Insurance policies frequently contain choice-of-law provisions providing that their interpretation is subject to the law of a particular jurisdiction. Thus, if a policy’s choice-of-law provision requires that the policy be interpreted in accordance with New York law, then the policy should be interpreted in accordance with New York law. That seemingly self-evident proposition was recently upheld by the United States District Court for the Southern District of New York in Cajun Conti, LLC v. Starr Surplus Lines Ins. Co., 23 Civ. 8844 (KPF), 2025 WL 764131 (S.D.N.Y. Mar. 11, 2025).
But, according to the insured, Cajun Conti, the proposition is not self-evident at all. This is because the insurance policy containing the New York choice-of-law provision was issued to Cajun Conti in Louisiana, and, under the Louisiana Insurance Code, foreign choice-of-law provisions are void, at least for policies issued in Louisiana and subject to approval by the Louisiana Department of Insurance. See La. Rev. Stat. § 22:868.
The Southern District, however, rejected Cajun Conti’s invocation of the Louisiana statute, and enforced the parties’ contractual commitment to be bound by New York law. Cajun Conti, 2025 WL 764131, at *4-*7. The Court did so for several reasons.
First, Section 5-1401 of New York’s General Obligations Law provides that any contract governing transactions in excess of $250,000 containing a New York choice-of-law provision is enforceable in New York. Indeed, New York’s highest court has held that a provision subject to Section 5-1401 obviates the need for any further conflicts-of-law analysis. The provision is presumptively enforceable. Cajun Conti, 2025 WL 764131, at *4.
Second, the Cajun Conti court noted that, even in the absence of Section 5-1401, New York courts should enforce choice-of-law provisions as a matter of contract interpretation. To that end, the court cited a recent decision from New York’s Court of Appeals holding that “when the parties have chosen New York law, a court may not contravene that choice through common-law conflicts analysis.” Cajun Conti, 2025 WL 764131, at *5 (citing Petróleos de Venezuela S.A. v. MUFG Union Bank, N.A., 41 N.Y.3d 462, 476 (2024)).
Third, the Cajun Conti court rejected a “public policy” exception to the foregoing rules, finding no basis for such an exception in controlling New York law. Cajun Conti, 2025 WL 764131, at *6.
Based on the foregoing principles of New York law, the Cajun Conti court concluded that the Louisiana statute purporting to void the contract provision is ultimately irrelevant.
The takeaway is that courts in New York should apply New York law to insurance policies requiring the application of New York law, irrespective of alleged public policy concerns arising from contrary law of the insureds’ home state. This rule provides certainty to the parties concerning their rights and obligations and ensures that their contractual intent will be upheld.
Insurers Prevail in California Supreme Court on COVID-19 Business Interruption Coverage
By Todd Norris, Max Stern, Brian Kelly, Terrance Evans and Jessica La Londe.
Earlier today, the Supreme Court of California issued a long-awaited opinion answering an insurance coverage question that had been certified to it by the Ninth Circuit Court of Appeals in Another Planet Entertainment, LLC v. Vigilant Ins. Co. (Cal. May 23, 2024, No. S277893) 2024 WL 2339132: “Can the actual or potential presence of the COVID-19 virus on an insured’s premises constitute ‘direct physical loss or damage to property’ for purposes of coverage under a commercial property insurance policy?” (Another Planet Entertainment, LLC v. Vigilant Insurance Co. (2022) 56 F.4th 730, 734.)
“[T]he question [arose] in the context of a civil lawsuit filed by Another Planet Entertainment, LLC (Another Planet) against its property insurer, Vigilant Insurance Company (Vigilant). Another Planet operates venues for live entertainment. It suffered pandemic-related business losses when its venues closed, and Vigilant denied Another Planet’s subsequent claim for insurance coverage. Another Planet filed suit in federal district court, alleging that the actual or potential presence of the COVID-19 virus at its venues or nearby properties caused direct physical loss or damage to property and triggered coverage under its insurance policy. The district court granted Vigilant’s motion to dismiss for failure to state a claim, and Another Planet appealed. According to the Ninth Circuit, the issue on appeal “[was] whether [Another Planet’s] allegations, if taken as true, were sufficient to show ‘direct physical loss or damage to property’ as defined by California law.’ (Another Planet, supra, 56 F.4th at p. 731.) Because the Ninth Circuit concluded that resolution of this question of California law could determine the outcome of the case pending before it, the Ninth Circuit certified the question to [the Supreme Court of California.]” (Another Planet, 2024 WL 2339132, at *1.) Continue reading “Insurers Prevail in California Supreme Court on COVID-19 Business Interruption Coverage”
California Court of Appeal Disposes of COVID-19 Coverage Dispute After Discovery Reveals Cause of Business Income Losses
By Max H. Stern and Holden Benon
Late last week, the California Court of Appeal issued another COVID-19 business interruption decision reminding us that creative arguments do not win the day for policyholders in California. The true facts are decisive.
In Best Rest Motel, Inc. v. Sequoia Ins. Co., No. D079927, 2023 WL 2198660 (Cal. Ct. App. Feb. 24, 2023), the court upheld a trial court’s ruling on summary judgment, reasoning the policyholder could not show that its loss of business income was caused by “direct physical loss of or damage to property,” within the meaning of its commercial multi-peril insurance policy.
The policyholder, San Diego-based Best Rest Motel, Inc. argued that the presence of virus-infected droplets caused physical loss or damage rendering its property incapable of safely providing lodging to guests. Readers familiar with these issues may recognize this as an attempt to plead facts that fall within the “hypothetical scenario” posited in dicta by the court in Inns-by-the-Sea.
California’s Highest Court Rejects Inns-by-the-Sea’s Petition for Review
By Max H. Stern and Holden Benon
This week, the California Supreme Court declined to hear the Policyholder’s appeal of the Court of Appeal’s decision in The Inns by the Sea v. California Mutual Ins. Co., which we previously reported on. For those tracking the COVID-19 business interruption appellate landscape, this should come as no surprise. The Court of Appeal’s decision is well-reasoned, and it is aligned with many COVID-19 business interruption decisions across the nation that have reached very similar conclusions. Policyholder attorneys expressed it is “hard to feel hopeful at this point.” We can understand why.
Carriers Enjoy Unanimous Success in Recent Wave of COVID-19 Business Interruption Decisions in Federal Appeals (Update)
By: Max H. Stern & Holden Benon
Recently, we began to see real decisions being made by the appellate courts on COVID-19 Business Interruption issues. The U.S. Circuit Courts of Appeals have established a uniformly favorable trend for insurance carriers – these courts have affirmed the district court decisions that have ruled in favor of the insurers, and in one case, the Sixth Circuit vacated a district court’s decision that ruled in favor of the policyholder. Since our original blog post on this issue in October, this trend continued in December with a Tenth Circuit decision.
Ninth Circuit
Starting with the Ninth Circuit (where Duane Morris’ insurance group maintains a strong presence), carriers have enjoyed successful outcomes in a trio of much-anticipated decisions. In Mudpie, Inc. v. Travelers Casualty Insurance Company of America, Case No. 20-16858, 2021 WL 4486509, at *1 (9th Cir. Oct. 1, 2021) (applying California law), Mudpie, a San Francisco-based children’s store, brought a proposed class action asserting breach of contract and bad faith against its property insurance carrier. As in many COVID-19 business interruption cases, the carrier had denied its insured “Business Income” and “Extra Expense” coverage in 2020, after government authorities issued public health orders in response to the COVID-19 pandemic. Id. at *2. (For more background on business interruption insurance, please refer to one of our earlier blog posts on this topic.)
Mudpie made the argument that its inability to use its premises amounted to “direct physical loss or damage to” its property, sufficient to bring its claim within the scope of the policy’s business interruption coverage. Id. The court rejected this argument, however, reasoning that the phrase “direct physical loss of or damage to” requires some kind of physical alteration to the property in question. Id. at *5. The court also held that the policy’s virus exclusion bars coverage for the insured’s claims. Id. at *7. As many policyholders have tried arguing, Mudpie claimed that its losses were not subject to the policy’s virus exclusion because its losses were caused not directly by the virus, but by stay-at-home orders that restricted the insured’s use of its property. But the court didn’t buy this argument because Mudpie failed to meet the “efficient proximate cause” test. Id. (“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 throughout California, or that the virus was merely a remote cause of its losses.”) (internal citation omitted). In the end, the court affirmed the district court’s decision ruling in favor of the insurer. Id. at *7.
Yet Another Win for Insurers on COVID-19 Business Interruption Claims: The Inns by the Sea California Court of Appeal Decision
By Max H. Stern and Holden Benon
The first California state appellate decision on COVID-19 Business Interruption coverage is now in the books, and it’s one more victory for insurers. In The Inns by the Sea v. California Mutual Ins. Co., Case No. D079036 (Cal. Ct. App. 4th Dist., Div. 1, Nov. 15, 2021), the California Court of Appeal for the Fourth District found there was no coverage, notwithstanding the absence of a virus exclusion in the relevant policy. The court’s 36-page opinion provides a thorough and careful analysis of several important COVID-19-related business interruption issues, some highlights of which we summarize below.
Inns-by-the Sea operates lodges in the California coastal communities of Carmel and Half Moon Bay. In March of 2020, Inns closed its facilities in response to shutdown orders issued by Monterey and San Mateo counties. Then, Inns made a claim under its property insurance policy for its claimed loss of business income caused by the pandemic. (For more background on business interruption insurance, refer to one of our earlier blog posts on this topic.) Inns’ insurer denied coverage, and Inns filed suit in Monterey Superior Court.
Panel Rejects Consolidation Of All Federal Business Interruption Cases
By Damon Vocke
On July 31, the seven-member Judicial Panel on Multi-District Litigation (JPML) heard oral argument of extraordinary length on the potential consolidation of all federal cases involving business interruption coverage relating to COVID-19 and/or COVID-19 shutdown orders, totaling approximately 449 such federal cases, roughly 200 of which are putative class actions. Continue reading “Panel Rejects Consolidation Of All Federal Business Interruption Cases”
Lengthy Oral Argument on Potential Consolidation of Business Interruption Coverage Cases Related to COVID-19
By Damon Vocke
On July 30, the Judicial Panel on Multi-District Litigation (the Panel) heard oral argument of extraordinary length on the potential consolidation of all the federal cases involving business interruption coverage relating to COVID-19 and/or the COVID-19 shut-down orders. There are some 449 such federal cases, approximately 200 of which are putative class actions.
Normally, the arguments for consolidation are short. This one was not. This was likely due to the importance of the pandemic-related litigation, as well as the multiplicity of positions.
Several policyholder plaintiffs argued for national consolidation. Insurer-specific consolidation was the most common fall-back position among the policyholder plaintiffs. Several policyholder plaintiffs argued against any consolidation – most notably, David Boies. Counsel for some of the insurer defendants argued on behalf of the industry against any consolidation. Continue reading “Lengthy Oral Argument on Potential Consolidation of Business Interruption Coverage Cases Related to COVID-19”
Bid to Invalidate Virus Exclusion in Pennsylvania Federal Court
Berkshire Hathaway and one of its units on Monday urged a Pennsylvania federal court to toss a restaurant’s suit seeking insurance coverage for losses caused by the COVID-19 pandemic, arguing that a virus exclusion “plainly applies” to the restaurant’s claims.
Berkshire Hathaway and National Fire are represented by Robert L. Byer, Julie S. Greenberg and Damon N. Vocke of Duane Morris LLP.
To read the full text of this article, please visit the Law360 website.
Business Interruption Insurance, COVID-19 and Direct Physical Damage under New York Law
By Damon Vocke and David T. McTaggart
To date, approximately 150 business-interruption insurance coverage lawsuits have been filed in federal courts arising from COVID-19 and related government-ordered restrictions. In what appears to be the first substantive ruling on the merits in these cases, the Southern District of New York recently ruled against an insured who could not meet its burden to show a likelihood of success in establishing “property damage” due to the novel coronavirus to support its claim for injunctive relief. See Social Life Magazine, Inc. v. Sentinel Ins. Co., 1:20-cv-03311-VEC (Dkt. 24-1, S.D.N.Y. May 14, 2020). Judge Caproni expressed sympathy “for every small business that is having difficulties during this period of time,” but concluded that “New York law is clear” in requiring actual property damage to trigger business interruption coverage. Because the insured’s coverage theory rested on a government shutdown in the absence of any property damage, the Court denied its preliminary injunction motion, reasoning “this is just not what’s covered under these insurance policies.”