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The operators of two high-end Napa Valley restaurants, The French Laundry and Bouchon Bistro, have decided to drop their lawsuit seeking pandemic-related loss recovery from Hartford Fire Insurance Co. This move comes after the California Supreme Court ruled in a related case that a virus exclusion in insurance policies did not render limited virus coverage illusory.

 California Eateries COVID Coverage : Voluntary Dismissal

On Wednesday, the restaurants filed a motion with the Ninth Circuit to voluntarily dismiss their appeal against Hartford. Both parties agreed to bear their own costs and fees. The decision follows a September order from the California Supreme Court, which declined to address a key question certified by the Ninth Circuit regarding the enforceability of virus exclusions in insurance policies.

Impact of the John’s Grill Ruling

The dismissal is largely influenced by the California Supreme Court's ruling in John's Grill Inc. et al. v. The Hartford Financial Services Group Inc. et al. In that case, the court ruled that a virus endorsement in a similar Hartford policy was unambiguous. The endorsement allowed for limited virus-related coverage, but only if the virus led to specified causes of loss, such as physical damage. The ruling reversed an earlier decision that had found the endorsement created illusory coverage.

The Ninth Circuit had certified a question to the California Supreme Court earlier this year, seeking guidance on whether the virus exclusion in The French Laundry’s and Bouchon Bistro’s policy was enforceable, given the potential conflict with limited virus coverage elsewhere in the policy. However, the John's Grill decision effectively answered this question, making further litigation unnecessary.

 California Eateries COVID Coverage : The Initial Lawsuit

The French Laundry and Bouchon Bistro filed their original lawsuit against Hartford Fire Insurance Co. in March 2020, shortly after the onset of the COVID-19 pandemic. The restaurants sought coverage for losses incurred due to government-mandated shutdown orders. However, a California federal court dismissed the suit in April 2021, ruling that the virus exclusion in the policy explicitly barred coverage for pandemic-related economic losses.

Conclusion

The decision by The French Laundry and Bouchon Bistro to drop their California Eateries COVID Coverage lawsuit highlights the growing trend of courts siding with insurers on the enforceability of virus exclusions in pandemic-related cases. As businesses continue to recover from the effects of COVID-19, this ruling sets a precedent for how virus-related claims are likely to be handled in future disputes.