{"id":510,"date":"2024-08-20T15:48:23","date_gmt":"2024-08-20T19:48:23","guid":{"rendered":"https:\/\/blogs.duanemorris.com\/insurancelaw\/?p=510"},"modified":"2024-08-20T16:07:17","modified_gmt":"2024-08-20T20:07:17","slug":"california-supreme-court-questions-existence-of-so-called-illusory-coverage-doctrine-under-california-law-as-it-rejects-insureds-coverage-arguments-for-covid-19-related-loss","status":"publish","type":"post","link":"https:\/\/blogs.duanemorris.com\/insurancelaw\/2024\/08\/20\/california-supreme-court-questions-existence-of-so-called-illusory-coverage-doctrine-under-california-law-as-it-rejects-insureds-coverage-arguments-for-covid-19-related-loss\/","title":{"rendered":"California Supreme Court Questions Existence of \u201cSo-Called\u201d Illusory Coverage Doctrine Under California Law As It Rejects Insured\u2019s Coverage Arguments For COVID-19-Related Losses"},"content":{"rendered":"

By Max Stern<\/a>, Terrance Evans<\/a>, Todd Norris<\/a> and Jessica La Londe<\/a><\/em><\/p>\n

On August 8, 2024, in a case entitled John\u2019s Grill v. The Harford Financial Services Group, <\/em>No. S278481, the Supreme Court of California questioned the existence of the \u201cso-called\u201d illusory coverage doctrine under California law, as it concluded that a policyholder had, in any event, failed to satisfy its foundational elements.<\/p>\n

John\u2019s Grill suffered substantial losses during the COVID-19 pandemic. Its insurer denied coverage on various grounds including that the loss or damage claimed by John\u2019s Grill did not fall within the insurance policy\u2019s \u201cLimited Fungi, Bacteria or Virus Coverage\u201d endorsement.\u00a0 That endorsement generally excludes <\/em>coverage for any virus-related loss or damage that the policy would otherwise provide, but it extends<\/em> coverage for virus-related loss or damage if the virus was the result of certain specified causes of loss, including windstorms, water damage, vandalism, and explosion.<\/p>\n

John\u2019s Grill acknowledged that it could not meet the latter specified cause of loss limitation.\u00a0 Instead, it contended the limitation was unenforceable because it rendered the policy\u2019s promise of virus-related coverage illusory. The Court of Appeal below agreed, and allowed John\u2019s Grill\u2019s claims for virus-related losses or damage to proceed.<\/p>\n

Relying on \u201clong-settled principles of contract interpretation,\u201d the Supreme Court of California reversed, concluding that the \u201cplain meaning of the policy govern[ed].\u201d The Court stated that it \u201chas never recognized an illusory coverage doctrine as such,\u201d and rejected \u201cthe so-called illusory coverage doctrine [as articulated by John\u2019s Grill],\u201d stating that it \u201cdoes not appear in our precedents.\u201d<\/p>\n

The Court went on to explain that even assuming some version of the doctrine did exist under California law, there were two hurdles John\u2019s Grill would still need to clear before it could establish coverage, and it had not cleared either one in this case. First, in such a case, an insured would have to \u201cmake a foundational showing that it had a reasonable expectation that the policy would cover the insured\u2019s claimed loss or damage.\u201d The Court declared that \u201c[s]uch a reasonable expectation of coverage is necessary under any assumed version of the doctrine.\u201d Here, the Court concluded that based on the policy language limiting coverage to certain causes, John\u2019s Grill could not have an objectively reasonable expectation the policy would provide coverage for all<\/em> virus-related loss or damage, regardless of the cause. Second, the Court explained that even accepting John\u2019s Grill\u2019s articulation of the doctrine, it still could not demonstrate that coverage was illusory. The Court noted that restaurants handle both raw and cooked food, which could be contaminated by a virus and that \u201cJohn\u2019s Grill has not shown that the prospect of such contamination by water damage or other specified cause of loss is so unrealistic as to render the promised coverage illusory.\u201d According to the Court, it is for the insured to consider the likelihood of benefiting from the policy\u2019s limited virus coverage when obtaining coverage.<\/p>\n","protected":false},"excerpt":{"rendered":"

By Max Stern, Terrance Evans, Todd Norris and Jessica La Londe On August 8, 2024, in a case entitled John\u2019s Grill v. The Harford Financial Services Group, No. S278481, the Supreme Court of California questioned the existence of the \u201cso-called\u201d illusory coverage doctrine under California law, as it concluded that a policyholder had, in any … <\/p>\n

Continue reading “California Supreme Court Questions Existence of \u201cSo-Called\u201d Illusory Coverage Doctrine Under California Law As It Rejects Insured\u2019s Coverage Arguments For COVID-19-Related Losses”<\/span><\/a><\/p>\n","protected":false},"author":6,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[18,407,178,50,231,478],"ppma_author":[417],"class_list":["post-510","post","type-post","status-publish","format-standard","hentry","category-general","tag-california","tag-covid19","tag-jessica-la-londe","tag-max-stern","tag-terrance-evans","tag-todd-norris"],"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","0":null,"1":"","2":"","3":"","4":"","5":"","6":"","7":"","8":""}],"_links":{"self":[{"href":"https:\/\/blogs.duanemorris.com\/insurancelaw\/wp-json\/wp\/v2\/posts\/510","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=510"}],"version-history":[{"count":0,"href":"https:\/\/blogs.duanemorris.com\/insurancelaw\/wp-json\/wp\/v2\/posts\/510\/revisions"}],"wp:attachment":[{"href":"https:\/\/blogs.duanemorris.com\/insurancelaw\/wp-json\/wp\/v2\/media?parent=510"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/insurancelaw\/wp-json\/wp\/v2\/categories?post=510"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/insurancelaw\/wp-json\/wp\/v2\/tags?post=510"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/insurancelaw\/wp-json\/wp\/v2\/ppma_author?post=510"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}