By Max H. Stern and Holden Benon
The primary California state appellate choice on COVID-19 Enterprise Interruption protection is now within the books, and it’s another victory for insurers. In The Inns by the Sea v. California Mutual Ins. Co., Case No. D079036 (Cal. Ct. App. 4th Dist., Div. 1, Nov. 15, 2021), the California Courtroom of Enchantment for the Fourth District discovered there was no protection, however the absence of a virus exclusion within the related coverage. The courtroom’s 36-page opinion gives a radical and cautious evaluation of a number of vital COVID-19-related enterprise interruption points, some highlights of which we summarize under.
Inns-by-the Sea operates lodges within the California coastal communities of Carmel and Half Moon Bay. In March of 2020, Inns closed its amenities in response to shutdown orders issued by Monterey and San Mateo counties. Then, Inns made a declare underneath its property insurance coverage coverage for its claimed lack of enterprise earnings brought on by the pandemic. (For extra background on enterprise interruption insurance coverage, confer with one in all our earlier weblog posts on this subject.) Inns’ insurer denied protection, and Inns filed go well with in Monterey Superior Courtroom.
The ensuing attraction was heard by the Fourth Appellate District, Division 1, in San Diego (after a workload re-assignment). Notably, the courtroom discovered that, even assuming Inns’ criticism described the presence of coronavirus on the property, there was a scarcity of causal connection between Inns’ suspension of its enterprise and the alleged bodily presence of virus. The courtroom centered on the coverage’s commonplace language that said that the suspension of the insured’s operations “have to be prompted by direct bodily lack of or injury to property at [Inns’] premises . . .” (Emphasis added.) The courtroom noticed that the county shutdown orders weren’t issued in response to any particular presence of the coronavirus on Inns’ premises; as an alternative, they have been issued to sluggish the unfold of coronavirus that was current all through Monterey and San Mateo Counties. As a result of Inns’ losses have been brought on by the counties’ shutdown orders, the courtroom decided that the suspension of Inns’ operations was not brought on by a direct bodily loss or damage to property, and thus there was no protection for its losses.
The courtroom additionally held that the absence of a virus exclusion within the coverage didn’t impression the that means of “direct bodily loss or injury to” property. Inns had argued that the truth that the insurer didn’t add a virus exclusion to its coverage was proof that the coverage truly meant to offer protection for virus losses, as a result of the insurer didn’t “reap the benefits of extra particular wording that was obtainable to it.” The courtroom rejected this argument, reciting the overall precept that, underneath California legislation, protection is outlined first by the insuring clause, and when an prevalence is clearly not included throughout the protection afforded by the insuring clause, it needn’t even be particularly excluded. The courtroom additionally pointed to precedent from courts nationwide holding that the absence of an exclusion, standing alone, doesn’t suggest protection.
As intermediate appellate courtroom selections from any District are binding on all California state trial courts, Inns by the Sea represents an vital improvement in California COVID-19 Enterprise Interruption protection legislation and one other addition to the growing variety of appellate rulings that favor insurers.