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.
Court Description: California Insurance Law. The panel affirmed the district court’s order dismissing Mudpie, Inc.’s claims against its insurer in Mudpie’s diversity putative class action 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 filed suit on behalf of itself and a putative class of all retailers in California that: purchased comprehensive business insurance coverage from Travelers Casualty Insurance Company of America that included coverage for business interruption; filed a claim for lost business income following California’s Stay at Home order; and were denied coverage. The parties disputed whether Mudpie adequately alleged a “direct physical loss of or damage” to property under the Policy. The panel held that California courts would construe the phrase “physical loss of or damage to” as requiring an insured to allege physical alteration of the property. The panel rejected Mudpie’s interpretation of “direct physical loss of or damage to” to be synonymous with “loss of use.” Mudpie’s complaint did not identify a distinct, physical alteration of the property. The panel affirmed the district court’s ruling that Mudpie’s claimed losses were not covered by the Policy, and MUDPIE V. TRAVELERS CAS. INS. CO. OF AMERICA 3 concluded that the district court did not err by dismissing Mudpie’s claims for declaratory relief, breach of contract, and breach of the covenant of good faith and fair dealing. The panel held that the Policy’s Virus Exclusion barred coverage for Mudpie’s claimed losses. The panel rejected Mudpie’s argument that its losses were not subject to the Policy’s Exclusion because the losses were caused by Stay at Home Orders that restricted Mudpie’s use of its property, not directly by the virus. California courts apply the efficient proximate (meaning predominate) cause of the loss. The panel held that Mudpie did not plausibly allege that the efficient cause (the cause that set others in motion) was anything other than the spread of the virus throughout California, or that the virus was merely a remote cause of its losses.
Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You should read the full case before relying on it for legal research purposes.
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.