Shusha, Inc. v. Century-National Ins. Co.

Shusha, Inc. v. Century-National Ins. Co.

Opinion

Shusha, Inc., dba La Cava (La Cava) appeals from the judgment of dismissal entered after the trial court sustained without leave to amend the demurrer filed by Century-National Insurance Company (Century-National) to La Cava's first amended complaint. La Cava sued Century-National for breach of an insurance contract and related claims after Century-National denied coverage for La Cava's lost business income as a result of its suspension of restaurant operations in March 2020 due to the COVID-19¹ pandemic and associated government shutdowns.

On appeal, La Cava contends the trial court erred in concluding the alleged presence of the COVID-19 virus in its restaurant did not constitute "direct physical loss of or damage to" the restaurant necessary for coverage under [*2]  the terms of the policy at issue. La Cava also argues Century-National acted in bad faith by summarily denying coverage without investigating La Cava's claim. We agree La Cava's allegations that contamination by the COVID-19 virus physically altered its restaurant premises were sufficient to withstand demurrer, and we reverse.

FACTUAL AND PROCEDURAL BACKGROUND

A. The Century-National Insurance Policy

As alleged in the operative first amended complaint (complaint), La Cava purchased from Century-National a "commercial package" insurance policy, including commercial property insurance and general liability coverage for a one-year period beginning November 22, 2019 (the policy). A copy of the policy was attached to the complaint.

Section A.1 of the "Business Income (and Extra Expense) Coverage Form" provided in relevant part, "We will pay for the actual loss of business income you sustain due to the necessary 'suspension' of your 'operations' during the 'period of restoration'. The 'suspension' must be caused by direct physical loss of or damage to property at premises which are described in the declarations and for which a business income limit of insurance is shown in the declarations . [*3]  . . ." (Capitalization omitted and italics added.) "Suspension" was defined to mean, in pertinent part, "[t]he slowdown or cessation of your business activities." The "period of restoration" was defined in part as the period that "begins with the date of direct physical loss or damage caused by or resulting from any covered cause of loss at the described premises" and ends on the earlier of "the date when the property at the described premises should be repaired, rebuilt or replaced with reasonable speed and similar quality" or "one year immediately following the date of direct physical loss or damage caused by a covered cause of loss." (Capitalization omitted.)

Section A.5.a of the business income coverage form also included civil authority coverage. This provision provided, "We will pay for the actual loss of business income you sustain and necessary extra expense caused by action of civil authority that prohibits access to the described premises due to direct physical loss of or damage to property, other than at the described premises, caused by or resulting from any covered cause of loss." (Capitalization omitted and italics added.)

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