California Supreme Court Rules Virus Endorsement Does Not Provide Coverage for COVID-19 Related Losses
By Melinda S. Kollross
The California Supreme Court unanimously rejected a lower court finding that Sentinel’s promise of coverage to John’s Grill under a “limited fungi, bacteria or virus coverage” endorsement in the restaurant’s property policy was illusory because John’s Grill “had no realistic prospect of benefiting from the virus-related coverage as written.” The seven-justice panel ruled that the endorsement was unambiguous and only provided virus-related coverage if the virus resulted from certain specified causes of loss. John’s Grill Inc. et al. v. Hartford Financial Services Group Inc., et al., No. S278481.
The endorsement’s specified cause of loss limitation states that the exclusion doesn’t apply if the fungi, bacteria or virus resulted from causes such as windstorms, water damage, vandalism and explosion. John’s Grill maintained that the specified cause of loss limitation “rendered any promise of coverage illusory,” requiring Sentinel to provide coverage because the specified causes in the limitation “[were] not the kinds of things that cause a virus” and thus rendered the requirement impossible to satisfy. Sentinel argued that the restaurant didn’t allege sufficient facts to state a cause of action and that the endorsement was not illusory because there were circumstances where coverage could be provided.
The California Supreme Court agreed with Sentinel, explaining that a reasonable insured would understand that the virus endorsement was limited and would only be available if the virus resulted from certain causes and that John’s Grill failed to show it had a reasonable expectation of coverage for its COVID-19 pandemic-related losses.
Melinda S. Kollross