Insurers Not Liable for Business Interruptions Caused Solely by Government Ordered COVID-19 Closures

July 28, 2022 / News / Writing and Speaking

The Inns by the Sea v. California Mutual Ins. Co., 2022 Cal. LEXIS 1412 (March 9, 2022)

The California Supreme Court summarily denied review of now the seminal case, Inns By The Sea v. California Mutual, regarding no coverage for business interruption losses due to government orders shutting doors of hospitality businesses in order to stop spread of the COVID-19 virus. The Fourth Appellate District had affirmed the trial court’s dismissal after an order sustaining a demurrer by the insurer. The Appellate Court also commented that despite Inns’ allegation that the COVID-19 virus was present on its premises, its complaint did not sufficiently identify any direct physical damage to property that caused it to “suspend” its operations and defined “loss of usability” must be causally connected to “a distinct, demonstrable, physical alteration of the property” which could not be found to arise out of the government closure order. In contrast, in a very recently published case the Second Appellate District in Marina Pacific Hotel v. Fireman’s Fund Ins. (July 13, 2022) found the complaint was adequately pled as to “direct physical loss” to covered property due to robust allegations of presence of the virus that could not be eradicated and reversed the trial court’s order dismissing the complaint under a demurrer. Marina Pacific has been the only case thus far adverse to California insurers regarding artful pleading of direct physical damage to property arising out of COVID-19. Complaints that inescapably allege losses caused solely by government orders are still controlled by the Inns case.

  • Chicago

    Illinois 60603

    10 South LaSalle Street

    Chicago, Illinois 60603

    T: 312.855.1010 TF: 800.826.3505 F: 312.606.7777 Office Managing Partner: Dennis D. Fitzpatrick

  • New York

    New York 10005

    28 Liberty Street 39th Floor

    New York, New York 10005

    T: 212.805.3900 TF: 800.826.3505 F: 212.805.3939 Office Managing Partner: Carl M. Perri

  • Mission Viejo

    California 92691

    27285 Las Ramblas

    Suite 200

    Mission Viejo, California 92691

    T: 949.260.3100 TF: 800.826.3505 F: 949.260.3190 Office Managing Partner: Ian R. Feldman

  • Florham Park

    New Jersey 07932

    100 Campus Drive

    Florham Park, New Jersey 07932

    T: 973.410.4130 TF: 800.826.3505 F: 973.410.4169 Office Managing Partner: Carl M. Perri

  • Michigan City

    Indiana 46360

    200 Commerce Square

    Michigan City, Indiana 46360

    T: 219.262.6106 TF: 800.826.3505 F: 312.606.7777 Office Managing Partners: Paige M. Neel, Kimbley A. Kearney

  • Appleton

    Wisconsin 54914

    4650 W. Spencer Street

    Appleton, Wisconsin 54914

    T: 920.560.4658 TF: 800.826.3505 F: 920.968.4650 Office Managing Partner: Patrick L. Breen

  • Stamford

    Connecticut 06902

    68 Southfield Avenue

    2 Stamford Landing Suite 100

    Stamford, Connecticut 06902

    T: 203.921.0303 TF: 800.826.3505 F: 212.805.3939 Office Managing Partner: Matthew J. Van Dusen

  • Tampa

    Florida 33609

    4830 West Kennedy Boulevard, One Urban Center

    Suite 600

    Tampa, Florida 33609

    T: 813.509.2578 TF: 800.826.3505 F: 312.606.7777 Office Managing Partner: Dennis D. Fitzpatrick

  • San Francisco

    California 94111

    100 Pine Street

    Suite 1250

    San Francisco, California 94111

    T: 415.745.3598 TF: 800.826.3505 F: 949.260.3190 Office Managing Partner: Ian R. Feldman

  • Houston

    Texas

    2929 Allen Parkway

    American General Center, Suite 200

    Houston, Texas

    T: 346.229.4612 TF: 800.826.3505 F: 312.606.7777 Office Managing Partner: Ramy P. Elmasri

  • Boca Raton

    Florida

    7777 Glades Road

    Suite 405

    Boca Raton, Florida

    T: 561.765.5305 TF: 800.826.3505 F: 312.606.7777 Office Managing Partner: Dennis D. Fitzpatrick