November 28, 2022

Volume XII, Number 332

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Does COVID-19 Cause Direct Physical Loss or Damage To Property?

I don't usually write about insurance coverage cases in part because I find policy language to be unabashedly fuliginous.  However, an opinion issued yesterday by the California Court of Appeal warrants some attention because it deals with Covid-19 and is admittedly at odds with decisions by other courts.  

The case involved a claim for "direct physical loss or damage" under a commercial insurance policy.  The insureds (a hotel and restaurant) alleged that the COVID-19 was present on, and continually reintroduced to, surfaces throughout the insured properties.  As a direct result, the insureds were required to close or suspend operations in whole or in part at various times, incur restoration and remediation expenses, and dispose of property damaged by the virus.  The insurance company successfully demurred.  The Court of Appeal reversed finding that the insureds had unquestionably pled direct physical loss or damage, i.e., a distinct, demonstrable, physical alteration of the property.  Marina Pacific Hotel and Suites, LLC v. Fireman's Fund Ins. Co., 2022 WL 2711886.  It is important to note that the Court of Appeal did not hold that the virus had damaged or altered the property, only that the plaintiff had adequately alleged facts sufficient to state a cause of action.  Thus, the ultimate question remains to be answered - Can COVID-19 cause direct physical loss or damage to property for purposes of insurance coverage?

© 2010-2022 Allen Matkins Leck Gamble Mallory & Natsis LLP National Law Review, Volume XII, Number 195
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About this Author

Keith Paul Bishop, Corporate Transactions Lawyer, finance securities attorney, Allen Matkins Law Firm
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Keith Bishop works with privately held and publicly traded companies on federal and state corporate and securities transactions, compliance, and governance matters. He is highly-regarded for his in-depth knowledge of the distinctive corporate and regulatory requirements faced by corporations in the state of California.

While many law firms have a great deal of expertise in federal or Delaware corporate law, Keith’s specific focus on California corporate and securities law is uncommon. A former California state regulator of securities and financial institutions, Keith has decades of...

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