French Laundry Partners v. Hartford Fire Insurance Company

French Laundry Partners, LP (plaintiff) was a limited partnership that operated the world-renowned, three-Michelin-starred restaurant the French Laundry. Bouchon Bistro was a one-Michelin-starred restaurant owned and operated by Yountville Food Emporium, LLC (plaintiff). KRM, Inc. (KRM) (plaintiff) managed the French Laundry and Bouchon Bistro (the restaurants). In July 2019, Hartford Fire Insurance Company and Trumbull Insurance Company (insurance companies) entered into a contract with the restaurants and promised to indemnify the restaurants for losses including, but not limited to, business income losses at the restaurants. The restaurants paid premiums to the insurance companies specifically to provide additional coverages under “The Property Choice Business Income and Extra Expense Form” in the event of business closures by order of a civil authority. Under this provision, the insurance companies would cover the actual loss of business income sustained and the necessary and reasonable extra expenses incurred when access to the restaurants’ premises was prohibited by order of civil authority as the direct result of a covered cause of loss to property in the immediate area of the restaurants’ premises. The policy was an all-risk policy that covered direct physical loss or damage unless the loss was specifically excluded. The policy’s “Property Choice Deluxe Form” specifically extended coverage to direct physical loss or damage caused by a virus. In March 2020, the health officer of Napa County, Karen Relucio, issued a stay-at-home order in response to the Covid-19 pandemic (the order). The order directed individuals to stay at home and only to leave for essential activities. The order also directed all nonessential businesses in the county to cease all activities. The order specifically stated that it was issued based on evidence of physical damage to property that was in the immediate area of the restaurants. The restaurants were forced to close and furlough hundreds of employees. The restaurants alleged that they incurred a substantial loss of business income and other expenses covered under the policy. The restaurants claimed that the insurance companies disputed and denied that their policy provided coverage under the civil-authority provisions for closures due to Covid-19. The restaurants filed suit in superior court, seeking a declaratory judgment to affirm that their policy provided coverage to the restaurants for civil-authority closures of restaurants due to Covid-19 and that the policy provided business-income coverage in the event of damage or loss as a result of Covid-19.