First and Stewart Hotel Owner Llc, a Delaware limited liability company v. Fireman's Fund Insurance Company, a California corporation

NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
FIRST AND STEWART HOTEL OWNER
LLC, a Delaware limited liability company,
Plaintiff-Appellant,
v.
FIREMAN'S FUND INSURANCE
COMPANY, a California corporation,
Defendant-Appellee.
No. 21-35637
D.C. No. 2:21-cv-00344-BJR
MEMORANDUM*
Appeal from the United States District Court
for the Western District of Washington
Barbara Jacobs Rothstein, District Judge, Presiding
Submitted March 31, 2023**
Seattle, Washington
Before: NGUYEN and HURWITZ, Circuit Judges, and PREGERSON,*** District
Judge.
In this insurance coverage action, First & Stewart Hotel Owner LLC seeks
* 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 Dean D. Pregerson, United States District Judge for the
Central District of California, sitting by designation.
FILED
MAY 19 2023
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS

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reimbursement from Fireman’s Fund Insurance Co. (“FFIC”) for business losses
incurred at a hotel during the COVID-19 pandemic. Applying Washington law, the
district court granted FFIC’s motion to dismiss. We have jurisdiction under 28
U.S.C. § 1291. Reviewing the Rule 12(c) dismissal de novo, Fleming v. Pickard,
581 F.3d 922, 925 (9th Cir. 2009), we affirm.
1. To establish coverage under Washington law, an “insured must show the
loss falls within the scope of the policy’s insured losses.” McDonald v. State Farm
Fire & Cas. Co., 837 P.2d 1000, 1003–04 (Wash. 1992). FFIC’s policy insures
against loss “arising from direct physical loss or damage to property.” The
Washington Supreme Court recently observed that “in order to recover under a
property insurance policy for physical loss of or damage to the property, something
physically must happen to the property.” Hill & Stout, PLLC v. Mut. of Enumclaw
Ins. Co., 515 P.3d 525, 533 (Wash. 2022). The court went on to hold that the “loss
of intended use and loss of business income” caused by the Governor’s orders “is
not a physical loss of property,” id. at 532, and stated that it agreed with the district
court’s conclusion in a related case that “there must be some physical effect on the
property” to trigger coverage, id. at 534. Although Hill & Stout dealt only with a
claim that the Governor’s orders triggered coverage, the court also noted, as did the
district court here, “the strong, if not unanimous, consensus around the country” that
COVID-19 itself does not cause a direct physical loss of property. Id.

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Hill & Stout acknowledged “that there are likely cases in which there is no
physical alteration to the property but there is a direct physical loss under a theory
of loss of functionality.” Id. at 533. But, in rejecting a claim by dentists for business
losses caused by the COVID-19 pandemic, the court held that “this case is not one
of them” because there was “no physical loss of functionality to the property.” Id.
“[T]here was no alleged imminent danger to the property, no contamination with a
problematic substance, and nothing that physically prevented use of the property or
rendered it useless; nor were the dental offices rendered unsafe or uninhabitable
because of a dangerous physical condition.” Id. The same is true here.
2. First and Stewart’s Communicable Disease Coverage is triggered by a
“Communicable Disease event,” which is “an event in which a public health
authority has ordered that a location be evacuated, decontaminated, or disinfected
due to the outbreak of a communicable disease at such location.” There is no
coverage under this provision because no such order was issued.
3. Even assuming that coverage was triggered under the FFIC policy, its
exclusions preclude coverage. See Overton v. Consol. Ins. Co., 38 P.3d 322, 329
(Wash. 2002). The policy excludes “any loss, damage, or expense caused directly
or indirectly by or resulting from . . . [m]ortality, death by natural causes, disease,
sickness, any condition of health, bacteria, or virus.” This is materially similar to
the exclusion that precluded coverage in Hill & Stout. See 515 P.3d at 528, 536–37

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(applying an exclusion stating that the insurer “will not pay for loss or damage
caused directly or indirectly by” “[a]ny virus . . . that induces or is capable of
inducing physical distress, illness or disease”).
4. As COVID-19 does not cause direct physical loss of covered property, the
district court correctly concluded that discovery would be futile.1
AFFIRMED.
1 Given the guidance in Hill & Stout, we deny First & Stewart’s motion to
certify the coverage question to the Washington Supreme Court. Dkt. 11. We also
deny First & Stewart’s motion to take judicial notice of district court orders in related
litigation. Dkt. 14. We grant the motions to file briefs as amici curiae. Dkts. 21,
24, 33.

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