The first California state appellate decision on COVID-19 Business Interruption coverage is now in the books, and it\u2019s one more victory for insurers.\u00a0 In The<\/em> Inns by the Sea <\/em>v. California Mutual Ins. Co.<\/em>, Case No. D079036 (Cal. Ct. App. 4th Dist., Div. 1, Nov. 15, 2021), the California Court of Appeal for the Fourth District found there was no coverage, notwithstanding the absence of a virus exclusion in the relevant policy.\u00a0 The court\u2019s 36-page opinion provides a thorough and careful analysis of several important COVID-19-related business interruption issues, some highlights of which we summarize below.<\/p>\n Inns-by-the Sea operates lodges in the California coastal communities of Carmel and Half Moon Bay.\u00a0 In March of 2020, Inns closed its facilities in response to shutdown orders issued by Monterey and San Mateo counties.\u00a0 Then, Inns made a claim under its property insurance policy for its claimed loss of business income caused by the pandemic.\u00a0 (For more background on business interruption insurance, refer to one of our\u00a0earlier\u00a0<\/a>blog posts on this topic.)\u00a0 Inns\u2019 insurer denied coverage, and Inns filed suit in Monterey Superior Court.<\/p>\n <\/p>\n The resulting appeal was heard by the Fourth Appellate District, Division 1, in San Diego (after a workload re-assignment).\u00a0 Notably, the court found that, even assuming Inns\u2019 complaint described the presence of coronavirus on the property, there was a lack of causal connection between Inns\u2019 suspension of its business and the alleged physical presence of virus.\u00a0 The court focused on the policy\u2019s standard language that stated that the suspension of the insured\u2019s operations \u201c<\/span>must be caused<\/em> by direct physical loss of or damage to property at [Inns\u2019] premises . . .\u201d\u00a0 (Emphasis added.)\u00a0 The court observed that the county shutdown orders were not issued in response to any p<\/span>articular presence of the coronavirus on Inns\u2019 premises; instead, they were\u00a0<\/span>issued to slow the spread of coronavirus that was present throughout Monterey and San Mateo Counties. \u00a0Because Inns\u2019 losses were caused by the counties\u2019 shutdown orders, the court determined that the suspension of Inns\u2019 operations was not caused by a direct physical loss or da<\/span>mage to property, and thus there was no coverage for its losses.\u00a0<\/span><\/p>\n The court also held that As intermediate appellate court decisions from any District are binding on all California state trial courts, Inns by the Sea<\/em> represents an important development in California COVID-19 Business Interruption coverage law and another addition to the increasing number of appellate rulings that favor insurers.<\/p>\n","protected":false},"excerpt":{"rendered":" By Max H. Stern and Holden Benon The first California state appellate decision on COVID-19 Business Interruption coverage is now in the books, and it\u2019s one more victory for insurers.\u00a0 In The Inns by the Sea v. California Mutual Ins. Co., Case No. D079036 (Cal. Ct. App. 4th Dist., Div. 1, Nov. 15, 2021), … <\/p>\n Continue reading “Yet Another Win for Insurers on COVID-19 Business Interruption Claims: The Inns by the Sea California Court of Appeal Decision”<\/span><\/a><\/p>\n","protected":false},"author":6,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[2],"tags":[75,382,381,12,19,50],"ppma_author":[417,413],"class_list":["post-402","post","type-post","status-publish","format-gallery","hentry","category-general","tag-california-court-of-appeal","tag-coronavirus","tag-covid-19","tag-insurance","tag-insurance-coverage","tag-max-stern","post_format-post-format-gallery"],"authors":[{"term_id":417,"user_id":6,"is_guest":0,"slug":"duanemorris3","display_name":"Duane Morris","avatar_url":"https:\/\/secure.gravatar.com\/avatar\/843ff6e7a8fe5fc92109b47a45f34b6cf0ea499e6e788db23456c838b0ae6747?s=96&d=blank&r=g","author_category":"1","last_name":"Sullivan","first_name":"Margaret","job_title":"","user_url":"http:\/\/www.duanemorris.com","description":"Visit the Duane Morris website.<\/a>"},{"term_id":413,"user_id":6,"is_guest":0,"slug":"duanemorris3","display_name":"Max H. Stern","avatar_url":"https:\/\/blogs.duanemorris.com\/insurancelaw\/wp-content\/uploads\/sites\/12\/2024\/12\/sternmax-100x100.jpg","author_category":"1","last_name":"Stern","first_name":"Max H.","job_title":"","user_url":"http:\/\/www.duanemorris.com\/attorneys\/maxhstern.html","description":"Max Stern is a partner in the San Francisco office of Duane Morris, and he is the former Head of the firm\u2019s Insurance Litigation Division. Read Max's bio.<\/a>"}],"_links":{"self":[{"href":"https:\/\/blogs.duanemorris.com\/insurancelaw\/wp-json\/wp\/v2\/posts\/402","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blogs.duanemorris.com\/insurancelaw\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blogs.duanemorris.com\/insurancelaw\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/insurancelaw\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/insurancelaw\/wp-json\/wp\/v2\/comments?post=402"}],"version-history":[{"count":0,"href":"https:\/\/blogs.duanemorris.com\/insurancelaw\/wp-json\/wp\/v2\/posts\/402\/revisions"}],"wp:attachment":[{"href":"https:\/\/blogs.duanemorris.com\/insurancelaw\/wp-json\/wp\/v2\/media?parent=402"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/insurancelaw\/wp-json\/wp\/v2\/categories?post=402"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/insurancelaw\/wp-json\/wp\/v2\/tags?post=402"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/insurancelaw\/wp-json\/wp\/v2\/ppma_author?post=402"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}![\"\"](\"http:\/\/blogs.duanemorris.com\/insurancelaw\/wp-content\/uploads\/sites\/12\/2021\/11\/Full-page-photo-300x232.jpg\")
<\/span> the absence of a virus exclusion in the policy did not impact the meaning of \u201cdirect physical loss or damage to\u201d property. Inns ha<\/span>d argued that the fact that the insurer did not add a virus exclusion to its policy was evidence that the policy actually intended to provide coverage for virus losses, because the insurer did not \u201ctake advantage of more specific wording that was available to it.\u201d\u00a0 The court rejected this argument, reciting the general principle that, under California law, coverage is defined first by the insuring clause, and when an occurrence is clearly not included within the coverage afforded by the insuring clause, it need not also be specifically excluded.\u00a0 The court also pointed to precedent from courts nationwide holding that the absence of an exclusion, standing alone, does not imply coverage.<\/span><\/p>\n