Business Law

APPELLATE LAW UPDATE APRIL 2024

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The following published decisions may be of interest to attorneys practicing insurance law:

CALIFORNIA COURT OF APPEAL

The undefined term “occurrence” in a property policy refers to the cause of the loss; a coordinated theft that occurs in multiple stages close in time and space constitutes a single “occurrence.”Apex Solutions v. Falls Lake Insurance Management (2024) __ Cal.App.5th __.

A large group of burglars or looters broke into two vaults at the insured’s cannabis dispensary and stole all the inventory. The insured sought coverage from its property insurer. The insured argued that the two vaults were robbed by two different groups at two different times over the night, and that therefore, it was entitled to two “per occurrence” limits for its losses. The insurer disagreed. On cross-motions for summary judgment, the trial court ruled that the thefts constituted a single occurrence. The insured appealed.

The Court of Appeal (First Dist., Div. Four) affirmed the summary judgment on the “per occurrence ruling.” The term “occurrence” in a property policy, even if not defined in the policy, refers to the cause of the loss. When multiple events causing a loss are closely linked in time and space, they will constitute a single occurrence. How this rule applies must be determined on a case-by-case basis. In this case, the thefts appeared to have been a coordinated effort by a single group and occurred near in time and space. Absent non-speculative evidence that the thefts were committed by separate groups, the thefts were properly considered to be a single occurrence.

A property policy containing an endorsement offering coverage for the “cost of removal” of a virus potentially covered losses for the costs of disinfecting a premises due to the presence of the coronavirus. Brooklyn Restaurants, Inc. v. Sentinel Insurance Company(2024) __ Cal.App.5th __.

A restaurant brought claims for business losses due to the COVID-19 pandemic shutdowns. Its policy included a virus endorsement that provided coverage for property damage caused by a virus, the costs of testing for presence of a virus, and the costs of “removal” of a virus. The policy excluded coverage for losses due to “fungi, wet or dry rot, bacteria, or viruses” unless caused by various events. Following the majority of cases holding that the mere presence of the coronavirus did not constitute property loss or damage, the trial court granted the insurer’s motion for judgment on the pleadings. The restaurant appealed.

The Court of Appeal (Fourth Dist., Div. One) reversed. This is one of those “rare” cases in which the insured adequately alleged direct physical loss. The insured’s allegations that it incurred significant decontamination costs triggered potential coverage under the virus endorsement’s coverage for the “costs of removal” of a virus. While the exclusion for losses due to a virus unless caused by various causes appeared to eliminate coverage, none of the identified causes would ever appear to cause the spread of virus. The insured therefore raised triable issues about whether the virus exclusion renders the coverage illusory.

This e-Bulletin was prepared by Emily V. Cuatto, Certified Appellate Specialist and Partner of Horvitz & Levy LLP. Ms. Cuatto is a member of the Insurance Law Standing Committee of the Business Law Section of the California Lawyers Association.


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