Even the Much Reversed Ninth Circuit Requires Direct Physical Loss to Recover for Lost Business due to Covid

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Mudpie, Inc. sued on behalf of itself and a putative class of all retailers in California that purchased comprehensive business insurance coverage from Travelers Casualty Insurance Company of America that included coverage for business interruption; filed a claim for lost business income following California’s Stay at Home order; and were denied coverage. In Mudpie, Inc. v. Travelers Casualty Insurance Company of America, No. 20-16858, United States Court of Appeals, Ninth Circuit (October 1, 2021) the Ninth Circuit ruled on the effort to gain business interruption coverage for losses due to state shut down orders.

ZALMA OPINION

When even the Ninth Circuit requires actual direct physical loss or damage to pursue a business interruption claim after shut down because the state of California made it a crime to do business, is not a covered cause of loss, many were surprised. Then, it also found that the efficient cause that sets all other causes in motion was the virus and the orders that followed its ability to infect citizens of the state. If any person or entity caused damage to Mudpie and its described class members was not Travelers but the state of California that took the ability to do business from Mudpie who may wish to seek damages under the Fifth Amendment for a taking of its business by the state of California in an effective condemnation of Mudpie’s business.