9th Circuit Rejects Theatre’s COVID-19 Coverage Claim
By Melinda S. Kollross
A unanimous 3-judge panel of the Ninth Circuit holds that there is no coverage for Regal Cinemas’ business interruption losses stemming from the COVID-19 pandemic, holding that controlling New York law and a contamination exclusion bar coverage under policies obtained from Allianz, Liberty Mutual and Zurich. Crown Intermediate Holdco Inc. v. Allianz Global Risks US Ins. Co. et al., No. 22-55661 (9th Cir.).
Affirming judgment on the pleadings for the insurers, the Court first determined that New York law governed per a choice-of-law provision in Regal’s policies. The Court then cited the New York Court of Appeals’ February 2024 decision in Consolidated Restaurant Operations, Inc. v. Westport Ins. Co., which held that for “physical damage” to be covered under a property policy, there had to be “material physical alteration to the property,” and that “direct physical loss” required “actual, complete dispossession,” not just loss of use.
Noting that “plaintiff’s claims and the applicable insurance policy provisions here are materially identical to the plaintiff’s unsuccessful claims and the insurance policy provisions in Consolidated Restaurant Operations,” the Ninth Circuit ruled that “under the governing law of New York, plaintiff was not insured for the claimed business losses incurred during the COVID-19 pandemic.”
The panel also rejected Regal’s request to amend its coverage claims, finding that the subject policies contain a contamination exclusion that “clearly states” that coverage is unavailable for losses resulting from a “contaminant, including toxins, pathogens, pathogenic organisms, or viruses.”
Melinda S. Kollross