Inns-by-the-Sea v. California Mutual Ins. Co.

Inns-by-the-Sea v. California Mutual Ins. Co.

Opinion

 [*692] 

IRION, J.—This appeal presents an issue of first impression for a California appellate court: does a commercial property insurance policy provide coverage for a business's lost income due to the COVID-19 pandemic?¹ As we will explain, under the specific insurance policy that California Mutual Insurance Company (California Mutual) issued to the Inns-by-the-Sea (Inns) for its five lodging facilities, Inns cannot recover from California Mutual for its lost business income resulting from the COVID-19 pandemic. Further, Inns has not identified any manner in which it can amend its complaint to state a claim for coverage. Accordingly, we affirm the trial court's order sustaining California Mutual's demurrer without leave to amend.

FACTUAL AND PROCEDURAL BACKGROUND

Inns operates four lodging facilities in Carmel-by-the-Sea, and one lodging facility in Half Moon Bay. On January 9, 2020, Inns renewed its commercial insurance policy with California Mutual (the Policy), which includes commercial property insurance covering each of Inns' five lodging facilities.

In March 2020, the COVID-19 pandemic resulted in government orders restricting the movement of citizens [**3]  and the operation of businesses. On [*693]  March 16 and 17, 2020, the counties of Monterey and San Mateo, where Inns' lodging facilities are located, issued orders for the express purpose of “ensur[ing] that the maximum number of people self-isolate in their places of residence to the maximum extent feasible, while enabling essential services to continue, to slow the spread of COVID-19 to the maximum extent possible” (the Orders).² Among other things, the Orders required citizens to shelter in place and prohibited travel unless essential. The Orders also required businesses (except those classified as “Essential Businesses”) to cease all but minimum basic operations at any facilities located within the counties. The Monterey County order defined “Essential Businesses” to include “[h]otels, motels, bed and breakfast establishments, and other businesses that provide transient occupancy for visitors to the County, provided that such business[es] require their patrons to shelter in place as otherwise required by this Order.” The San Mateo County order contained no such specification. Inns closed its lodging facilities in response to the Orders.

On March 24, 2020, Inns made a claim to California [**4]  Mutual under its commercial property insurance coverage for the loss of business income caused by the pandemic. On the same day, California Mutual denied coverage, stating that “[l]oss of business due to reasons other than covered physical damage is beyond the scope of the insurance policy.”

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