Yesterday, U.S. District Judge Charles R. Breyer dismissed a proposed class action by Bay Area restaurants against a California insurance company because the insurer has a virus exclusion. 

When explaining his decision, the California federal judge said, “COVID-19 remains the ‘indirect’ cause of the insured’s harm,” meaning the virus exclusion expressly bars coverage. Plain and simple, Judge Breyer acknowledged that “the court cannot ignore that the insurance policy excludes coverage for losses caused by viruses, like COVID-19.”

Judge Breyer also held that the insurer’s virus exclusion refers not only to a stand-alone virus, but also pandemics. 

This is an important development in the ongoing litigation fight between business owners and their insurers across the U.S. You can review a compendium of court decisions affirming the necessity of direct physical damage in BI coverage here. 

Judge Breyer’s decision is further confirmation that insurers shouldn’t cover the costs of pandemic losses. Global pandemic risks are uninsurable, and the majority of policyholders’ business interruption contracts and premiums reflect that standard. 

You can read more about the California case in Law360 here.

For more information, visit fairinsure.org.