Court Opinion

ID: 9368686
Source: CourtListenerOpinion
Date Created: 2023-02-06 18:00:54.628462+00
Date Added: 2024-06-11T17:16:10.097883
License: Public Domain

FOR PUBLICATION

  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

FRENCH LAUNDRY PARTNERS,             No. 21-15927
LP, DBA The French Laundry; KRM,
INC., DBA Thomas Keller Restaurant; D.C. No. 3:20-cv-
YOUNTVILLE FOOD EMPORIUM,              04540-JSC
LLC, DBA Bouchon Bistro,

             Plaintiffs-Appellants,         ORDER
                                          CERTIFYING
 v.                                      QUESTION TO
                                         THE SUPREME
HARTFORD FIRE INSURANCE                    COURT OF
COMPANY,                                  CALIFORNIA

             Defendant-Appellee,

and

TRUMBULL INSURANCE
COMPANY; KAREN RELUCIO,

             Defendants.

                Filed February 6, 2023

Before: Consuelo M. Callahan, Ryan D. Nelson, and Holly
              A. Thomas, Circuit Judges.
2     FRENCH LAUNDRY PARTNERS V. HARTFORD FIRE INS. CO.

                          SUMMARY *

           Certification Order / California Law

   The panel certified the following question to the
Supreme Court of California:

        Is the virus exclusion in French Laundry’s
        insurance policy unenforceable because
        enforcing it would render illusory a limited
        virus coverage provision allowing for the
        possibility of coverage for business losses
        and extra expenses allegedly caused by the
        presence and impacts of COVID-19 at an
        insured’s properties, including the loss of
        business due to a civil authority closure
        order?

*
 This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
      FRENCH LAUNDRY PARTNERS V. HARTFORD FIRE INS. CO.       3

                           ORDER

    We respectfully ask the Supreme Court of California to
answer the certified question presented below, pursuant to
California Rule of Court 8.548, because we have concluded
that resolution of this question of California law “could
determine the outcome of a matter pending in [this] court,”
and “[t]here is no controlling precedent” in the decisions of
the Supreme Court of California. Cal. R. Ct. 8.548(a).
    This case involves an insured who sued for declaratory
judgment that its insurance policy provides coverage for its
losses arising from the COVID-19 pandemic. At issue here
is whether the policy’s virus exclusion is enforceable and
precludes coverage.
                               I
    We briefly summarize the material facts. See Cal. R. Ct.
8.548(b)(3).       French Laundry Partners, LP (“French
Laundry”) operates two restaurants in Napa County, CA.
After the COVID-19 pandemic began in early 2020,
government closure orders forced French Laundry to shut
down its restaurants, resulting in economic losses. French
Laundry sought and was denied coverage for its losses from
the issuer of its insurance policy, Hartford Fire Insurance Co.
(“Hartford”). In response, French Laundry filed an action in
state superior court, which was removed to federal court.
    French Laundry seeks coverage under several provisions
of its policy, two of which are at issue here. The policy
contains a “Virus Exclusion” provision stating that Hartford
“will not pay for loss or damage caused directly or indirectly
by any of the following . . . [p]resence, growth, proliferation,
spread or any activity of . . . virus.” This exclusion, however,
does not apply to coverage otherwise provided by the
4     FRENCH LAUNDRY PARTNERS V. HARTFORD FIRE INS. CO.

“Fungus, Wet Rot, Dry Rot, Bacteria and Virus - Limited
Coverage” provision of the policy, which allows for
recovery of certain loss or damage caused by fungus, wet or
dry rot, bacteria, or virus, assuming one of the listed risks
was the result of one of the listed causes. Among other
points raised in this appeal, French Laundry argues that the
virus exclusion cannot be construed to preclude coverage
because such a construction would render the limited virus
coverage illusory.
    Hartford filed a motion to dismiss under Federal Rule of
Civil Procedure 12(b)(6), and the district court dismissed the
case based on a finding that the virus exclusion was
enforceable and barred any coverage.
                             II
    Because California law governs interpretation of the
policy and the Supreme Court of California has not yet
considered the issue, we “must determine what result [that]
court would reach based on state appellate court opinions,
statutes and treatises.” Mudpie, Inc. v. Travelers Cas. Ins.
Co. of Am., 15 F.4th 885, 889 (9th Cir. 2021) (quoting Diaz
v. Kubler Corp., 785 F.3d 1326, 1329 (9th Cir. 2015)).
    When this case was initially decided by the district court
in April of 2021, there was limited state case law discussing
the application of insurance provisions to COVID-19-related
losses. Since that time, at least two California Courts of
Appeal have addressed policies containing virus exclusion
terms. See Musso & Frank Grill Co., Inc. v. Mitsui
Sumitomo Ins. USA Inc., 77 Cal. App. 5th 753 (2022); John’s
Grill, Inc. v. Hartford Fin. Servs. Grp., Inc., 86 Cal. App.
5th 1195 (2022). Relevant here, in John’s Grill, the court
analyzed the interaction of a virus exclusion term and a
limited virus coverage provision in a policy issued by the
      FRENCH LAUNDRY PARTNERS V. HARTFORD FIRE INS. CO.      5

same insurance company in this case and held, as French
Laundry urges, that the exclusion could not be enforced
because it would render the limited virus coverage illusory.
    In California, and indeed nationwide, a multitude of
COVID-19-related insurance cases are moving through the
judicial process. Courts at both the state and federal level
are grappling with the application of California insurance
contract interpretation law to coverage for losses from
business shutdowns due to government closure orders in
response to COVID-19. While both state and federal courts
have published opinions providing some guidance, there
remains much uncertainty as to how California law applies
in many scenarios (such as the scenario presented in this
case).
    The prevalence of and uncertainty surrounding COVID-
19 insurance litigation is underscored by our certification to
the Supreme Court of California on December 28, 2022, in
another case asking whether the actual or potential presence
of the COVID-19 virus can constitute “direct physical loss
or damage to property” for the purposes of coverage under
an insurance policy. See Another Planet Ent., LLC v.
Vigilant Ins. Co., 56 F.4th 730 (9th Cir. 2022). We believe
the Supreme Court of California may gain some efficiencies
through concurrent consideration of our certification in this
case.
    The answer to our certified question “could determine
the outcome of [this] matter,” Cal. R. Ct. 8.548(b)(4),
because if there is a possibility that the virus exclusion does
not preclude coverage, we would remand to the district court
for further proceedings. Alternatively, if the virus exclusion
does bar coverage in this situation, we would affirm the
district court’s order dismissing this case. Furthermore,
6     FRENCH LAUNDRY PARTNERS V. HARTFORD FIRE INS. CO.

interpretation of insurance policies in the COVID-19 context
has important public policy ramifications and would be
applicable to pending cases in both state and federal courts.
See Vasquez v. Jan-Pro Franchising, Int’l, Inc., 939 F.3d
1045, 1048 (9th Cir. 2019).
                             III
    In light of the foregoing discussion, and because the
answer to this question “could determine the outcome of a
matter pending in [this] court,” Cal. R. Ct. 8.548(a), we
respectfully certify to the Supreme Court of California the
following question:

       Is the virus exclusion in French Laundry’s
       insurance policy unenforceable because
       enforcing it would render illusory a limited
       virus coverage provision allowing for the
       possibility of coverage for business losses
       and extra expenses allegedly caused by the
       presence and impacts of COVID-19 at an
       insured’s properties, including the loss of
       business due to a civil authority closure
       order?

    We do not intend our framing of this question to restrict
the Supreme Court of California’s consideration of any
issues that it determines are relevant. Moreover, should the
Supreme Court of California decide to consider the certified
question, it may, in its discretion, reformulate the question.
Broad v. Mannesmann Anlagenbau AG, 196 F.3d 1075,
1076 (9th Cir. 1999). We will accept the decision of the
Supreme Court of California on this question. See Cal. R.
Ct. 8.548(b)(2).
      FRENCH LAUNDRY PARTNERS V. HARTFORD FIRE INS. CO.        7

    If the Supreme Court of California accepts review of the
certified question, we designate Appellant French Laundry
Partners, LP as the petitioner pursuant to California Rule of
Court 8.548(b)(1). The clerk of our court is hereby ordered
to transmit forthwith to the Supreme Court of California,
under official seal of the United States Court of Appeals for
the Ninth Circuit, a copy of this order and all relevant briefs
and excerpts of record, along with a certificate of service on
the parties. Cal. R. Ct. 8.548(c), (d).
    Further proceedings in our court are stayed pending the
Supreme Court of California’s decision on whether it will
accept review, and if so, receipt of the answer to the certified
question. This case is withdrawn from submission until
further order of this court. The Clerk is directed to
administratively close this docket, pending further order.
    The panel will resume control and jurisdiction on the
certified question upon receiving an answer to the certified
question or upon the Supreme Court of California’s decision
to decline the certified question. The parties shall file a joint
report informing the court of the Supreme Court of
California’s decision within 10 days after the Supreme Court
of California decides whether or not to accept the certified
question. If the Supreme Court of California accepts the
certified question, the parties shall file a joint status report
every six months after the date of the acceptance, or more
frequently if circumstances warrant.
    It is so ORDERED.