Musso & Frank Grill Co., Inc. v. Mitsui Sumitomo Ins. USA Inc.

Musso & Frank Grill Co., Inc. v. Mitsui Sumitomo Ins. USA Inc.

Opinion

VOGEL, J.²—Musso & Frank Grill Co., Inc., an iconic Hollywood restaurant, had a business interruption insurance policy issued by Mitsui Sumitomo Insurance USA Inc. (MSI). Due to COVID-19 and notices from the Governor, the Mayor of Los Angeles, and several public health agencies, Musso & Frank was ordered to close its restaurant in March 2020, resulting in the loss of all its business. Musso & Frank filed a claim with MSI, which was denied on the grounds that the policy covered only “direct physical loss of or damage to” the property, and expressly excluded coverage for losses resulting from a government order and [**2]  losses caused by or resulting from a virus. When Musso & Frank sued MSI, MSI's demurrer was sustained without leave to amend. Musso & Frank appeals. We affirm.

FACTS

Musso & Frank's MSI policy was effective from June 30, 2019, to June 30, 2020. Under the heading “Coverage,” the policy promised to pay for “the actual loss of Business Income [Musso & Frank] sustain[ed] due to the necessary ‘suspension’ of [its] ‘operations’ during the ‘period of restoration.’ The ‘suspension’ [had to] be caused by direct physical loss of or damage to property at the covered premises. … The loss or damage must be caused by or result from a Covered Cause of Loss.” (Italics added.)

 [*756] 

Under the heading “Exclusion of Loss Due to Virus or Bacteria,” the policy included two relevant exclusions, one for losses arising from governmental action, the other for losses sustained by reason of a virus or bacteria. The exclusion for “Governmental Action” is defined as the “Seizure or destruction of property by order of governmental authority.” The virus exclusion provided: “We will not pay for loss or damage caused by or resulting from any virus, bacterium or other micro-organism that induces or is capable of inducing [**3]  physical distress, illness or disease.”

On March 15, 2020, in response to the COVID-19 pandemic, the Mayor of the City of Los Angeles issued an order mandating that all the city's restaurants and retail food facilities close by midnight that day, the only exception being takeout food (picked up or delivered). A few days later, the mayor issued an order requiring residents to remain in their homes except for “essential activities or infrastructure,” and prohibiting public and private gatherings. Because Musso & Frank never offered food for pickup or delivery, the closure orders forced it to shut down completely.

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