By Max H. Stern and Holden Benon
Late last week, the California Court of Appeal issued another COVID-19 business interruption decision reminding us that creative arguments do not win the day for policyholders in California. The true facts are decisive.
In Best Rest Motel, Inc. v. Sequoia Ins. Co., No. D079927, 2023 WL 2198660 (Cal. Ct. App. Feb. 24, 2023), the court upheld a trial court’s ruling on summary judgment, reasoning the policyholder could not show that its loss of business income was caused by “direct physical loss of or damage to property,” within the meaning of its commercial multi-peril insurance policy.
The policyholder, San Diego-based Best Rest Motel, Inc. argued that the presence of virus-infected droplets caused physical loss or damage rendering its property incapable of safely providing lodging to guests. Readers familiar with these issues may recognize this as an attempt to plead facts that fall within the “hypothetical scenario” posited in dicta by the court in Inns-by-the-Sea.