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Court of Appeal:
Costs of Metallica Concert Postponements Were Excluded From Coverage
By a MetNews Staff Writer
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—AP In this undated file photo, Robert Trujillo, James Hetfield, Lars Uhlrich and Kirk Hammett of Metallica, celebrate after a performance at the Rock and Roll Hall of Fame. |
The Court of Appeal for this district has held that a communicable disease exclusion in an insurance contract covering concert tour activities exclude coverage for the postponement of the rock band Metallica’s South American stops in a world-wide tour during the COVID-19 pandemic.
The justices were not persuaded that the absence of the word “virus” in the exclusion changed the analysis.
The suit was brought by Frantic, Inc., known professionally as Metallica, against Certain Underwriters at Lloyd’s, London after Underwriters denied the band’s claim.
The unpublished opinion, filed Monday, was written by Presiding Justice Maria E. Stratton and affirmed the summary judgment by Los Angeles Superior Court Judge Holly Fujie in favor of the insurer. The opinion was joined by Justices Elizabeth A. Grimes and John Shepard Wiley Jr.
Scheduled Performances
Frantic purchased cancellation insurance from Underwriters to cover a planned world-wide tour to take place between August 2019 and April 2020. Frantic successfully began its tour in the United States in September and was scheduled to perform six shows in Chile, Argentina and Brazil beginning in April 2020.
The band’s South American performances were postponed by the tour company after the countries began cancelling visas and imposing border restrictions in response to the pandemic. Frantic sought payments from Underwriters for its losses related to the postponement.
In denying coverage, Underwriters cited the communicable disease exclusion in the insurance contract. Fujie granted summary judgment based on that clause.
Frantic appealed, arguing that Fujie erred by conflating “virus” with “disease” and failing to find triable issues as to reasonable interpretations of other “ambiguous” phrases in the agreement.
Communicable Disease Exclusion
The exclusion at issue provides (with paraphing omitted):
“This Insurance does not cover any loss directly or indirectly arising out of, contributed to by, or resulting from:… any Communicable Disease or fear or threat thereof, unless…such Communicable Disease infects an Insured Person and such infection of an Insured Person is the sole and direct cause of the necessary Cancellation, Abandonment, Postponement, Interruption, Curtailment or Relocation of any Insured Event; or…the Venue is closed by or under the order of any government or public or local authority as a sole and direct result of a Communicable Disease which originates and manifests itself within the confines of the Venue.”
The policy defined “Communicable Disease” as “any disease capable of being transmitted from an infected person or species to a susceptible host, either directly or indirectly.”
On May 20, 2020, Katherine Proctor, on behalf of the lead underwriter Talbot Underwriting Ltd., denied coverage to Frantic saying “[t]his policy has a Communicable Disease Exclusion 8.15 and therefore we regret that there is no coverage for this matter.”
Virus Versus Disease
On appeal, Frantic accused the trial court of adding the word “virus” to the exclusion on a faulty presumption that “virus” was synonymous with “disease.” Turning to the policy, Stratton wrote:
“The insurance policy definition of communicable disease does not refer to any pathogens nor does it limit the exclusion to only those communicable diseases caused by specific pathogens. Given these facts, Frantic’s alleged interpretation of the communicable disease exclusion would render the exclusion meaningless. Because no pathogens are specified, no communicable diseases would ever be excluded from coverage. The communicable disease exclusion would be meaningless. Frantic does not offer any alternate interpretation which would render the exclusion applicable in even one situation.”
She declared:
“The definition of ‘communicable disease’ is not ambiguous and its ordinary meaning in the Policy subsumes the pathogen which causes the disease.”
Other Reasonable Interpretations
The jurist noted that the exclusion states that the policy does not cover losses from any communicable disease “or fear or threat thereof.” Frantic contended that summary judgment was improper because there were at least two reasonable interpretations of the phrase “fear or threat thereof.”
Frantic argued that a reasonable interpretation of the phrase would require that a policyholder actually feel fear or threat and, because no band member felt such fear, the exclusion should not apply.
Underwriter asserted that the only reasonable interpretation of the phrase was that any person or entity could experience the requisite fear as long as the fear caused the relevant loss.
Stratton said:
“To preclude summary judgment, ambiguity must arise because there are at least two reasonable interpretations of the policy provision.”
Applying that standard, she said:
“Because Frantic’s interpretation is not supported by the language of the exclusion itself, nor by any missing language, it is not a reasonable interpretation. Summary judgment was proper.”
She also rejected Frantic’s argument that there were two reasonable interpretations of the other exception to the exclusion—if the outbreak originated and manifested within an event venue—and wrote:
“[I]t would not be enough for Frantic to offer a reasonable interpretation of an exception in opposition to summary judgment: Frantic would also have to offer evidence sufficient to create a triable issue of fact that the conditions required under its interpretation existed. Frantic did neither.”
She noted that there was no sufficient evidence submitted to support the assertion that the communicable disease originated within the venue and a declaration as to individuals testing positive at the venue did not change that fact.
Proximate Cause
Frantic contended that a jury could have concluded that a cause other than COVID-19 was the efficient proximate cause of its loss and identified the cessation of visa issuances in March of 2020, the suspension of the tour by the tour company and the closure of several South American borders as three possible causes.
Stratton noted that what causes a loss is generally a question of fact but “many factual issues may be decided on summary judgment if the material facts are not in dispute.”
She turned to the 2022 Second District case of Musso & Frank Grill Company v. Mitsui Sumitomo Insurance USA Inc. and the 2021 Ninth U.S. Circuit case of Mudpie, Inc. v. Travelers Casualty Insurance Company to determine the issue of proximate cause. Stratton said:
“We understand both Musso & Frank and Mudpie as holding that as a matter of law Covid-19 is the efficient cause of losses sustained from closures during the pandemic, and the existence of closure orders issued in response to Covid-19 does not, as a matter of law, make Covid-19 so remote or attenuated a cause that it is not the predominate or efficient proximate cause of loss. We agree with those conclusions.”
The case is Frantic, Inc. v. Certain Underwriters at Lloyd’s, London, B326222.
Frantic was represented by Kirk A. Pasich and Caitlin S. Oswald from the Los Angeles office of Pasich, LLP and Jeffrey L. Schulman from the New York office of the firm. Underwriters were represented by Locke Lord LLP and attorneys Mitchell J. Popham and William Colin Mullen from the Los Angeles office and Hugh S. Balsam from the Chicago office.
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