Citing an extension of coverage for communicable diseases, a California state appeals court overturned a lower court on Thursday, ruling that a restaurant group was entitled to insurance coverage from an Allianz SE unit for its Covid-19-related business interruption losses.
West Hollywood, Calif.-based Saddle Ranch Sunset LLC, which operates three restaurants in California and one in Arizona, sued Fireman’s Fund Insurance Co. for breach of contract and breach of the implied covenant of good faith and fair dealing after the insurer denied its covid. -19-related claims, according to the decision of the California Court of Appeal in Los Angeles in Saddle Ranch Sunset LLC et al. v. Brandmansfondförsäkringbolaget et al.
A three-judge panel of the appeals court cited the restaurant group̵7;s expansion of coverage for communicable diseases to overturn the lower court.
“The firemen’s fund’s central argument is that the plaintiffs cannot claim that they suffered direct physical loss or damage,” the judgment said.
The coverage extension said the firefighter’s fund would pay for costs to tear out and replace property; repair and rebuild property; and “alleviate, contain, remedy, treat, clean, detoxify, disinfect, neutralize, clean up, remove, dispose of, test for, monitor and assess the effects of the infectious disease,” the ruling said.
In ruling that there is coverage under this extension, the panel cited two policyholder decisions from 2022 state appellate courts involving Fireman’s Fund policies that it said had identical language: Amy’s Kitchen Inc. v. Fireman’s Fund Insurance Co., and Marina Pacific Hotel & Suites LLC v. Fireman’s Fund Insurance Co .
The panel remanded the case to the lower court.
Firefighters Fund attorney Brett Solberg, a partner with DLA Piper LLP in Houston, issued a statement that said in part, “We are evaluating options for further proceedings.”
The appeals court “failed to recognize the full definition of ‘location’ in the policy” and also “failed to properly consider policy causation and misinterpreted the policy requirement for direct physical or property damage,” he said.
“The court’s opinion runs counter to every other appellate decision in the country interpreting similar language, including the published decision in Amy’s kitchen,” he said.
Plaintiff attorneys did not respond to a request for comment.