therefore applies equally to Plaintiffs’ claim under
`the Business Income and Extra Expense coverage provisions. Like the Civil Authority provision,
`the Business Income and Extra Expense provisions provide coverage for “loss or
`damage . . . caused by or result from a Covered Cause of Loss.” See Policy at 55, 57 (emphasis
`included). Thus, the Virus Exclusion precludes Plaintiffs’ claim under the Business Income and
`Extra Expense provisions because viruses, like COVID-19, do not constitute a Covered Cause of
`Loss. Contra Opp. at 7, 20–21.
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`Case 3:20-cv-04571-CRB Document 34 Filed 10/27/20 Page 8 of 12
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`opposite, “The absence from a policy of a . . . word . . . does not by itself . . . necessarily
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`create an ambiguity.” Bay Cities Paving & Grading, Inc. v. Lawyers’ Mut. Ins. Co., 5 Cal.
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`4th 854, 866 (1993).
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`Second, the word “pandemic” describes a disease’s geographic prevalence, but it
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`does not replace disease as the harm-causing agent. See Oxford English Dictionary (3rd
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`ed., 2005). Plaintiffs provide no support for their argument that insurers must specify the
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`magnitude of an excluded cause of loss in order to avoid ambiguity. See Opp. at 8. The
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`Virus Exclusion’s alleged failure to specify how widespread a disease must become to
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`trigger the exclusion does not demonstrate that the exclusion is ambiguous.
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`Third, the second interpretation also effectively nullifies the plain language of the
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`Virus Exclusion. Courts interpreting a policy must give effect to every term in the policy
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`so that no term is rendered meaningless. See Collin v. American Empire Ins. Co., 21 Cal.
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`App. 4th 787, 818 (1994). The Virus Exclusion contemplates situations where a virus
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`indirectly contributes to or worsens a loss. See Policy at 43. Even if the Court accepts
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`Plaintiffs’ distinction between a stand-alone virus and a pandemic, only COVID-19 can
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`cause the COVID-19 pandemic and subsequently, civil authority orders and business
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`income losses. COVID-19 remains the “indirect” cause of the insured’s harm, even if the
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`exclusion did not contemplate the scale of COVID-19. See id. The second interpretation
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`therefore renders the use of “indirect” meaningless.
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`Thus, the Virus Exclusion is only subject to one reasonable interpretation: that
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`coverage does not extend to any claim premised on virus-induced damage, regardless of
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`the virus’s magnitude. See Franklin EWC, Inc., 2020 WL 5642483, at *2–3.
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`C.
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`Reasonable Expectations Doctrine Does Not Apply.
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`Plaintiffs cite extrinsic evidence to argue that denying coverage under the Virus Exclusion
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`would be contrary to the reasonable expectations of the parties. Opp. at 10–11 (citing ISO
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`Circular LI-CF-2006-175, New Endorsements Filed to Address Exclusion of Loss Due to Virus or
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`Bacteria, ISO (July 6, 2006), https://www.propertyinsurancecoveragelaw.com/files/2020/03/ISO-
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`Circular-LI-CF-2006-175-Virus.pdf.). But courts do not evaluate the reasonable expectations
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`Case 3:20-cv-04571-CRB Document 34 Filed 10/27/20 Page 9 of 12
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`doctrine when a policy’s language is clear and unambiguous. See, e.g., Bank of the W., 2 Cal. 4th
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`at 1265 (“[A] court that is faced with an argument for coverage based on assertedly ambiguous
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`policy language must first attempt to determine whether coverage is consistent with the insured’s
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`objectively reasonable expectations.” (emphasis added)).6 Because the Virus Exclusion is
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`unambiguous, see supra III.B, the Court does not evaluate the reasonable expectations of the
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`parties.
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`D.
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`Discovery is Unnecessary to Determine the Scope and Validity of the Virus
`Exclusion.
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`Even if a contract is unambiguous, California courts consider extrinsic evidence when the
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`evidence “is relevant to prove a meaning to which the language of the instrument is reasonably
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`susceptible.” Pac. Gas & Elec. Co. v. G.W. Thomas Drayage & Rigging Co., 69 Cal. 2d 33, 37
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`(1968) (“Drayage”). Such consideration includes evaluating evidence of the parties’ intentions.
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`See id. at 38. However, an insurer moving to dismiss based on policy language may “establish
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`conclusively that this language unambiguously negates beyond reasonable controversy the
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`construction alleged in the body of the complaint.” Palacin v. Allstate Ins. Co., 119 Cal. App. 4th
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`855, 862 (2004). To do so, the court must conditionally consider extrinsic evidence “alleged in
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`the complaint, to determine if it would be relevant to prove a meaning to which the language of
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`the instrument is reasonably susceptible.” George v. Auto. Club of S. Cal., 201 Cal. App. 4th
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`1112, 1122 (2011). None of Plaintiffs’ alleged extrinsic evidence suggests a reasonable
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`alternative construction of the Virus Exclusion.
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`First, Plaintiffs argue that Defendant could not have intended for the exclusion to
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`encompass pandemics because Defendant allegedly borrowed Insurances Services Office’s
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`6 California courts have reaffirmed that the reasonable expectations analysis does not apply when a
`policy’s language is unambiguous. See, e.g., Williams v. Cal. Physicians’ Serv., 72 Cal. App. 4th
`722, 738 (1999) (“[W]here contractual language is clear and unequivocal, the subscriber may only
`reasonably expect the coverage afforded by the plain language of the contract.”); Ananda Church
`of Self-Realization v. Mass. Bay Ins. Co., 95 Cal. App. 4th 1273, 1279 n.2 (2002) (“The
`[reasonable expectations] doctrine is triggered only where a policy provision or exclusion is
`uncertain or ambiguous, in which case the court's inquiry would turn to what a reasonable
`purchaser of the policy would expect.”); Lyons v. Fire Ins. Exch., 161 Cal. App. 4th 880, 885
`(2008) (“[W]here there is no ambiguity or uncertainty in the coverage provisions, the insured
`cannot reasonably expect a defense.”).
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`Case 3:20-cv-04571-CRB Document 34 Filed 10/27/20 Page 10 of 12
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`(“ISO”) standardized language that ISO drafted before the COVID-19 pandemic. See Opp. at 13.
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`Plaintiffs allege little, if any, evidence of Defendant’s intent, instead they rely on evidence of
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`ISO’s intent and attribute ISO’s intent to Defendant. See Compl. ¶¶ 21–23. Notwithstanding that
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`Plaintiffs have not cited any authority permitting the Court to use evidence of third-party intent to
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`infer Defendant’s intent, the evidence of ISO’s intent indicates that the Virus Exclusion
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`contemplates highly infectious diseases. For example, the complaint alleges that ISO created its
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`Virus Exclusion in response to the early 2000s SARS outbreak, id. ¶¶ 21–22, which suggests that
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`both ISO and Defendant’s Virus Exclusion account for highly infectious diseases, such as
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`COVID-19. Plaintiffs contend that the opposite is true: SARS was not a pandemic, and therefore
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`the Virus Exclusion cannot apply to pandemics. See id. ¶ 22; Opp. at 13. But as sources in the
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`complaint acknowledge, state regulators and insurer representatives, like ISO, sought to introduce
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`new virus exclusions to account for potential pandemic diseases like SARS. Compl. ¶ 23 (citing
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`Richard P. Lewis, et al., Here we go again: Virus exclusion for COVID-19 and insurers,
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`PropertyCasualty360 (Apr. 7, 2020) https://www.propertycasualty360.com/2020/04/07/here-we-
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`go-again-virus-exclusion-for-covid-19-and-insurers/?slreturn=20200907134604). Even if
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`Defendant based its Virus Exclusion on ISO’s standardized language, such language contemplates
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`widespread diseases like SARS and COVID-19.
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`Second, Plaintiffs argue that “the Court should consider statements made to insurance
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`regulators to determine” whether insurers and regulators “intended to exclude” losses related to
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`the pandemic. Opp. at 13. But the complaint only alleges that ISO made statements to regulators,
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`not Defendant. Compl. ¶ 23. The Court cannot consider statements that have not been alleged in
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`the complaint. See George, 201 Cal. App. 4th at 1122 (“[T]he court must conditionally consider
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`the parol evidence alleged in the complaint to determine if it would be relevant to prove a meaning
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`to which the language of the instrument is reasonably susceptible.” (emphasis added)). Further,
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`even if the Court attributes ISO’s communications with state regulators to Defendant, both the
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`complaint and the sources it relies on acknowledge that the widespread outbreak of SARS
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`prompted ISO and state regulators to agree to a new virus exclusion. Compl. ¶¶ 22–23 (citing
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`Lewis, et al., supra.). Thus, both the complaint and parol evidence suggest that state regulators
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`Case 3:20-cv-04571-CRB Document 34 Filed 10/27/20 Page 11 of 12
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`intended to exclude coverage for damages caused by a pandemic.
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`Third, Plaintiffs allege that ISO fraudulently misled state regulators about the scope of its
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`Virus Exclusion to induce them to approve it. Id. ¶ 23. Plaintiffs attempt to use ISO’s alleged
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`misrepresentations—the substance of which is unknown—to argue that regulators did not intend
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`for the Virus Exclusion to exclude widespread viruses. See id. However, extrinsic evidence “may
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`not be used to show that words in contracts mean the exact opposite of their ordinary meaning.”
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`ACL Techs., Inc. v. Northbrook Prop. & Cas. Ins. Co., 17 Cal. App. 4th 1773, 1790–91 (1993).
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`Even if ISO mispresented the purpose and scope of its Virus Exclusion, Plaintiffs’ theory requires
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`the Court to construe Defendant’s plain, unambiguous Virus Exclusion to mean the exact opposite
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`of its ordinary meaning. Neither California law nor federal courts interpreting Virus Exclusions,
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`permit such an outcome. See, e.g., id.; Turek Enter., Inc. v. State Farm Mut. Auto. Ins. Co., 20-
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`11655, 2020 WL 5258484, at *9 (E.D. Mich. Sept. 3, 2020) (“[E]ven if Defendants
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`misrepresented the purpose and extent of the Virus Exclusion in 2006, the plain, unambiguous
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`meaning of the Virus Exclusion today negates coverage.”). Further, ISO’s alleged improper
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`conduct cannot change Defendant’s Virus exclusion because the language in Defendant’s Virus
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`Exclusion is materially different from ISO’s Virus Exclusion. Compare Compl. ¶ 24 (“[L]oss or
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`damage caused by or resulting from any virus, bacterium or other microorganism that induces or is
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`capable of inducing physical distress, illness or disease.”)7 with Policy at 43 (“[L]oss or damage
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`caused by, resulting from, contributing to or made worse by the actual, alleged or threatened
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`presence of any pathogenic organism, all whether direct or indirect, proximate or remote, or in
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`whole or in part caused by, contributed to or aggravated by any physical damage insured by this
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`policy, except as provided under section A.”).
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`Thus, while California law permits parties to introduce extrinsic evidence that may clarify
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`the meaning of an insurance policy, none of Plaintiffs’ proposed evidence “is relevant to prove a
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`meaning to which the language of the instrument is reasonably susceptible.” Drayage, 69 Cal. 2d
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`7 Plaintiffs do not cite the source of the quoted excerpt in Compl. ¶ 24, but a review of other cases
`confirms that Plaintiffs drew the quoted language directly from ISO’s Virus Exclusion. See Turek
`Enter., Inc., 2020 WL 5258484, at *9 n.13; 10E, LLC v. Travelers Indem. Co. of Conn., 2:20-cv-
`04418-SVW-AS, 2020 WL 5359653, at *1 (C.D. Cal. Sept. 2, 2020).
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`

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`Case 3:20-cv-04571-CRB Document 34 Filed 10/27/20 Page 12 of 12
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`at 37 (emphasis added). Plaintiffs have failed to demonstrate that discovery is necessary to
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`determine the scope of the Policy’s Virus Exclusion, and as a result, the Virus Exclusion bars
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`Plaintiffs’ claim for business interruption coverage.8
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`IV. CONCLUSION
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`If a court does dismiss a complaint for failure to state a claim, it should “freely give leave
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`[to amend] when justice so requires.” Fed. R. Civ. P. 15(a)(2). However, a court has discretion to
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`deny leave to amend due to, among other things, “futility of amendment.” Leadsinger, Inc. v.
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`BMG Music Pub., 512 F.3d 522, 532 (9th Cir. 2008) (citing Foman v. Davis, 371 U.S. 178, 182
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`(1962)). The Court initially issued an order dismissing Plaintiffs’ complaint without prejudice.
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`Order (dkt. 33). However, the Court recognizes that any attempt to amend the Complaint would
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`be futile considering the breadth of the Virus Exclusion. Accordingly, the Court GRANTS
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`Defendant’s motion to dismiss with prejudice.
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`IT IS SO ORDERED.
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`Dated: October 27, 2020
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`
`CHARLES R. BREYER
`United States District Judge
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`8 The Court’s holding should not be construed to necessarily apply to all virus exclusions. The
`Virus Exclusion casts an exceptionally wide net relative to other virus exclusions because it lacks
`relevant limitations and ambiguous language. Compare Policy at 47 with Urogynecology
`Specialist of Fla. LLC v. Sentinel Ins. Co., Ltd., 6:20-cv-1174-Orl-22EJK, 2020 WL 5939172, at
`*3 (M.D. Fla. Sept. 24, 2020) (involving a virus exclusion that contained ambiguous language and
`potentially permitted the plaintiff’s claim).
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