The California Supreme Court ruled unanimously today in favor of an insurance company in a case involving pandemic-related closure orders and whether property loss insurance could be applied to address economic losses from a virus.

The case was brought by Another Planet Entertainment, which operates five music venues in the Bay Area including the Berkeley Greek Theater, Bill Graham Civic Auditorium, and the Fox Theater. The company alleged losses of $20 million stemming from the forced closure of its venues in 2020, and sued Vigilant Insurance Company for breach of contract and bad faith for denying policy coverage for those losses.

U.S. District Judge Vince Chhabria of California’s Northern District had earlier ruled against Another Planet in the case in 2021, and the company appealed.

Now, as Law.com reports, the state's Supreme Court has ruled 7-0 in favor of the defendant, Vigilant, finding that losses incurred due to a viral pandemic do not equate to property damage.

"The mere fact that a property cannot be used as intended is insufficient on its own to establish direct physical loss to property," Chief Justice Patricia Guerrero wrote for the court. "Similarly, the fact that a business was forced to curtail its operations, in whole or in part, based on pandemic related government public health orders is likewise insufficient."

Guerrero adds, "A property insurance policy does not cover a particular intended use; it covers the property itself... Direct physical loss or damage to property requires a distinct, demonstrable, physical alteration to property."

As the Chronicle notes, Kirk Pasich, an attorney for Another Planet, had earlier argued in court, "We know from the science that this virus spreads inside buildings... [and] The property is rendered unusable."

But the high court disagreed that being rendered temporarily unusable was not the same as suffering actual property damage.

The case had been closely watched by other entertainment venues, restaurants, and sports teams, including the Los Angeles Lakers and Major League Baseball, per Law.com. Both submitted amicus briefs supporting Another Planet's arguments.

Los Angeles-based United Talent Agency similar sued Vigilant insurance for $150 million in business losses, in which an appeals court also found in favor of Vigilant.

Photo: Martin de Arriba