On 18 March 2024 the California appellate court dismissed an appeal by Frantic Inc, professionally known as heavy metal band Metallica, claiming losses under a Cancellation, Abandonment and Non-Appearance Insurance policy because it was subject to a Communicable Disease exclusion excluding “any loss directly or indirectly arising out of, contributed by, or resulting from any communicable disease or fear or threat thereof” save where it infected a particular insured person. A communicable disease was defined as “any disease capable of being transmitted from an infected person or species to a susceptible host, either directly or indirectly”.

The policy period was August 2019 to April 2020. The band was scheduled to perform six shows in Chile, Argentina and Brazil beginning in April 2020. In March 2020 much of the world was shut down and the South American performances were postponed by the claimant.

The court held that the definition of “communicable disease” was not ambiguous and its ordinary meaning includes the pathogen which underlies the disease (for instance a virus). The phrase “fear or threat thereof” can only be reasonably understood as referring to emotions felt by individuals. The allegation that the members of the band did not feel fearful or threatened did not affect the general application of the exclusion. Thirdly, the court found that the claimant did not offer any evidence that an outbreak of Covid-19 originated and manifested within the confines of an event venue. The claimant was relying on an exception to the communicable disease exclusion when the venue is closed by or under the order of any government or public or local authority as a sole and direct result of a communicable disease which originates and manifests itself “within the confines of the venue”, namely the place where the insured event is to be held. In the absence of any such evidence, the claimant’s argument was rejected.

Finally the court found that Covid-19 was the efficient proximate cause of Metallica’s loss. There was no doubt that in March 2020 the South American countries suspended visas and then closed their borders due solely to Covid-19 or the fear or threat thereof. The court relied on its own knowledge of the nature of the Covid-19 pandemic and in doing so paraphrased Taylor Swift: “We were there. We remember it all too well”. The court rejected the argument there were multiple possible causes of the claimant’s loss. The only possible causes on the evidence were visa cessations and border closures as concurrent causes. The closure orders were not remote from Covid-19 but were the predominant or efficient proximate causes of the loss.

That is a rational decision, compatible with South African law on the same facts.

[Frantic, Inc. v Certain Underwriters at Lloyd’s of London case number B326222, in the Court of Appeal in the State of California, Second Appellate District (18 March 2024)]