Judge: Daniel S. Murphy, Case: 21STCV19983, Date: 2024-01-12 Tentative Ruling

Case Number: 21STCV19983    Hearing Date: January 12, 2024    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 then appealed the Court’s ruling, and Defendants moved to stay discovery pending the appeal. The Court granted the stay on August 22, 2022. On October 2, 2023, the Court of Appeal issued a ruling reversing and remanding on the issue of “direct physical loss.” (JRK Property Holdings, Inc. v. Colony Ins. Co. (2023) 96 Cal.App.5th 1.) Defendants have appealed that decision to the Supreme Court. On December 20, 2023, the Supreme Court granted review and stated that “[f]urther action in this matter is deferred pending consideration and disposition of a related issue in Another Planet Entertainment v. Vigilant Insurance Company S277893.” (JRK Property Holdings, Inc. v. Colony Ins. Co. (Dec. 20, 2023, No. S282657) 2023 Cal. LEXIS 7161, at *1.)

On December 19, 2023, Plaintiff filed the instant motion to lift the stay given the Court of Appeal decision. Defendants filed their opposition on December 29, 2023. Plaintiff filed its reply on January 5, 2024.  

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

            Plaintiff requests a lift of the stay “so that the parties may resume litigating the portion of this case involving JRK’s claims for communicable disease [ICD] coverage under the policy.” (Mtn. 1:10-13.) Plaintiff argues that litigation on ICD coverage can continue because the Supreme Court appeal relates only to the “direct physical loss” issue. Plaintiff wishes to file a motion for summary adjudication to resolve the legal question of what constitutes an “occurrence” under the policy’s ICD provision. (Mtn. 3:20-4:5.) Plaintiff also claims that “there are other issues relating to discovery and damages that can be resolved pre-trial.” (Mtn. 4:10-15.) Plaintiff contends that the Court can reinstate the stay if necessary once the ICD claims are prepared for trial. (Ibid.)

The Court agrees with Defendants that a stay remains justified. As this Court held in granting the stay, 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 Supreme Court 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. 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 Supreme Court affirms the Court of Appeal decision.     

            While a continued stay prolongs the case and causes some prejudice to Plaintiff, duplicative litigation causes greater prejudice to both parties and the Court. The reasons behind granting a stay in the first place are equally present today because the “direct physical loss” issue remains unresolved. Defendants’ Supreme Court petition is not a delay tactic because there is a genuine legal question and split in authority requiring resolution by the Supreme Court. The Supreme Court has granted review and deferred the matter pending the resolution of Another Planet. Therefore, the stay should remain in effect.    

CONCLUSION

            Plaintiff’s motion to lift stay is DENIED.