Palmdale Estates, Inc. v. Blackboard Insurance Company ( 2022 )

FILED
NOT FOR PUBLICATION
MAY 2 2022
UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
PALMDALE ESTATES, INC., No. 21-15258
Plaintiff-Appellant, D.C. No. 3:20-cv-06158-LB
v.
MEMORANDUM*
BLACKBOARD INSURANCE
COMPANY,
Defendant-Appellee.
Appeal from the United States District Court
for the Northern District of California
Laurel D. Beeler, Magistrate Judge, Presiding
Submitted April 13, 2022**
San Francisco, California
Before: BYBEE and R. NELSON, Circuit Judges, and RAKOFF,*** District Judge.
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
**
The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
***
The Honorable Jed S. Rakoff, United States District Judge for the
Southern District of New York, sitting by designation.
Palmdale filed suit against Blackboard Insurance Company in July 2020 for
declaratory relief, breach of contract, and breach of the implied covenant of good
faith and fair dealing. Palmdale alleged that “a flawed public health response and
government negligence allowed COVID-19 to spread, causing its venue to become
dangerous, unsafe, and unusable and requiring it to suspend its business
operations.” After removing the case to the district court, Blackboard moved to
dismiss. Blackboard argued that Palmdale’s lawsuit concerns only “losses [that]
were directly caused by shutdown orders—not the abstract statistical possibility
that someone with COVID-19 may have been ‘present’ on some prior date.”
Blackboard also argued that the virus exclusion precluded coverage.
The district court granted Blackboard’s motion and permitted Palmdale
leave to amend. It explained “that direct physical loss does not cover lost business
income or expenses resulting from closure orders like those here.” Thus, Palmdale
had failed to satisfy the coverage trigger under the policy. And in the alternative,
coverage did not exist “because the policy excludes coverage for virus-related
losses.” Palmdale elected not to amend its complaint and requested that judgment
be entered. The district court entered judgment in Blackboard’s favor, dismissing
the claim. Palmdale appeals that judgment.
2
We review the district court's decision to grant a motion to dismiss under
Rule 12(b)(6) de novo. Fayer v. Vaughn, 649 F.3d 1061, 1063–64 (9th Cir. 2011)
(per curiam). We may affirm the district court's dismissal of the complaint on any
basis supported by the record. See Johnson v. Riverside Healthcare Sys., LP, 534
F.3d 1116, 1121 (9th Cir. 2008).
On appeal, Palmdale contends that the COVID-19 virus is not the proximate
cause of its losses and thus the virus exclusion does not apply. It relies on
California’s efficient proximate cause test to reach this conclusion. That test looks
to the predominant or most important cause of the loss, “when there are two or
more distinct perils that cause a loss.” De Bruyn v. Super. Ct., 70 Cal. Rptr. 3d 652,
659 (Cal. Ct. App. 2008); see Julian v. Hartford Underwriters Ins. Co., 110 P.3d
903, 907 (Cal. 2005). Palmdale’s argument is neither novel nor availing.
We have rejected similar arguments in two recent cases. First, the plaintiffs
in Mudpie made a similar argument—the government shutdown orders, not the
virusv caused the loss. Mudpie, Inc. v. Travelers Cas. Ins. Co. of Am., 15 F.4th
885 (9th Cir. 2021). Applying California’s efficient proximate cause test, we
wrote that “Mudpie does not plausibly allege that the efficient cause, i.e., the one
that set others in motion, was anything other than the spread of the virus
3
throughout California, or that the virus was merely a remote cause of its losses.”
Id. at 894 (quotation marks and citation omitted).
Similarly, in a second case, the plaintiffs argued that their losses “were
attributable to other causes not implicated by the virus, including . . . governmental
responses to the pandemic.” Chattanooga Prof’l Baseball LLC v. Nat’l Cas. Co.,
No. 20-17422, 2022 WL 171936 at *2 (9th Cir. Jan. 19, 2022) (as amended). We
once again rejected that argument, applying California’s efficient proximate cause
test. We wrote that “although the ‘attendant disease, resulting pandemic, and
governmental responses’ might have affected the Teams' claimed losses, the Teams
do not plausibly allege that any of these other causes, and not the spread of the
COVID-19 virus, were the ‘efficient proximate cause’ that set others in motion and
predominated.” Id. at *3 (citations omitted). Indeed, it would be difficult to blame
the government’s response to the COVID-19 pandemic without implicating the
virus itself—a fact that proved fatal to the plaintiffs case in Chattanooga. “The
Teams have not plausibly alleged that the need for the government to act in the
first place—i.e., the context in which any alleged governmental inaction or action
arose—was something other than the COVID-19 virus.” Id.
4
Likewise, Palmdale cannot show that the government’s response to the virus
was the product of anything other than the virus. The virus exclusion, therefore,
precludes coverage. We affirm the district court’s decision.
AFFIRMED.
5