Mudpie, Inc. v. Travelers Casualty Insurance Co. of America, No. 20-16858 (9th Cir. 2021)Annotate this Case
The Ninth Circuit affirmed the district court's order dismissing Mudpie's claims against its insurer in a putative class action brought by Mudpie, seeking to recover under the insurance policy's "Business Income" and "Extra Expense" coverage after state and local authorities in California issued several public health orders in response to the COVID-19 pandemic. Mudpie claimed that the public health orders prevented it from operating its children's stores. Mudpie sought declaratory relief and asserted claims for breach of contract and breach of the implied covenant of good faith and fair dealing.
The panel affirmed the district court's ruling that Mudpie's claimed losses are not covered by the policy and the district court did not err in dismissing the claims for declaratory relief, breach of contract, and breach of the covenant of good faith and fair dealing. The panel explained that California courts would construe the phrase "physical loss of or damage to" as requiring an insured to allege physical alteration of its property. In this case, Mudpie did not identify a distinct, physical alteration of the property. The panel also concluded that the policy's Virus Exclusion bars coverage of Mudpie's claimed losses.