Court of Appeal:
Insured Claiming Covid Damage Must Prove Specific Harm
Gilbert Says Allegations That Virus Adhered to Surfaces, Causing Damage, Might Suffice for Pleading Purposes, As Some Cases Have Held, but on Summary Judgment, Concrete Proof of Loss or Damage Must Be Shown
By a MetNews Staff Writer
The Court of Appeal for this district held yesterday that while businesses seeking payments by insurers for losses occasioned by government-ordered shutdowns stemming from the COVID-19 pandemic are able to get past the demurrer stage, under some recent opinions, by claiming the virus adhered to the contents of the premises, causing damage, they cannot prevail on summary judgment without showing specific property loss or damage.
Presiding Justice Arthur Gilbert of Div. Six wrote:
“Here we interpret an insurance contract that provides coverage for physical loss or damage to real or personal property. Experts disagreed whether the property was permanently damaged or altered by the COVID-19 virus landing on its surface.
“We decide this is not a loss as provided in the insurance contract. Some courts have ruled the phrase “the COVID-19 virus has altered the property” to be sufficient as an allegation of property damage in cases involving demurrers. In a motion for summary judgment, however, the plaintiff must show the alteration is so material that it caused specific economic damage to the property to make a sufficient property damage insurance claim.”
Departing from a stream of federal opinions as well as California Court of Appeal decisions—including United Talent Agency v. Vigilant Insurance Co., decided in 2021 by this district’s Div. Four—Presiding Justice Dennis M. Perluss on July 13, 2022 said in Marina Pacific Hotel & Suites, LLC v. Fireman’s Fund Ins. Co.:
“[T]he United Talent court, based on its de novo review, affirmed a trial court ruling that, like the decision we review, found—without evidence—the COVID-19 virus does not damage property. But the insureds here expressly alleged that it can and that it did, including the specific allegation they were required to dispose of property damaged by COVID-19. We are not authorized to disregard those allegations when evaluating a demurrer….” He added: “Because the insureds adequately alleged losses covered by Fireman’s Fund’s policy, they are entitled to an opportunity to present their case, at trial or in opposition to a motion for summary judgment.”
A few state and federal cases have followed Marina Pacific.
In his opinion affirming a summary judgment granted by Santa Barbara Superior Court Judge James F. Rigali in favor of Lexington Insurance Company in an action by the Santa Ynez Band of Chumash Mission Indians of the Santa Ynez Reservation California based on damage to its casino and resort, Gilbert wrote:
“We do not take issue with recent California decisions holding that business plaintiffs may be able to show that the COVID-19 virus caused damage to their property so as to fall within the property damage provisions of a business insurance policy.
“The issue here, however, is whether Chumash presented sufficient evidence to show that the virus actually caused physical damage to its property.”
The presiding justice noted that the tribe pled that it had to shut down its facility—which it acknowledged was in direct response to government orders—but “presented no evidence to show that the shutdown was for the purpose of repairing or replacing damaged items such as rugs, gaming tables, or gambling machines.”
“Had the Chumash Casino and Resort sustained property damage, it was required to specify what property was damaged and to submit a claim for the dollar amount of that loss. The absence of such information supports Lexington’s decision to deny coverage.”
The case is Santa Ynez Band of Chumash Mission Indians of the Santa Ynez Reservation California v. Lexington Insurance Company, 2023 S.O.S. 1709.
Attorneys on appeal were Nicholas P. Roxborough of the Woodland Hills office of Roxborough, Pomerance, Nye & Adreani, and Vincent S. Gannuscio of that firm’s Los Angeles office, for the tribe, and Richard J. Doren, Matthew A. Hoffman, Daniel R. Adler, Katarzyna Ryzewska and Kenneth H. Oshita of the Los Angeles office of Gibson, Dunn & Crutcher, for the insurer.
Copyright 2023, Metropolitan News Company