DEMURRER IS IMPROPER IF ALLEGATIONS OF COMPLAINT IS SUFFICIENT TO STATE A CAUSE OF ACTION

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This is Not a Ruling on Evidence & Is Not a Win for Insureds

In Marina Pacific Hotel And Suites, LLC, et al. v. Fireman’s Fund Insurance Company, B316501, California Court of Appeals, (July 13, 2022) the Court of Appeals was faced with a ruling on a demurrer without leave to amend when the complaint alleged all elements required to allege a cause of action.

The First Amended Complaint

The first amended complaint alleged, in part, the insureds, beginning in March 2020, had suffered loss arising from direct physical loss or damage to covered property based on the existence of COVID-19. They asserted that “COVID-19 is a covered cause of loss under the Policy because it is not excluded or limited thereunder” and, on information and belief, that “the presence of COVID-19 on property, including on and within Insured Properties (i.e., an external force), caused and continues to cause physical loss and/or damage to property by causing, among other things, a distinct, demonstrable or physical alteration to property” and “by transforming the physical condition of property at Insured Properties and within the covered radius,” causing the properties to remain in an unsafe and hazardous condition.

The Insureds Adequately Alleged Direct Physical Loss or Damage Caused by the COVID-19 Virus and a Cause of Action for Breach of Contract by Fireman’s Fund

The Court of Appeal noted that the trial court’s decision: “[m]ight be the correct outcome following a trial or even a motion for summary judgment.”

Even if there had been evidence subject to proper judicial notice to establish that disinfecting repaired any alleged property damage, it would not resolve whether contaminated property had been damaged in the interim, nor would it alleviate any loss of business income or extra expenses.

ZALMA OPINION

Although press reports consider this decision to be a win for the plaintiffs, it is not. It is a statement that the Plaintiffs adequately pleaded a cause of action that, if proved with admissible evidence, can result in coverage and that the Plaintiffs are entitled to try to prove their case. At best it is a decision that the mere allegation of direct physical loss is sufficient to avoid a demurrer but that evidence is required to avoid a motion for summary judgment or a trial.

(c) 2022 Barry Zalma & ClaimSchool, Inc.

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