California appellate ruling could lead to differing COVID coverage decisions

California appellate ruling could lead to differing COVID coverage decisions

April 10, 2023, Business Insurance

David Goodwin's comments were included in a Business Insurance article about Coast Restaurant Group Inc. v. Amguard Insurance Co., a California appeal's court decision in a COVID-19 business interruption case that creates a conflict among the state’s appeals courts as to whether the virus’ presence creates physical damage and could lead to differing trial court decisions regarding coverage.

A California appellate panel ruling that held that a restaurant owner sufficiently argued government COVID-19 pandemic orders could cause a "direct physical loss" by restricting in-person dining services, but found exclusions in its policy barred coverage. Covington represented United Policyholders, which filed an amicus brief.

David pointed to the November 2021 ruling by the California state appeals court in San Diego in The Inns by the Sea v. California Mutual Insurance Co., which held there was no physical loss or damage caused by the virus. The policy in that case did not have a virus exclusion.

Monday’s ruling “means there’s now a difference between two appellate courts and the trial courts are now free to follow one or the other” under the state’s judicial procedures," David said.

The California Supreme Court has accepted for review two other COVID-19 business interruption cases but is not expected to rule on them until next year, David added.

David said many small businesses’ policies include the Insurance Service Office’s virus exclusion, while those of larger businesses typically do not.

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