Amy's Kitchen, Inc. v. Fireman's Fund Ins. Co.

Amy's Kitchen, Inc. v. Fireman's Fund Ins. Co.

Opinion

POLLAK, P. J.—Amy's Kitchen, Inc. (Amy's), sued Fireman's Fund Insurance Company (Fireman's) after the insurer denied Amy's claim for costs incurred to clean, disinfect, and test its facilities for the coronavirus that causes COVID-19. Amy's claim was made under a policy with both communicable disease coverage and loss avoidance and mitigation extensions. The trial court sustained without leave to amend Fireman's demurrer to Amy's initial complaint. We conclude that the trial court correctly sustained the demurrer, but for the wrong reason, and that it wrongly denied Amy's leave to amend.

 [*1065] 

Factual and Procedural [**2]  History¹

Amy's employs over 2,500 people to manufacture organic and vegetarian meals at facilities in California, Oregon, and Idaho and to oversee its operations from headquarters in Petaluma. It purchased a comprehensive property insurance policy from Fireman's for a one-year period ending in July 2020. The policy includes coverage extensions for communicable disease and for loss avoidance and mitigation.

The communicable disease coverage extension states that Fireman's “will pay for direct physical loss or damage to Property Insured caused by or resulting from a covered communicable disease event at a location including the following necessary costs incurred to: [¶] … [m]itigate, contain, remediate, treat, clean, detoxify, disinfect, neutralize, cleanup, remove, dispose of, test for, monitor, and assess the effects [of] the communicable disease.” (Boldface omitted.) The policy defines “communicable disease event” as one in which “a public health authority has ordered that a location be evacuated, decontaminated, or disinfected due to the outbreak of a communicable disease at such location.”² (Boldface omitted.) The loss avoidance or mitigation coverage extension states that Fireman's will pay “necessary [**3]  expense you incur to protect, avoid, or significantly mitigate potential covered loss or damage that is actually and imminently threatening Property Insured.” (Boldface omitted.)

The complaint alleges that Amy's incurred costs “to mitigate, contain, clean, disinfect, monitor, and test for the effects of” the coronavirus at insured locations, and to avoid or mitigate potential coronavirus-related losses threatening those locations. The costs were for the purchase of temperature-screening equipment to test for COVID, protective shields to prevent transmission on assembly lines, masks and goggles, cleaning supplies, and “hero pay.”

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