Judge: H. Jay Ford, III, Case: 20SMCV00952, Date: 2023-01-20 Tentative Ruling

Case Number: 20SMCV00952    Hearing Date: January 20, 2023    Dept: O

  Case Name:  Marina Pacific Hotel & Suites, LLC, et al. v. Fireman’s Fund Insurance Company

SUBJECT:                 MOTION FOR SUMMARY JUDGMENT, OR IN THE ALTERNATIVE, SUMMARY ADJUDICATION

MOVING PARTY:   Defendant Fireman’s Fund Insurance

RESP. PARTY:         Plaintiff Marina Pacific Hotel & Suites, LLC

TENTATIVE RULING

Defendant Fireman’s Fund Insurance’s Motion for Summary Judgment, or in the alternative, Summary Adjudication is DENIED.  Plaintiff is to submit the proposed order in compliance with C.C.P. 437c(g) by reference to this ruling in the order (included in the minutes).

Defendants objections ##2-5 to Plaintiff’s declaration of Mark Sokol, ¶¶3-4; # 11 to the declaration of Timothy Brewer, ¶¶6, 9, 11, 12; and,  #12 to the  declaration of A. Klibanov, ¶¶11. 14-15, 17, 18, 22-24, 27-29 are OVERRULLED.  Defendant’s remaining objections are not material to the Court’s ruling. C.C.P. 437c(q).

REASONING

Summary judgment is proper “if all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to judgment as a matter of law.”  (Code of Civil Procedure §437c(c),)  From commencement to conclusion, the party moving for summary judgment bears the burden of persuasion that there is no triable issue of material fact and that he is entitled to a judgment as a matter of law.  There is a triable issue of material fact if, and only if, the evidence would allow a reasonable trier of fact to find the underlying fact in favor of the party opposing the motion in accordance with the applicable standard of proof.  See Aguilar v. Atlantic Richfield Company (2001) 25 Cal.4^th 826, 855.

            Where a defendant seeks summary judgment or adjudication, he must show that either “one or more elements of the cause of action, even if not separately pleaded, cannot be established, or that there is a complete defense to that cause of action.”  See Code of Civil Procedure §437c(o)(2).)  A defendant may satisfy this burden by showing that the claim “cannot be established” because of the lack of evidence on some essential element of the claim.  See Union Bank v. Superior Court (1995) 31 Cal.App.4th 574, 590.  See also, Harris v. Thomas Dee Engineering Co., Inc. (2021) 68 Cal.App.5th 594, 600–601 (“The defendant is not required conclusively to negate an element of the plaintiff's cause of action. The defendant need only show the plaintiff cannot establish at least one element of the cause of action, such as by showing the plaintiff does not possess, and cannot reasonably obtain, needed evidence.”)  

            “The burden of a defendant moving for summary judgment only requires that he or she negate plaintiff's theories of liability as alleged in the complaint.… The [papers] filed in response to a defendant's motion for summary judgment may not create issues outside the pleadings and are not a substitute for an amendment to the pleadings.’ [Citations.]”  Tsemetzin v. Coast Federal Savings & Loan Assn. (1997) 57 Cal.App.4th 1334, 1342–1343.  Likewise, “[T]he court's assessment of whether the moving party has carried its burden—and therefore caused a shift—occurs before the court's evaluation of the opposing party's papers.  Therefore, the burden on the motion does not initially shift as a result of what is, or is not, contained in the opposing papers.”  Mosley v. Pacific Specialty Insurance Company (2020) 49 Cal.App.5th 417, 434–435 (landlord’s failure to address issue of whether they were aware of their tenant’s marijuana growing operation was not grounds to grant summary judgment where moving party failed to satisfy its initial burden as to the issue); Thatcher v. Lucky Stores, Inc. (2000) 79 Cal.App.4^th 1081, 1086-1087 (court cannot grant summary judgment based merely on lack of opposition; court must first determine if the moving party has satisfied its burden). 

            Finally, the evidence and affidavits of the moving party are construed strictly, while those of the opponent are liberally read.  See Government Employees Ins. Co. v. Sup. Ct. (2000) 79 Cal.App.4th 95, 100.  “All doubts as to the propriety of granting the motion (whether there is any issue of material fact [Code of Civil Procedure] § 437c) are to be resolved in favor of the party opposing the motion (i.e., a denial of summary judgment).”  Hamburg v. Wal-Mart Stores, Inc. (2004) 116 Cal.App.4th 497, 502.  

I.  Plaintiff’s First Amended Complaint and alleged insurance coverage

            Plaintiff alleges causes of action for breach of contract, tortious breach of contract, elder abuse and unfair competition based on Defendant’s denial of coverage under Defendant’s Insurance Policy No. USC007058190 (“Policy”).  Plaintiff alleges it is entitled to insurance coverage based on three different provisions of the Policy:  (1) the Business Income, Extra Expense Coverage; (2) the Civil Authority Coverage; (3) the Business Access Coverage; and (4) the Communicable Disease Coverage.

            The Policy provides Business and Income and Extra Expense Coverage for “the actual loss of business income and necessary extra expense you sustain due to the necessary suspension of your operations during the period of restoration arising from direct physical loss or damage to property at a location…caused by or resulting from a covered cause of loss.”  See Dec. of J. Phillips, Ex. A, p. 6, para. II [PDF p. 32]. 

            The Policy provides Business Access Coverage where “the actual loss of business income and necessary extra expense you [insured] sustain due to the necessary suspension of operations at a location if access to such location is impaired or obstructed.  Such impairment or obstruction must:  (1) Arise from direct physical loss or damage to the property other than at such location; and (2) Be caused by or result from a covered cause of loss; and (3) occur within the number of miles stated int eh Declarations from such location.”  See Dec. of J. Phillips, Ex. A, p. 18, para. 1 (PDF p. 44).

            The Policy provides Civil Authority Coverage where “the actual loss of business income and necessary extra expense you [insured] sustain due to the necessary suspension of your operations caused by action of civil authority that prohibits access to a location.  Such prohibition of access to such location by a civil authority must:  (1) Arise from direct physical loss or damage to property other than at such location; and (2) Be caused by or result from a covered cause of loss; and (3) Occur within the number of miles stated in the Declarations from such location.”  See Dec. of J. Phillips, Ex. A, p. 18, para. 2 (PDF p. 44).

            The Policy provides Communicable Disease Coverage for “direct physical loss or damage to the Property Insured caused by or resulting from a covered communicable disease event at a location including the following necessary costs incurred to:  (a) Tear out and replace any part of Property Insured in order to gain access to the communicable disease; (b) Repair or rebuild Property Insured which has been damaged or destroyed by the communicable disease; and (c) Mitigate, contain, remediate, treat, clean, detoxify, disinfect, neutralize, cleanup, remove, dispose of, test for, monitor, and assess the effects of the communicable disease.”  See Dec. of J. Phillips, Ex. A, p. 21, para. F(1)(a)(1) [PDF p. 47]. 

II. Defendant fails to negate Plaintiff’s allegation that it suffered “direct physical loss or damage” due to COVID under the Business Income, Business Access and Civil Authority coverage

            A. Marina Pacific does not preclude this Court from granting summary judgment or adjudication but the Court is precluded from reexamining the sufficiency of the complaint

            In Marina Pacific, the Court of Appeals (COA) held that it was error to find COVID could not “physically alter” property as an issue of law on demurrer.  See Marina Pacific Hotel and Suites, LLC (2022) 81 Cal.App.5^th at 99.  The COA stated that such an issue could be resolved, however, based on evidence presented on a summary judgment motion or at trial.  Id. (dismissal on grounds that COVID cannot cause “direct physical loss or damage” to property for insurance “might be the correct outcome following a trial or even a motion for summary judgment” but was error on demurrer, a “nascent phase of the case”).  Granting summary judgment based on undisputed evidence negating Plaintiff’s allegation of “direct physical loss or damage” would not run afoul of Marina Pacific Hotel and Suites, LLC.  The Court is, however, precluded by the doctrine of law of the case from finding that the complaint did not sufficiently allege “direct physical loss or damage” due to COVID.  Marina Pacific Hotel and Suites, LLC clearly held that the complaint sufficiently allegations direct physical loss or damage.

            The COA expressly disagreed with United Talent Agency v. Vigilant Ins. Co. (2022) 77 Cal.App.5th 821, 830, which affirmed the trial court’s dismissal of an identical lawsuit based on its finding that the COVID virus does not damage property.  “Thus, the United Talent court, based on its de novo review, affirmed a trial court ruling that, like the decision we review, found—without evidence—the COVID-19 virus does not damage property. But the insureds here expressly alleged that it can and that it did, including the specific allegation they were required to dispose of property damaged by COVID-19.”  Marina Pacific Hotel and Suites, LLC, supra, 81 Cal.App.5th at 111 (emphasis added). 

            Defendant does not present any evidence or argument challenging Plaintiff’s allegation that the COVID virus is an external force that caused physical change or alteration to Hotel Erwin’s property.  Instead, Defendant submits evidence challenging (1) Plaintiff’s ability to prove that COVID was present on surfaces at Hotel Erwin at all; and (2) Plaintiff’s allegation that the physical change caused by COVID required Plaintiff to dispose of property. 

            B.  Defendant fails to negate Plaintiff’s allegation that the surfaces at Hotel Erwin were exposed to COVID and the virus was present on them

            A defendant may satisfy its burden as moving party by showing that the claim “cannot be established” because of the lack of evidence on some essential element of the claim.  See Union Bank v. Superior Court (1995) 31 Cal.App.4th 574, 590.  A defendant does not meet its burden under CCP §437(c)(o)(1) by merely “pointing out” or “arguing” that the plaintiff does not possess or cannot reasonably obtain necessary evidence. Id.; Lona v. Citibank, N.A. (2011) 202 Cal.App.4th 89 (defendant bank did not meet its burden on summary judgment of wrongful foreclosure by merely arguing that plaintiff lacked evidence to support her claim and only documentary evidence submitted were the loan documents); Gaggero v. Yura (2003) 108 Cal.App.4th 884, 890 (defendant did not establish plaintiff’s lack of evidence or inability to reasonably obtain evidence of plaintiff’s ability and willingness to perform by pointing to plaintiff’s refusal to answer certain questions during deposition on grounds of a meritless privacy objection; such a refusal, regardless of its merit, was neither an admission nor a factually devoid discovery response). 

            Triable issues remain as to whether any surfaces at Hotel Erwin were exposed to COVID.  Defendant relies on Mark Sokol’s deposition testimony to establish Plaintiff’s lack of evidence that COVID was present at Hotel Erwin.  See Dec. of J. Phillips, Ex. D, Dep. of M. Sokol, 65:23-67:11.  The cited portion of Sokol’s testimony does not establish Plaintiff’s lack of evidence regarding the presence of COVID at Hotel Erwin.  Sokol testified regarding his personal belief that COVID was “everywhere,” that every surface could potentially have it and that no destructive testing had been done to determine whether COVID was present.  Id.  Sokol testified that he based his personal belief that COVID was everywhere on an article he read in Virology.  Id. 

            Sokol’s testimony does not establish that Plaintiff lacks evidence of the presence of COVID at Hotel Erwin and it certainly does not establish that such evidence cannot reasonably be obtained.  His testimony is not the equivalent of factually devoid discovery responses or discovery responses admitting facts negating an essential element of the plaintiff’s claim.  See Union Bank, supra, 31 Cal.App.4^th at 592-593. 

             In addition, Plaintiff submits evidence supporting a finding that COVID was present at Hotel Erwin during the relevant time period.  Plaintiff’s evidence consists of expert testimony regarding the nature of the COVID virus and how it is transmitted, the estimated number of patrons who would have been carrying COVID based on public health information regarding infections in the general population, and percipient witness testimony regarding specific cases of COVID at the hotel during the relevant time period (49 employees).  See Dec. of T. Brewer, ¶¶6, 9, 11, 12; Dec. of A. Klibanov, ¶¶11. 14-15, 17, 18, 22-24, 27-29; Dec. of M. Sokol, ¶¶3-4.   Thus, even if Defendant had satisfied its burden on the issue of whether COVID was present at Hotel Erwin, Plaintiff’s evidence raises a triable issue as to this fact. 

            Triable issues of fact remain as to whether COVID was present at Hotel Erwin or on the surfaces of the property.  Defendant’s MSJ/A on this ground is DENIED. 

            C. Defendant fails to negate Plaintiff’s allegation that it suffered direct physical loss or damage due to COVID under the Business Income, Business Access and Civil Authority coverage

            “Although ‘direct physical loss or damage’ is a crucial term in a first party commercial property insurance policy, it is left undefined in commercial property policies, which define a plethora of other words and phrases.”  Marina Pacific Hotel and Suites, LLC v. Fireman's Fund Insurance Company (2022) 81 Cal.App.5th 96, 106.  Multiple courts have interpreted the phrase to mean “an actual change in insured property then in a satisfactory state, occasioned by accident or other fortuitous event directly upon the property causing it to become unsatisfactory for future use or requiring that repairs be made to make it so.”  Id. (quoting MRI Healthcare Center of Glendale, Inc. v. State Farm General Ins. Co. (2010) 187 Cal.App.4th 766); United Talent Agency v. Vigilant Ins. Co. (2022) 77 Cal.App.5th 821, 830; Inns-by-the-Sea v. California Mutual Ins. Co. (2021) 71 Cal.App.5th 688, 706.  “Direct physical loss or damage” therefore requires an insured to “allege an external force acted on the insured property causing a physical change in the condition of the property to come within the coverage provision.”  Marina Pacific Hotel and Suites, LLC, supra, 81 Cal.App.5th at 107 (citing United Talent Agency, supra, 77 Cal.App.5th at 830; Inns-by-the-Sea, supra, 71 Cal.App.5th at 706; Doyle v. Fireman's Fund Ins. Co. (2018) 21 Cal.App.5th 33, 38).

            Thus, where “period of restoration” language is included in a policy covering “direct physical loss or damage,” coverage requires “a physical loss requiring repair or replacement, not simply loss of use.”  United Talent Agency v. Vigilant Insurance Company (2022) 77 Cal.App.5^th 821, 833.  “Direct physical loss or damage” “has a physical nature that can be physically fixed, or if incapable of being physically fixed because it is so heavily destroyed, requires a complete move to a new location.”  Id. Coverage requires “physical impact to the property that could be repaired rebuilt or replaced.” 

            The mere physical presence of COVID without “damage to the property necessitating rehabilitation or restoration efforts similar to those required to abate asbestos or remove poisonous fumes which permeate property” does not qualify as “direct physical loss or damage” triggering coverage.  See Appel Annie, LLC v. Oregon Mutual Ins. Co. (2022) 82 Cal.App.5^th 919, 926 (quoting Inns-by-the-Sea (2021) 71 Cal.App.5^th 688, 704).  Thus, the mere fact that COVID may have “physically changed” the insured property alone is insufficient.  The change must also have damaged the property such that repair or replacement was required.  See Marina Pacific Hotel and Suites, LLC, supra, 81 Cal.App.5^th at 107. 

            However, insurance policies are contractual agreements and parties are free to define the terms as they choose. The focus in interpreting any policy provision is reasonableness, and “how a reasonable layperson would read its language, not how insurance-coverage lawyers might understand terms of art defined not by the policy but by caselaw.”  See John’s Grill, Inc. v. Hartford Financial Services Group, Inc. (2022) 2022 WL 17959561, *8 (cases interpreting “direct physical loss of or physical damage to” property as requiring “distinct ; Amy’s Kitchen, Inc. v. Fireman’s Fund Ins. Co. (2022) 83 Cal.App.5^th 1062, 1070 (“direct physical loss or damage” under policy’s communicable disease extension did not require “a distinct, demonstrable, physical alteration of the property” or a “physical change in the condition of the property” based on the specific language of that extension extension expressly included remediation and cleaning as “direct physical loss or damage” without qualification). 

            Defendant submits the deposition testimony of Sokol and Haug, Plaintiff’s representatives, as evidence that Plaintiff was not required to repair, rebuild or replace any property.  Defendant systematically questioned Haug as to specific categories of property at the premises and whether that property had to be disposed of, replaced or repaired due to the presence of COVID on its surfaces.  See Defendants’ SSUMF Nos. 2-51.  Haug testified that certain items had to be cleaned, other items, such as tables, bar stools and chairs, were placed in storage primarily due to social distancing and in-restaurant dining regulations.  Id.  Haug testified that these items have been taken out of storage and used again once they were cleaned, negating any assertion that they were rendered unsatisfactory for future use.  Id.  Haug testified that these items did not require repair or replacement, and at most, they had to be cleaned or stored until certain regulations were lifted.  Based on this testimony, those items were never disposed of, replaced or repaired due to COVID. 

            However, both Sokol and Haug also testified that Plaintiff was forced to dispose of room keys and paper menus due to COVID.  See Dec. of J. Phillips, Ex. D, Dep. of M. Sokol, 70:15-25, 71:1-25 (replacement and destruction of keys and menus due to COVID 19 presence); 76:1-10 (furniture became “inoperable” due to COVID 19 at the property); 97:4-15 (indicating that there may be other items that were removed due to pandemic); Dec. of J. Phillips, Ex. E, Dep. of D. Haug, 115:5-14 (menus discarded).  Defendant does not address Sokol and Haug’s testimony that Plaintiff disposed of the keys and menus due to COVID.  On that basis, Defendant fails to negate Plaintiff’s allegation that it was required to dispose of property due to the physical changes caused by COVID.  Defendant’s own evidence establishes that property was in fact disposed of as Plaintiff claimed in the complaint. 

            In opposition, Plaintiff relies on this same testimony regarding disposal of the room keys and menus as clear evidence that they disposed of property due to COVID.  Plaintiff also submits the declaration of Mark Sokol that room keys, menus and magazines were disposed of due to the 49 employees who tested positive for COVID from 6-10-20 through 12-7-22.  See Dec. of M. Sokol, ¶8.  Mark Sokol also points out his testimony that the other items that had to be cleaned and/or placed in storage became “inoperable” due to the presence of COVID.  See Dec. of J. Phillips, Ex. D, Dep. of M. Sokol 76:1-10 (furniture became “inoperable” due to COVID 19 at the property).  Plaintiff’s evidence raises a triable issue of fact regarding whether it disposed of property due to the physical changes to the property caused by COVID 19. 

            Finally, Defendant fails to negate Plaintiff’s allegation that it suffered “direct physical loss or damage” due to COVID under the Communicable Disease Extension.  Plaintiff alleges coverage under four different sections of the Policy, including the Communicable Disease Extension.  In order to satisfy its burden on summary judgment or adjudication based on lack of “direct physical loss or damage,” Defendant had to establish the absence of “direct physical loss or damage” under every single type of coverage.  Based on Amy’s Kitchen, Inc. v Fireman’s Fund Ins. Co. (2022) 83 Cal.App.5^th 1062, Defendant fails to negate “direct physical loss or damage” under the Communicable Disease Extension. 

In Amy’s Kitchen, Inc., the Court of Appeals found that “direct physical loss or damage” under an identical Communicable Disease Extension did not require a “physical change” or a “distinct, demonstrable physical alteration of the property” or a “physical change in the condition of the property.”  See Amy’s Kitchen, Inc., supra, 83 Cal.App.5^th at 1068 (error for the court to find on demurrer that definition of “direct physical loss or damage” articulated in MRI Healthcare Center of Glendale, Inc. v. State Farm General Ins. Co. (2010) 187 Cal.App.4^th 766, 779-780.  The Court of Appeals reasoned that case law requiring “physical alteration” or physical change” was inapposite, because those cases dealt with very different coverage provisions that did not contain language expressly covering the costs “incurred to ‘(c) Mitigate, contain, remediate, treat, clean, detoxify, disinfect, neutralize, cleanup, remove, dispose of, test for, monitor, and assess the effects [of] the communicable disease.’”  Id. at 1070.

Given this express language, the Court explained that the only reasonable interpretation of the Communicable Disease Extension would not require physical alteration or change.  Id. at ¶1071  “Thus, the only plausible interpretation of subparagraph (c) of the communicable disease extension in this policy is that the need to clean or disinfect infected or potentially infected covered property constitutes “direct physical loss or damage” of that property within the meaning of the policy. The trial court erred in holding otherwise.”  Id. at 1071 (trial court erred in sustaining demurrer without leave on grounds that physical alteration was required under Communicable Disease Extension and failure to allege “communicable disease event” as defined under Policy; physical alteration not required under Communicable Disease Extension and plaintiff submitted sufficient facts establishing that it could plead facts establishing “communicable disease event” if given leave to amend). 

Defendant therefore fails to negate Plaintiff’s allegation of coverage under the Communicable Disease Extension based on solely on the absence of physical alteration or damage requiring replacement or disposal.  For purposes of the Communicable Disease Extension, physical alteration or damage is not required and cleaning to remove the effects of COVID qualifies as “direct physical loss or damage.” 

Defendant fails to establish as an issue of law that Plaintiff did not suffer any “direct physical loss or damage” under the provisions of the Policy alleged in the complaint.  Defendant’s MSJ/A based on this element is DENIED. 

III.  Defendant fails to negate Plaintiff’s allegation of causation

            Defendant also moves for summary judgment on grounds of causation.  As summarized by the Court of Appeals in Marina Pacific Hotel and Suites, LLC, Plaintiff alleges that the physical loss or damage to the property caused by COVID “required the closure or suspension of operations at Hotel Erwin and Larry’s or portions of those properties at various times and caused them to incur extra expense, adopt remedial and precautionary measures ‘to attempt to restore and remediate the air and surfaces at the Insured Properties, dispose of property damaged by COVID-19 and limit operations at the Insured Properties.’  In addition, access to the insured properties, the insureds alleged, had at times been prevented or limited by governmental orders issued ‘in response to the direct physical loss and/or damage caused by COVID-19 to other property within the covered radius [as defined by the policy].”  Marina Pacific Hotel and Suites, LLC, supra, 81 Cal.App.5^th at 102; see FAC, ¶¶25, 29

Defendant argues Plaintiff did not suffer any suspension of their operations or slow down in business due to the physical loss or damage caused by COVID, contrary to the complaint allegations.  See FAC, ¶29; see also Marina Pacific Hotel and Suites, LLC v. Fireman’s Fund Insurance Company (2022) 81 Cal.App.5^th at 108-109.  Defendant relies on the deposition testimony of Mark Sokol to establish that Plaintiff did not suffer any suspension or reduction of their operations.  Defendant argues Sokol’s testimony confirms that (1) any fluctuation in occupancy was caused by government orders restricting hotel access to essential travelers and patrons’ decision not to travel; (2) the restaurant was closed due to government orders, lack of staff or lack of patrons, not physical loss or damage; (3) .  See Dec. of J. Phillips, Ex. D, Dep. of M. Sokol, 105:7-16, 106:3-11,108:4-12, 109:5-16, 110:11-15; Separate Statement, UMF No. 53. 

“Ordinarily, the issue of causation is a question of fact for the jury.”  Crossroads Investors, L.P. v. Federal National Mortgage Assn. (2017) 13 Cal.App.5th 757, 792–793.  Plaintiff alleges that it suffered suspension of business operations and reduction in business due to the physical damage caused by COVID.  As stated above, questions of fact remain as to whether Plaintiff suffered physical damage or loss under the four types of coverage alleged in the complaint.  Assuming that physical damage or loss occurred, Defendant’s evidence fails to establish as an issue of law that none of the business suspension or reduction suffered by Plaintiff was due to that physical damage or loss from COVID.  Plaintiff is not required to demonstrate that physical loss or damage was the sole cause of any business suspension or reduction it suffered. 

At best, Defendant’s evidence suggests there may have been additional, contributing causes for Plaintiff’s business suspension and reduction in addition to the physical loss or damage caused by the virus.  See Defendant’s SSUMF Nos. 53-55, 58-59.  This is particularly true as to the “physical loss or damage” required under the Communicable Disease Extension, which does not require physical alteration or change due to the virus and includes loss due to cleaning and disinfection of areas.  Defendant does not dispute that the property had to be repeatedly cleaned and disinfected.  Plaintiff also submits evidence that its business suffered suspension and reduction due to COVID, including shut down of areas for disinfection and cleaning after exposure to persons infected with COVID.  See Plaintiff’s Response to Defendant’s Separate Statement and Additional Material Facts (“AMFs”), AMF Nos. 43-64, 71-73. 

Triable issues remain as to whether Plaintiff suffered any business suspension or reduction due to the physical loss or damage caused by COVID.  Defendant’s Motion for Summary Judgment or Adjudication on this ground is DENIED. 

IV.  Defendant fails to negate Plaintiff’s allegation that a communicable disease event occurred, triggering coverage under the “Communicable Disease Extension”

Defendant argues Plaintiff’s claims pursuant to the Communicable Disease Extension fail, because no “communicable disease event” ever occurred.  “Communicable disease event” is defined under the Policy as “an event in which a public health authority has ordered that a location be evacuated, decontaminated, or disinfected due to the outbreak of a communicable disease at such location.”  See Dec. of J. Phillips, Ex. A, p. 52, MARINA000241 [PDF No. 94]. 

After this MSJ was filed, the Court of Appeals addressed what qualifies as a “communicable disease event” under identical policy language in Amy’s Kitchen, Inc. v. Fireman’s Fund Ins. Co. (2022) 83 Cal.App.5^th 1062.  The Court of Appeals addressed the issue in the context of a demurrer and whether the plaintiff had sufficiently pled a “communicable disease event” under the policy. 

“The policy defines this term as ‘an event in which a public health authority has ordered that a location be evacuated, decontaminated, or disinfected due to the outbreak of a communicable disease at such location.’  On appeal, Fireman's argues that Amy's failed to allege facts constituting such an event because it did not allege that a public health authority ordered that its premises be decontaminated or disinfected “due to the outbreak of a communicable disease” at its particular premises. The complaint alleges only that authorities issued jurisdiction-wide orders or ‘guidance’ triggered by general conditions in areas encompassing Amy's locations.”  Amy's Kitchen, Inc. v. Fireman's Fund Ins. Co. (2022) 83 Cal.App.5th 1062, 1071–1072. 

The Court of Appeals in Amy’s Kitchen agreed with Fireman’s interpretation of “communicable disease event” and required that plaintiff allege that there as an order of decontamination due to an outbreak at the plaintiff’s specific location.  See Amy’s Kitchen, Inc., supra, 83 Cal.App.5^th at 1072.  While the existing allegations were insufficient to plead a communicable disease event, the Court found the trial court erred in denying leave to amend where plaintiff’s counsel stated that he could plead there were specific call with the county and correspondence and communication where in response to plaintiff’s location, authorities directed plaintiff to clean, disinfect and do other steps.  Id. at 1072. 

Defendant Fireman’s makes this identical argument on this summary judgment.  Defendant argues that this definition requires that (1) a public health office order Plaintiffs’ specific insured property be evacuated, decontaminated, or disinfected, and (2) that the order was due to an outbreak at the property.  Defendant argues Plaintiff’s representatives failed to identify any such order. 

In response, Plaintiff argues (1) the language of the definition does not require that the order be directed to Plaintiff’s location specifically or that the order be issued in response to an outbreak at Plaintiff’s specific location; (2) even if such an order is required, the LA County Department of Health required them specifically to comply with the County’s Quarantine Order after Plaintiff reported that an employee had tested positive for COVID; and (3) Plaintiff experienced an outbreak at its location when 49 of its employees tested positive for COVID from June 2020 to December 2022. 

             Defendant asserts Plaintiff “is unaware of any government orders related to COVID-19 that specifically addressed Marina Pacific or its property”; and (2) “at no point did a government order related to COVID-19 close Marina Pacific’s business.”  See Defendant’s SSUMF Nos. 52-54.  Defendant’s cited evidence does not establish that Plaintiff was unaware of any government orders specifically addressing Marina Pacific or its property. 

As to SSUMF No. 52, Mark Sokol testified that he was not aware of any such specific orders, “just the order to the hotel that we discussed.”  See Dec. of J. Phillips, Ex. D, 92:25-93:8.  Both Sokol’s answer and the line of questioning suggest there was at least one such “specific” order or communication.  The cited testimony therefore does not support SSUMF No. 53, much less satisfy the Union Bank standard to establish that Plaintiff cannot prove an essential element of its claim (lacks evidence of that element and cannot reasonably obtain it). 

Haug’s testimony in support of SSUMF No. 52 likewise does not establish the nonexistence of an order satisfying the definition of “communicable disease event,” Plaintiff’s unawareness of such an order, Plaintiff’s lack of evidence of such an order or Plaintiff’s inability to obtain evidence of such an order.  Haug merely responded that he personally did not know of any such order.  See Dec. of J. Phillips, Ex. E, 32:7-33:7; 33:22-34:6. 

As to SSUMF No. 53, a “communicable disease event” does not require an order requiring closure of the property.  The order need only require that the property be “evacuated, decontaminated, or disinfected.”

            Based on Amy’s Kitchen, the Court rejects Plaintiff’s position that a standing, jurisdiction-wide order from the LA County Department of Health alone is sufficient to satisfy the definition of a “communicable disease event.”  However, Defendant fails to satisfy its burden as moving party to negate that such an order exists.  In addition, Defendant’s evidence implies that such an order or direction existed.

Plaintiff’s evidence also raises an issue as to whether such order existed. Plaintiff submits evidence that when it reported a positive case to the LA County Department of Health, the Department sent it instructions to comply with its quarantine order governing positive cases at a property and it suffered closures as a result.  See Plaintiff’s Response to Defendant’s SSUMF Nos. 47-51; Dec. of M. Sokol, ¶6.  This evidence is similar to the facts deemed sufficient to justify plaintiff’s entitlement to leave to amend in Amy’s Kitchen. 

            Triable issues of fact remain as to whether a “communicable disease event” occurred triggering coverage under the Communicable Disease Extension. Defendant’s motion for summary judgment or adjudication on this ground is denied. 

V.  Triable issues of fact remain as to the other causes of action

            A.  Triable issues of fact remain as to the existence of bad faith for purposes of Plaintiff’s bad faith denial, elder abuse and  unfair competition cause of action.

            Defendant argues it is entitled to summary adjudication or judgment of the remaining causes of action, because Plaintiff was not entitled to coverage as an issue of law based on the undisputed evidence. As discussed above, Defendant failed to satisfy its burden on summary judgment and triable issues of fact remain as to whether Plaintiff was entitled to coverage.  Lack of coverage is therefore not grounds to summarily adjudicate the bad faith denial, elder abuse or unfair competition causes of action.

            Defendant also argues that its denial of Plaintiff’s claim was based on a genuine dispute, as evidenced by the numerous cases that have found no coverage for COVID 19-related business losses.  The Court of Appeals rejected this precise argument in the recent case of Shusha, Inc. v. Century-National Insurance Company, 2022 WL 18110247, at *9-10 (Dec. 14, 2022).  The Court noted that the genuine dispute doctrine “does not relieve an insurer from its obligation to thoroughly and fairly investigate, process and evaluate the insured’s claim.  A genuine dispute exists only where the insurer’s position is maintained and in good faith and on reasonable grounds.”  Id.  The plaintiff alleged bad faith denial based on the defendant’s failure to undertake any steps to determine whether the virus had caused physical damage to he plaintiff’s premises and without engaging in any legitimate, true, meaningful or thorough investigation.  Id. at *10. 

A “genuine dispute foreclosing a bad faith claim exists only where the insurer’s position is maintained in good faith with reasonable grounds.”  Id.  The genuine dispute doctrine therefore did not apply where plaintiff alleged coverage was denied “without having taken any steps to determine whether COVID 19 caused physical damage to the plaintiff’s premises.”  Id.   

Here, Defendant does not address Plaintiff’s allegations that Defendant denied coverage without any investigation into Plaintiff’s claim that the virus had physically damaged its property under the Policy.  Defendant fails to submit any evidence of its investigation into Plaintiff’s claim of loss.  The mere fact that there is case law holding that there is no coverage for COVID 19 losses does not establish that Defendant conducted a reasonable, good faith investigation into the claim. 

Triable issues of fact remain as to the bad faith denial, elder abuse and unfair competition claims based on the existence of coverage and whether Defendant’s denial was based on a reasonable, good faith investigation.  Defendant’s MSJ/A as to these causes of action is DENIED. 

            B.  Defendant fails to establish that Erwin Sokol lacks standing to sue for elder abuse

            Defendant argues Erwin Sokol lacks standing in his capacity as trustee to sue for elder abuse.  Defendant argues Erwin can only sue for elder abuse in his personal capacity.  Defendant argues Erwin is only named in his capacity as trustee of the Frances Sokol Trust. 

            Defendant relies on the definition of “elder” and “financial abuse” under Welfare and Institutions Code §§15610.27 and 15610.30 to establish Sokol’s lack of standing.  “‘Elder’ means any person residing in this state, 65 years of age or older.”  Welf. & Inst. C. §15610.27.  “‘Financial abuse’ of an elder or dependent adult occurs when a person or entity does any of the following: (1) Takes, secretes, appropriates, obtains, or retains real or personal property of an elder or dependent adult for a wrongful use or with intent to defraud, or both.”  Welf. & Inst. C. §15610.30(a). 

            Defendant fails to establish that Sokol is not an “elder” under the statute.  Defendant also fails to establish that denial of insurance coverage did not result in the taking, secreting, obtaining or retention of Sokol’s real or personal property.  The fact that Sokol is named as “trustee” does not negate either of these alleged facts. 

            In fact, under Welf. & Inst. C. §15610.30(c), the Legislature specifically stated that a person or entity “takes, secretes, appropriates, obtains, or retains real or personal property when an elder or dependent adult is deprived of any property right…regardless of whether the property is held directly or by a representative of an elder or dependent adult.”  Plaintiff submits evidence that Sokol is the named insured under the Policy as trustee of the trust, and he is also the sole beneficiary of that trust.  See Plaintiff’s Response to Separate Statement, AMF Nos. 133-140.  Given Sokol’s status as trustee and beneficiary of the trust and the named insured under the Policy, the Court cannot find as a matter of law that Erwin Sokol lacks standing to sue merely because he is named in his capacity as trustee. 

Triable issues of fact remain as to Plaintiff’s Elder Abuse cause of action and whether Erwin Sokol has standing to sue.  Defendant’s MSA of the Elder Abuse claim based on standing is denied. 

VI.  Civil Authority Coverage

            Based on the discussion above, triable issues of fact remain that preclude summary judgment of the complaint or summary adjudication of each of the causes of action.  Resolution of the existence of civil authority coverage would not result in adjudication of any cause of action, because they are based on four policy provisions and failure to obtain coverage under the Civil Authority Extension would not result in disposition of an entire cause of action.  CCP §437c(f)(1)(summary adjudication only proper if it would fully dispose of cause of action, affirmative defense issue of existence or nonexistence of duty or punitive damages claim). 

Defendant also did not seek adjudication of the existence or nonexistence of coverage under the Civil Authority provision.  Defendant’s notice of motion asks for adjudication of each cause of action, not any issue of duty.  Where summary adjudication is sought, the notice must specify the “specific cause of action, affirmative defense, claims for damages, or issues of duty” sought to be adjudicated.  CRC 3.1350(b).  The court may not summarily adjudicate claims or defenses as to which no triable issue was raised unless requested in the notice of motion. Homestead Sav. v. Sup.Ct. (Dividend Develop. Corp. (1986) 179 CA3d 494, 498.