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Court of Appeal of California, First Appellate District, Division Four
December 27, 2022, Opinion Filed
STREETER, J.—John's Grill, Inc., and its owner John Konstin (collectively, John's Grill) appeal from the trial court's orders (1) sustaining Sentinel Insurance Company, Ltd. (Sentinel)'s demurrer without leave to amend, and (2) granting The Hartford Financial Services Group, Inc. (HFSG)'s motion to quash service of summons.
John's Grill alleges that Sentinel and HFSG wrongfully denied its claim for business interruption coverage for losses sustained in connection with the COVID-19 pandemic. The trial court sustained Sentinel's demurrer on the ground that its business insurance policy affords no coverage for the claim, and granted the motion to quash on the ground that John's Grill failed to show personal jurisdiction over HFSG. In the unpublished portion of this opinion, we conclude [**2] that the trial court correctly granted the motion to quash, and in the published portion of the opinion, we conclude that the court erred in sustaining the demurrer without leave to amend.
On the merits, we write in a rapidly evolving area of law. Over the last 18 months, a nearly uniform line of cases in California and across the country holds that temporary loss of use of property due to the COVID-19 pandemic does not constitute “direct physical loss of or damage to” property for purposes of first party insurance coverage. (See Apple Annie, LLC v. Oregon Mutual Ins. Co. (2022) 82 Cal.App.5th 919, 930–935 [298 Cal. Rptr. 3d 886] [summarizing cases].) But nearly all of these cases turn on standard form language that was not customized in any material way by modifying endorsement.
The twist in this case is that Sentinel's policy has customized trigger-of-coverage language that is virus-specific. Unlike the undefined term “direct physical loss of or damage to” property in almost all of the COVID-19 business interruption cases decided to date, Sentinel's policy, by endorsement, (1) contains an affirmative grant of coverage specifically for “loss or damage” caused by a virus, and (2) a special definition of “loss or damage” that includes “[d]irect physical loss or direct physical damage [**3] to” property, but is broad enough to encompass pervasive infiltration of virus particulates onto the surfaces of covered property, which is what is alleged here.
Full case includes Shepard's, Headnotes, Legal Analytics from Lex Machina, and more.
86 Cal. App. 5th 1195 *; 2022 Cal. App. LEXIS 1056 **; 2022 WL 17959561
JOHN'S GRILL, INC., et al., Plaintiffs and Appellants, v. THE HARTFORD FINANCIAL SERVICES GROUP, INC., et al., Defendants and Respondents.
Notice: As modified Jan. 23, 2023.
CERTIFIED FOR PARTIAL PUBLICATION1
Subsequent History: Modified by John's Grill v. Hartford Fin. Servs. Group, 2023 Cal. App. LEXIS 45 (Cal. App. 1st Dist., Jan. 23, 2023)
Prior History: [**1] Superior Court of San Francisco County, No. CGC-20-584184, Ethan P. Schulman, Judge.
coverage, Virus, Endorsement, Fungi, insured, Subparagraph, Causes, physical loss, trigger, illusory, physical damage, cases, demurrer, first party, trial court, surfaces, line of cases, lose business, provisions, ambiguity, bacteria, parties, wet, premises, losses, rot, provide coverage, dry rot, restoration, alteration
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