In March, Los Angeles Mayor Eric Garcetti ordered all nonessential business to close due to the risks posed by COVID-19.

Geragos & Geragos filed a claim with its broker April 1 for lost income due to the COVID-19 pandemic, as it had to close its offices per government authorities' orders, according to Judge Gutierrez's order.

Travelers filed suit April 20 seeking a declaration that it did not owe Geragos coverage for the firm's claim of lost business income.

Geragos & Geragos also sued Travelers in the Los Angeles County Superior Court seeking coverage for its claim, but the insurer removed the suit and consolidated it with its action.

The firm then refiled its first amended complaint as a counterclaim seeking a declaration that the mayor's order triggered civil authority coverage because it prohibited access to its property. Geragos & Geragos also alleged that Travelers acted in breach of contract and breach of the implied covenant of good faith and fair dealing.

Travelers, represented by Theodore J. Boutrous Jr. of Gibson Dunn & Crutcher LLP and Robinson & Cole LLP, argued that Geragos & Geragos has no coverage available and moved for dismissal.

Travelers' policies say it will provide coverage if a civil authority order is issued in response to physical loss of or damage to property resulting from a covered cause of loss.

The policies also entitle Geragos & Geragos to business income and extra expenses if it sustains losses or damage due to a covered cause of loss.

Geragos & Geragos is not owed coverage because a virus is not a covered cause of loss, the firm did not sustain any physical loss of or damage to its property and a virus exclusion precludes coverage, Travelers argued.

Geragos & Geragos' policy says civil authority coverage applies only to a covered cause of loss, and the virus exclusion applies to that provision, Judge Gutierrez said.

He said similar claims have been dismissed based on virus exclusions, including Mark's Engine Co. No. 28 Restaurant LLC v. Travelers Indemnity Co. of Connecticut, No. 20-cv-4423, (C.D. Cal. Oct. 2, 2020).

In Mark's Engine Co. No. 28, a judge dismissed a claim based on the same virus exclusion and stay-at-home order because the exclusion precluded coverage, Judge Gutierrez said.

Business income and extra expense coverage is also unavailable because Geragos & Geragos did not allege any physical loss of or damage to its property, the judge said.

He cited the judge in 10E LLC v. Travelers Indemnity Co. of Connecticut, No. 20-cv-4418, (C.D. Cal. Sept. 2, 2020), who said a "distinct, demonstrable, physical alteration" is needed for physical loss or damage.

Judge Gutierrez also dismissed the breach-of-contract and bad-faith claims because they are derivative of coverage.

He granted Travelers' motion to dismiss without leave to amend, finding that amendment would be futile.