Caribe Restaurant & Nightclub, Inc. ("Caribe") filed a class action lawsuit against the defendant Topa Insurance Company ("Topa") alleging breach of contract and seeking a declaratory judgment for insurance coverage. USDC Settles Claim on Covid 19 Business Interruption in Caribe Restaurant & Nightclub, Inc., Individually and on behalf of All Others Similar to Topa Insurance Company Case No. 2: 20-cv-03570 -ODW ), United States District Court Central District of California (April 9, 2021) which has almost all courts in the country.
Caribe owns and operates La Luz Ultralounge ("La Luz"), a restaurant and nightclub in Bonita, California. Caribe purchased a policy ("Policy") from Topa for the insurance period May 18, 2019 through May 18, 2020.
In March 2020 due to the COVID-19 pandemic, the State of California and the County of San Diego ordered "closure" of bars "and" bann [ed] serving on site. " In May 2020, San Diego County allowed "on-site food resumption" with restrictions. Caribe claimed that the orders of these civilian authorities were forced to "suspend or reduce business" in La Luz. Caribe also claims that COVID-19 "degraded Caribe's property by rendering it unusable in the way it had been used before."
Caribe claims that its losses are covered by the policy and identifies four specific provisions: "Business Income"; "Extra cost"; "Civil authority"; and "Liabilities in the event of loss" (referred to as the "Sue and Labor" provision). Caribe claimed coverage under these regulations, which Topa denied. Consequently, Caribe initiated this litigation against Topa, claiming that the denial of coverage was a breach of contract and requested an explanatory assessment. Caribe's property and Caribe cannot recover under any of these provisions as they do not claim "any" direct physical loss "or damage to" the insured premises. Caribe, on the other hand, insists that it has maintained "direct physical loss" of its property because it was "forced to close or reduce business on its site due to COVID-19" and the resulting security orders.
Each policy The provision in question contains language recovery in the event of physical loss or damage to the property. In fact, the business income provision states that coverage is dependent on "necessary" suspension of [business] "business" "caused by" direct physical loss of or damage to [the insured] property. " Thus, the question before the USDC as to whether Caribe has alleged "physical loss or damage" was sufficient to trigger coverage under one of these provisions.
Under California law, losses from inability to use property do not result in direct physical loss of or damage to property within the ordinary and popular meaning of that phrase. Furthermore, only a "clear, demonstrable, physical change" of property will constitute a physical loss or damage that could trigger coverage. MRI Healthcare Ctr . by Glendale Inc . v . State Farm Gen . Ins . Co ., 187 Cal. App. 4 766, 779 (2010). Only harmful economic consequences are insufficient. Several courts in this jurisdiction have recently dealt with cases with facts almost identical to this one, and these courts have reached agreement – where an insurance policy requires recovery due to "direct physical loss or damage", economic business reductions caused by COVID-19 security order does not fall within the scope of coverage .
The policy provisions on which Caribe is based presuppose a clear recovery from physical loss or damage to the insured premises. Caribe only claims that COVID-19 restrictions have prevented it from using its property for normal business activities, which they claim is direct physical harm. However, Caribe did not allege sufficient direct physical loss or damage that would trigger coverage. Therefore, Caribe's failure to claim direct physical loss or damage its claim for coverage under the policy excludes.
Nevertheless, Caribe argues that "direct physical loss" should be read to cover the type of economic deterioration it has suffered. Although the policy covered permanent delay, which it does not, Caribe has not claimed permanent delay, nor could it, as security clearance from COVID-19 only temporarily restricted Caribe's use of its premises. financially suffering from the unsurpassed COVID-19 pandemic, a financial business loss cannot be considered as physical loss or damage to the premises.
As the Caribe did not claim direct physical loss or damage, its claims and causes were not covered by the action for breach of contract and the declaratory failure. Therefore, the court granted Topa's motion to dismiss without permission to change.
Insurance is nothing more than a contract whose terms must be applied as written if they are unambiguous. Losing money is a real loss. When the plaintiff loses money due to an act that has not caused any direct physical loss or damage, there was no insurance race that the insurance entailed to compensate the insured involved. As sad as the losses are that a court is not entitled to, nor will it change the wording of the policy. The damage to the Caribbean and the like occurred by the state of California. Failure to Obtain Insurance Benefits Perhaps a creative lawyer can find a way to sue the state for its unfair and alleged constitutional rules that deprive Caribe of the right to do business.
© 2021 – Barry Zalma
Barry Zalma, Esq., CFE now limits his practice to acting as an insurance consultant specializing in insurance coverage, handling insurance claims, cheating and insurance fraud almost
insurers and insurers. He also acts as an arbitrator or mediator for insurance-related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and firstname.lastname@example.org.
Mr. Zalma is the first recipient of the first annual Claims Magazine / ACE Legend Award.
For the past 53 years, Barry Zalma has devoted his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to enable insurers and their claims staff to become professionals in insurance claims.
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