Judge: Daniel S. Murphy, Case: 21STCV19983, Date: 2022-08-22 Tentative Ruling

Case Number: 21STCV19983    Hearing Date: August 22, 2022    Dept: 32

BACKGROUND

            On May 27, 2021, JRK Property Holdings, Inc. (“Plaintiff”) filed this action against various insurance companies (“Defendants”), asserting breach of contract and declaratory relief for Defendants’ refusal to pay out insurance policies. JRK is a real estate investment company that owns various hotel and apartment properties. Defendants contend that COVID-related business losses are not covered by the policies.

Defendants moved for judgment on the pleadings on the grounds that the language of the policies precludes Plaintiff’s recovery. On April 18, 2022, the Court partially granted the MJOP, finding that the presence of COVID on Plaintiff’s premises cannot cause “direct physical loss” as a matter of law. This barred Plaintiff’s claims based on the Business Interruption and Interruption by Civil Authority provisions in the insurance policy, both of which require direct physical loss. However, the Court allowed Plaintiff to proceed with its claim based on the Communicable Disease provision in the policy, as that did not require direct physical loss. Plaintiff has since appealed the Court’s ruling, and Defendants presently move to stay discovery pending the appeal.   

LEGAL STANDARD

“Courts have inherent authority to control their own calendars and dockets . . . .” (Walker v. Superior Court (1991) 53 Cal.3d 257, 267.) This includes “the inherent power to stay proceedings in the interests of justice and to promote judicial efficiency.” (Freiberg v. City of Mission Viejo (1995) 33 Cal.App.4th 1484, 1489.) “[O]n motion and for good cause shown, the court may establish the sequence and timing of discovery for the convenience of parties and witnesses and in the interests of justice.” (Code Civ. Proc., § 2019.020(b).) “In general, the management of discovery matters lies within the sound discretion of the trial court.” (Philippine Exp. & Foreign Loan Guar. Corp. v. Chuidian (1990) 218 Cal.App.3d 1058, 1084.)

DISCUSSION

            The Court agrees with Defendants that a stay is justified. There are overlapping issues between (a) Plaintiff’s claims under the Business Interruption and Civil Authority provisions and (b) the claim under the Communicable Disease provision. If the Court of Appeal determines that Plaintiff is allowed to proceed on the former, all of the claims should be tried together for the sake of judicial economy.

            There are issues and facts common to all claims: (1) the claims depend on the actual presence of COVID-19 on Plaintiff’s premises; and (2) they depend on government orders causing a restriction of access to Plaintiff’s premises. (See Mtn. 8:9-10:10.) The complaint shows that Plaintiff asserts coverage under the policy provisions on the grounds that the presence of the virus onsite, as well as government shutdown orders, rendered the properties unusable. (See Compl. ¶¶ 3, 57, 61, 64, 70, 76-77.) This basis for recovery, as applied to any of the provisions, calls for the same facts and evidence, even though the Business Interruption and Civil Authority provisions have the added requirement of direct physical loss.  

            The Business Interruption and Civil Authority provisions require the presence of COVID on the premises which causes direct physical loss, and the Civil Authority provision requires a government order restricting access to the insured properties. (Compl. ¶¶ 10, 86, 90.) Similarly, the Communicable Disease provision requires an order by the government or an officer of Plaintiff restricting access to an insured property in response to the actual not suspected presence of COVID onsite. (Compl. ¶ 93, 111.) Because the issues and discovery will be the same across these claims, the parties should not be required to litigate the Communicable Disease provision only to repeat the process for the remaining claims in the event the Court of Appeal reverses the MJOP.     

            While Plaintiff will be prevented during the pendency of the appeal from pursuing relief, Plaintiff is the one who initiated the appeal and created the possibility of duplicate litigation. Therefore, the fact that Plaintiff must wait until the conclusion of the appeal does not provide sufficient prejudice to deny the stay. On the other hand, both parties and the Court would be prejudiced from duplicate litigation.

CONCLUSION

            Defendants’ motion to stay is GRANTED.