Virus Exclusion Applicable due to Proximate Cause of Closure

The United States Court of Appeals for the Ninth Circuit, applying California law, affirmed the district court’s dismissal of an insured’s claim for coverage of losses stemming from the state of California’s response to the COVID-19 pandemic. The insured, Mudpie Inc., operates a children’s retail store which shut down following the California governor’s shelter-in-place order at the outset of the pandemic. The Ninth Circuit held that Mudpie’s losses as a result of the closure were not due to “direct physical loss of or damage to property,” primarily because there was no actual physical change in Mudpie’s property. Additionally, because the coronavirus was the efficient proximate cause of Mudpie’s closure, their losses fell within the policy’s virus exclusion. Thus, the insurer owed no coverage to Mudpie. Mudpie, Inc. v. Travelers Cas. Ins. Co. of Am., 15 F.4th 885 (9th Cir. Oct. 1, 2021).