More Support for Policyholders Seeking Coverage for Pandemic Losses

A recent decision in a California State Court action provides further encouragement for businesses seeking insurance coverage for losses sustained due to a pandemic-related shut down.  In the case of Boardwalk Ventures CA, LLC v. Century-National Insurance Company, a Los Angeles trial court denied the insurance company’s motion for judgment on the pleadings, ruling that the plaintiff restaurant owner had stated a valid cause of action seeking a declaration that it was entitled to coverage when the restaurant was shut down due to COVID.

In its lawsuit, Boardwalk seeks a declaration that it is entitled to coverage under its commercial insurance policy on the basis that the policy covers lost business income and expenses resulting from “direct physical loss or damage to property” or because of “action of civil authority.” In the policy, there are no exclusions for virus caused losses.

The insurance company argued in its motion that Boardwalk did not have a valid claim because the claimed losses did not constitute “direct physical loss of or damage to” property.  Citing to MRI Healthcare Ctr of Glendale, Inc. v. State Farm Gen. Ins. Co. and other similar state and federal court decisions, the insurance company argued that a virus does not result in direct physical loss or damage to property.  However, this argument was rejected by the court.

In the ruling in favor of the restaurant, the trial court in Boardwalk concluded that the restaurant had alleged enough by contending that the presence of the coronavirus rendered physical property in the vicinity of the virus unsafe and unusable, thereby resulting in a direct physical loss of property.  By doing so, the court provided further support for policy holders seeking coverage under commercial liability policies for pandemic related losses.

Author’s Bio:  Michael G Kerbs

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