Metropolitan News-Enterprise


Tuesday, December 26, 2023


Page 1


National Hockey League, Teams Lose Bid to Renew Fight Against Insurer Over Coverage


By a MetNews Staff Writer


The National Hockey League and 19 of its teams, including the Anaheim Ducks and the San Jose Sharks, have lost their bid in the Sixth District Court of Appeal for a writ directing restoration of key allegations stripped from their complaint against their insurer over disclaimed coverage for the more than $1 billion in losses caused by closure of their outdoor arenas in response to the COVID-19 pandemic.

Thursday’s opinion by Justice Cynthia C. Lie leaves intact Santa Clara Superior Court Judge Sunil R. Kulkarni’s Aug. 8, 2022 order striking all allegations except those that support a surviving cause of action against Factory Mutual Insurance Company under clauses in the policies relating to business interruptions caused by communicable diseases, which would provide coverage of up to $1 million. Lie’s opinion agrees with the result Kulkarni reached, but not his reasoning.

Kulkarni based his ruling on agreement with United Talent Agency v. Vigilant Insurance Company, handed down by Div. Four of this district’s Court of Appeal in 2022, and his rejection of a contrary ruling later that year by this district’s Div. Seven in Marina Pacific Hotel and Suites, LLC v. Fireman’s Fund Ins. Co.

Judge’s Reasoning

He said in his order:

“[T]he policies at issue here…all require physical loss or damage to property….United Talent conclusively holds that the presence of COVID-19 in the air and on surfaces is not physical loss or damage to property.”

He noted that he “[r]espectfully… declines to follow” Marina Pacific which, he said, “essentially held that the nature of the virus’s impact on air and surfaces is a factual issue that is not properly resolved on demurrer, even though ‘common sense’ theoretically might dictate that it does not cause physical loss or damage to property.”

The issue is now before the California Supreme Court.

Lie’s Opinion

Agreeing with Div. Seven, Lie said:

“Assuming the truth of plaintiffs’ factual allegations regarding the interaction between the virus and the physical surfaces of the insured property, we are persuaded that plaintiffs have alleged physical loss or damage within the meaning of the policies.”

She nonetheless concluded that there is no coverage under the policy’s provisions not relating to communicable disease coverage, declaring:

“Interpreting the parties’ insurance policy in the context of plaintiffs’ factual allegations, we read the contamination exclusion as excluding from coverage both the physical loss or damage caused by viral contamination and the associated [business interruption] loss. Accordingly, although we consider plaintiffs to have adequately alleged physical loss or damage from the coronavirus, we deny writ relief.”

Wording of Clauses

The policies excluded coverage for losses based on “contamination, and any cost due to contamination including the inability to use or occupy property or any cost of making property safe or suitable for use or occupancy.” Contamination is defined in the policies as “any condition of property due to the actual or suspected presence…virus…” and COVID-19, Lie pointed out, is a virus.  

She said that although Kulkarni “did not reach” the applicability of the viral contamination exclusion, his “ultimate determination that plaintiffs cannot allege covered physical loss or damage to property is correct.”

The case is San Jose Sharks LLC v. Superior Court, 2023 S.O.S. 3896.


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