United Talent Agency v. Vigilant Ins. Co.

United Talent Agency v. Vigilant Ins. Co.

Opinion

COLLINS, J.—

INTRODUCTION

Appellant United Talent Agency (UTA) sued Vigilant Insurance Company and Federal Insurance Company, alleging that the insurers wrongfully denied property insurance coverage for economic losses related to the COVID-19 pandemic. The insurance policies covered “direct physical loss or damage” to insured property. UTA asserted that the policies covered its losses under two theories: first, loss of use of its properties due to civil closure orders and other limitations imposed to slow the spread of the virus, such as cancelled events and productions; and second, “damage” to its properties caused by the alleged presence of the virus in the air and on surfaces. The trial court sustained the insurers‘ [**2]  demurrer without leave to amend, and UTA appealed.

We find that UTA has failed to allege facts sufficient to demonstrate direct physical loss or damage under either theory, and therefore affirm.

FACTUAL AND PROCEDURAL BACKGROUND¹

A. UTA and the insurance policies

UTA is a large talent agency that represents actors, directors, producers, recording artists, writers, and other professionals in industries such as film, television, music, digital media, and publishing. It purchased property insurance policies from Vigilant and Federal that covered UTA premises in several states, including California, New York, Tennessee, and Florida.²

As relevant here, the policies included “business income and extra expense” provisions and a “civil authority” provision. The business income and extra expense provisions addressed business income loss and extra expenses incurred due to “impairment of … operations,” if the impairment was [*825]  “caused by or result[ed] from direct physical loss or damage by a covered peril to property.” The “direct physical loss or damage must … occur at, or within 1,000 feet of,” a covered premises. The provisions covered losses “during the period of restoration,” defined as beginning [**3]  “immediately after the time of direct physical loss or damage by a covered peril to property,” and continuing until “operations are restored,” including “the time required to … repair or replace the property.” Covered premises included “dependent business premises,” which were “premises operated by others” upon which the insured depends to do things such as “deliver materials or services” or “attract customers.” The parties agree that “direct physical loss or damage” is not defined in the policies.

The civil authority provision covered income loss or expenses incurred “due to the actual impairment of … operations, directly caused by the prohibition of access to” covered premises “by a civil authority.” The “prohibition of access by a civil authority must be the direct result of direct physical loss or damage to property away from” covered premises, “provided such property is within one mile” of the covered premises.

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