In the wake of the Coronavirus pandemic, countless policyholders made insurance claims with their carriers based on the closure or interruption of their businesses. The insurers with near-uniformity denied coverage, presenting a united front against their insureds.  Thousands upon thousands of cases ensued testing the propriety of the insurers’ denial of coverage.

Many business-interruption insurance policies are meant to cover losses tied to the “direct physical loss or direct physical damage” of (or to) the insured’s premises. Nationwide, courts are facing a complicated question—whether the COVID-19 virus can be said to cause “direct physical loss or direct physical damage.”

In an opinion that is the first of its kind in the California appellate courts, the Second District Court of Appeal, Division 7, has ruled that certain COVID-19-related business losses may be covered by business-interruption insurance (BII) policy provisions.  Marina Pacific Hotels & Suites, LLC v. Fireman’s Fund Ins., No. B316501, 2022 WL 2711886 (Cal. Ct. App. July 13, 2022) (slip op.), available at https://www.courts.ca.gov/opinions/documents/B316501.PDF.

The groundbreaking opinion gives a leg up to policyholders struggling with pandemic-era debt and business losses.  The decision may also inspire the California Supreme Court, other California Courts of Appeal, and the U.S. Court of Appeals for the Ninth Circuit (among other reviewing courts nationwide) to give policyholders the opportunity to prove BII coverage in the context of the pandemic.