Most are rejected, but Sonoma County COVID business damage case continues
Petaluma-based Amy’s Kitchen is being allowed by a judge to continue to pursue Fireman’s Fund Insurance Company to payout for damages and losses as the result of SARS-CoV-2 and COVID-19, something few other companies nationally have been able to achieve.
In its lawsuit, like thousands of across the country, the packaged natural foods producer asserts its policy, with extended coronavirus-related coverage during the pandemic, would allow it to claim damages and losses.
In most cases to date, courts have ruled in favor of insurance carriers citing the lack of standing to claim damages under the traditional definition of “direct physical damage or loss.” Unlike destruction and/or requiring replacement of property — as with a fire, hurricane, flood or theft — judges generally found while COVID-19 may have been present, it did not directly cause damage resulting in the need to replace property, based on the traditional, accepted definition of physical damage.
Ruling on Amy’s lawsuit against Fireman’s Fund Insurance, a panel of judges (including Justices Stuart R. Pollak, Jon B. Streeter and Jeremy M. Goldman) hearing this case in the Court of Appeal of the State of California, First Appellate District, Division Four, stated in their order Oct. 4 that while the Sonoma County Superior Court correctly sustained Fireman’s objection and denied the company’s claims in May 2020, “this decision was made for the wrong reason, since it wrongly denied Amy’s chance to amend its complaint.”
The effect of appellate court’s ruling is that the producer of organic and vegetarian meals will get the chance to have the case heard again.
The Business Journal attempted to contact Amy’s legal team, headed by attorneys Andrew Bisbas and Andrew Reidy with Lowenstein Sandler LLP based in Washington, D.C. They did not respond with a statement except to say that they plan to file an amended complaint.
The central issue for the courts has focused on whether a virus can cause physical alterations to property as required for insurance claims, and also how much credit should the court give to factual allegations premised on a theory that requires scientific expertise to evaluate.
Other plaintiff victories have occurred.
For example, in the case Marina Pacific Hotel & Suites LLC vs. Fireman’s Fund Insurance Company, the superior court dismissed the case, but the court of appeals reversed that decision. The hotels alleged that the virus caused chemical reactions that transformed the physical condition of the properties requiring the hotels to suspend operations to remediate the air and surfaces or replace property.
In July, that court held that these allegations sufficiently stated a claim for coverage of “physical loss of or damage to property” no matter how “improbable” those allegations were, according to the law firm Horvitz & Levy LLP.
With other recent California cases some judges have expanded the damage definition to include the presence of a “communicable disease” as constituting physical loss or damage, ruling in favor of plaintiffs in the case Sacramento Downtown Arena LLC vs. Factory Mutual Insurance Company. The arena is home to the Sacramento Kings team.
The judge said in his order, “No matter what might be possible to plead and prove about a different policy and viral pandemics in the abstract, the policy at the center of this case can reasonably be interpreted as defining the presence of a ‘communicable disease’ as ‘physical loss or damage.’”
“The policy’s first sentence explains that it offers coverage only for risks of ‘physical loss or damage and later lists ‘Additional Coverages for insured physical loss or damage’ among these additional coverages—by definition, all ‘for insured physical loss or damage’— the policy lists ‘the reasonable and necessary costs incurred’ in response to government orders regulating the actual presence of a ‘communicable disease.’”
He added, “An insured could reasonably expect, given these terms, that the presence of a communicable disease such as COVID-19 fits under the ‘physical loss or damage’ umbrella for the policy as a whole.”
In a similar case, U.S. District Court Judge J. Hatter Jr. granted the Los Angeles Lakers a motion for certification of an interlocutory appeal in the basketball team’s complaint against Federal Insurance Company alleging claims for property damage, business interruption and civil authority losses related to COVID-19.
An “interlocutory appeal” is a party's application to an appellate court challenging a non-final trial court order that decides an issue but does not result in final judgment.