Another Planet Entertainment, LLC v. Vigilant Insurance Company

Background

Another Planet alleged that its auditoriums shut down because the coronavirus was physically present on surfaces at those facilities. It claimed that the resulting shutdowns were caused by “direct physical loss or damage” covered by its insurance policy.

Another Planet also invoked the policy’s civil-authority coverage. That provision covered impaired operations caused directly by a civil authority’s prohibition of access to the insured premises, but only when the prohibition resulted directly from physical loss or damage to different property within a one-mile radius.

Court’s Analysis

The court granted Vigilant Insurance Company’s motion to dismiss. It stated that whether the virus was actually present on the facilities’ surfaces at the time of the shutdowns seemed unknowable, but dismissed the complaint for a more basic reason: the facilities closed in response to government closure orders. Those orders would have required the facilities to remain closed even if Another Planet could prove that the virus was not present there. The court therefore concluded that the losses were not caused by direct physical loss or damage to the facilities.

The court distinguished Hughes v. Potomac Insurance Co., which held that a building could have property damage when physical conditions made it unsafe even without tangible physical injury to the structure. Here, the court said, nothing specific about Another Planet’s properties caused the shutdowns. Instead, the facilities could not operate because of a generalized danger that people would spread the virus to one another and because generally applicable closure orders prevented nearly all businesses from operating.

The court also rejected Another Planet’s civil-authority theory. The complaint and the closure orders showed that the orders responded to the virus in the community at large, rather than specifically to the virus’s presence at properties within one mile of Another Planet’s facilities.

Disposition

Judge Vince Chhabria granted Vigilant’s motion to dismiss and dismissed the complaint with leave to amend. The court stated that any amended complaint had to be filed within 14 days of the ruling. If no amended complaint was filed by then, the dismissal would automatically be with prejudice. A response was due 14 days after an amended complaint was filed.