Marina Pacific Hotel And Suites, LLC v. Fireman's Fund Insurance Company

• Published date: 21 July 2022
• Subject Matter: Insurance, Litigation, Mediation & Arbitration, Insurance Laws and Products, Trials & Appeals & Compensation
• Law Firm: Lewis Brisbois Bisgaard & Smith LLP
• Author: Ms Monica Kalunian and Michael Velladao

(Complaint Alleged Sufficient Facts Regarding Physical Loss Caused by COVID-19, Such That Order Dismissing Case Based on Demurrer Required Reversal Thereof)

(July 2022) - In Marina Pacific Hotel and Suites, LLC v. Fireman's Fund Ins. Co., --- Cal.App.5th --- (July 13, 2022), the California Second District Court of Appeal, Division Seven, reversed the trial court's entry of judgment based on an order dismissing Marina Pacific Hotel and Suites, LLC's related restaurant's and property trust's (collectively, the "insureds") First Amended Complaint ("FAC") against Fireman's Fund Insurance Company ("Fireman's Fund"). The FAC alleged that Fireman's Fund wrongfully denied the insureds' claim for loss under a commercial property policy arising out of government shutdown orders due to the COVID-19 pandemic. The FAC alleged causes of action for breach of contract, tortious breach of contract, elder abuse, and unfair competition against Fireman's Fund.

The insureds purchased a commercial property policy from Fireman's Fund for the period of July 1, 2019 to July 1, 2020. The Court of Appeal described the coverage afforded by this policy as follows:

The policy's general property coverage provision states, "[W]e will pay for direct physical loss or damage to [the insured property] caused by or resulting from a covered cause of loss during the Policy Period." The policy provided business interruption coverage (with a $22 million limit) for "the actual loss of business income and necessary extra expense you sustain due to the necessary suspension of your operation during the period of restoration arising from direct physical loss or damage to [covered] property."' The terms printed in boldface type were separately defined. As pertinent here, "covered cause of loss" was defined as "risk of direct physical loss or damage not excluded or limited in the Coverage Form"'; "business income" was defined as the net profit or loss before income taxes from the business's operations; "suspension" as "the slowdown or cessation" of operations and also meant that part or all of the premises had been rendered untenable. "Period of restoration" meant "the period of time that begins immediately after the time of direct physical loss or damage caused by or resulting from a covered cause of loss to the property" and ends when the property "should be repaired, rebuilt, or replaced with reasonable speed and like kind or quality."

The policy also included "communicable disease coverage" (with a...