b'CASE LAW DEVELOPMENTS|UNITED STATESbe fixed. In this case, the court held, there were nonot a general safety net for all dangers and that physical repairs to be made, which again[e]fforts to push coverage beyond its terms supported the idea that this could not be acreates a mismatch by covering something no physical loss. The California appellate court furtherone paid for while running the risk of leaving held that the absence of a virus exclusion did notinsufficient funds to pay for perils that insureds affect the meaning of the direct physical lossdid pay for.The appellate courts appear necessary for coverage. Finally, the Californiacommonly committed to this principle, which appellate court held that civil authority coverage,allowed insurers to continue prevailing inwhich covered an action of civil authority thatCOVID-19 business interruption coverage prohibits access to the described premises due tolitigation through 2021.direct physical loss of or damage to neighboring property, did not cover the loss either. The courtTwo Decisions by the Ninth Circuit and reasoned that the governmental restrictions wereSupreme Court of Nevada Clarified made to prevent the spread of disease, notInsurers Right to Reimbursement of because of a direct physical loss of or damage to any property.Defense Costs When No Duty to Defend Ultimately ExistedThe guiding principle underlying the wave of victories for insurersnamely that insuranceIn Adir International, LLC v. Starr Indemnity & policies must be interpreted and enforced basedLiability Co., the Ninth Circuit rejected on the ordinary understanding of the policyconstitutional and statutory-based challenges to a languagewas best articulated by the SixthCalifornia statute that nullifies an insurance Circuit in Santos Italian Caf LLC v. Acuitycompanys duty to defend and indemnify against Insurance Co. Under the language of directconsumer protection claims. The court further physical loss of or damage, there was noheld that an insurance company was entitled to coverage for Santos losses, the Sixth Circuitreimbursement of defense costs advanced to the reasoned, because Santos restaurant has notinsured in violation of the statute, reasoning that been tangibly destroyed, whether in part or in full.reimbursement was required because the statute And the owner has not been tangibly ornullified the insurers duty to defend and concretely deprived of any of it. It still owns theindemnify and because the policy contained an restaurant and everything inside the space. And itexpress reservation of rights that required can still put every square foot of the premises torepayment of advanced defense costs if the use, even if not for in-person dining use.In itsinsured was not entitled to them.concluding remarks, the Sixth CircuitThe California Attorney General brought suit acknowledged the significant challenge faced byagainst Adir under Californias False Advertising businesses incurring economic losses because ofLaw (FAL) and Unfair Competition Law (UCL). the pandemic. But it emphasized that courts mustStarr Indemnity acknowledged that it would defend honor policies as written because insurance is 158|Global Insurance Industry Year in Review 2021'