Judge: Martha K. Gooding, Case: 2021-01234574, Date: 2022-12-19 Tentative Ruling

Motion for Summary Judgment and/or Adjudication           

The Motion by Defendant Brotherhood Mutual Insurance Company (“Defendant”) for summary judgment on the Complaint filed by Plaintiff Mount of Olives Lutheran Church’s (“Plaintiff”) is GRANTED. 

Defendant’s evidentiary objections to the Horton Declaration are sustained. 

Defendant’s request for judicial notice is granted, except as to Exhibit A, which is a pleading in the court’s file for this action. For such a document, the request for judicial notice is unnecessary.  “[A]ll that is necessary is to call the court’s attention to such papers.” (Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial (The Rutter Group 2020) ¶ 9.53.1a.)

Under the Civil Authority provision in its insurance policy with Defendant, Plaintiff seeks coverage for lost donations and income sustained as a result of the COVID-19 pandemic and various orders, including stay at home orders, issued by the County of Orange and the State of California.

The parties dispute interpretation or application of a number of the terms in the Civil Authority provision.  Because the Court finds that the requirement in the provision for “complete interruption of [Plaintiff’s] operations” is dispositive, the Court need not (and does not) address the other issues raised.

Defendant insured Plaintiff under a MinistryFirst Commercial Multi-Peril Insurance Policy, policy number 04M0461386, in force from December 20, 2019 to December 20, 2020 (the “Policy”). [UMF No. 24.] The applicable insuring agreement in the Policy provides that “we cover direct physical loss to covered property at the premises described on the declarations caused by a covered peril.” [UMF No. 25.] The EDEE Part of the Policy provides in part as follows:

COVERAGE OPTIONS

We provide the following Coverage Options for which a limit of coverage is shown on the declarations. These coverages are provided during the restoration period when your operations are necessarily interrupted by a peril covered under this Coverage Part.

EARNINGS AND DONATIONS

We cover the actual loss of your earnings and your donation income that you sustain, including, but not limited to, your tuition earnings, camp earnings, and rental earnings/value. This coverage includes, but is not limited to, the actual loss that you sustain of your payroll and other continuing expenses that you normally incur during the course of your operations. We cover only the expenses that are necessary during the restoration period.

 ***

PERILS COVERED

The following perils are covered under this Coverage Part.

***

3. Interruption by Civil Authority: This includes loss caused by order of civil authority which prohibits your staff or scheduled event participants from accessing premises described on the declarations. Coverage for this peril will only apply in the event that such order of civil authority results in the complete interruption of your operations, and will only apply for the lesser of:

a. 14 days following the revocation of the civil authority’s order, or

b. 60 days if the order is not revoked by the civil authority within 60 days after its inception.

***

[Lichtenberger Decl., Ex. B. (bold in original; italics added).]

The interpretation of an insurance policy is usually a question of law. Waller v. Truck Ins. Exch., Inc. (1995) 11 Cal.4th 1, 18.  Insurance policies are contracts and therefore subject to the rules of construction governing contracts. Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1258.  “Under statutory rules of contract interpretation, the mutual intention of the parties at the time the contract is formed governs interpretation … Such intent is to be inferred, if possible, solely from the written provisions of the contract.”  AIU Ins. Co. v. Superior Court (1990) 51 Cal.3d 807, 821-822; see also Waller v. Truck Ins. Exch., Inc. (1995) 11 Cal.4th 1, 18 (“The rules governing policy interpretation require us to look first to the language of the contract in order to ascertain its plain meaning or the meaning a layperson would ordinarily attach to it”).

The “clear and explicit” meaning of these provisions, interpreted in their “ordinary and popular sense,” unless “used by the parties in a technical sense or a special meaning is given to them by usage” (id., § 1644), controls judicial interpretation. (Id., § 1638.) Thus, if the meaning a layperson would ascribe to contract language is not ambiguous, we apply that meaning. (See, e.g., Reserve Insurance Co. v. Pisciotta (1982) 30 Cal.3d 800, 807, 180 Cal.Rptr. 628, 640 P.2d 764; Crane v. State Farm Fire & Cas. Co. (1971) 5 Cal.3d 112, 115, 95 Cal.Rptr. 513, 485 P.2d 1129.)

AIU Ins. Co. v. Superior Court (1990) 51 Cal.3d 807, 822 (emphasis added).

To construe words in an insurance policy in their “ordinary and popular sense,” courts often use dictionary definitions.  Scott v. Continental Ins. Co. (1996) 44 Cal. App. 4th 24, 29. See Stamm Theatres, Inc. v. Hartford Cas. Ins. Co. (2001) 93 Cal. App. 4th 531, 543 (“When ordinary people do not understand the meaning of a word … [t]hey turn to a dictionary”) (internal quotes omitted).  But dictionary definitions are not always controlling: “[E]xamination of various dictionary definitions of a word … does not necessarily yield the ‘ordinary and popular’ sense of the word if it disregards the policy's context.” MacKinnon v. Truck Ins. Exch. (2003) 31 Cal.4th 635, 649.

Thus, although each term must be read in its “ordinary and popular sense,” it also must be interpreted in context and with regard to its intended function and the structure of the policy as a whole.  Bay Cities Paving & Grading, Inc. v. Lawyers' Mut. Ins. Co. (1993) 5 Cal. 4th 854, 867; see also Garamendi v. Mission Ins. Co. (2005) 131 Cal.App.4th 30, 42; Mirpad, LLC v. California Ins. Guarantee Ass'n (2005) 132 Cal. App. 4th 1058, 1071 (finding, read in the context of the policy as a whole, “person” could only mean natural persons, not a corporation).

The parties agree that the State and Orange County COVID 19 orders they have identified are “order[]s of civil authority” under the policy.

The parties do not, however, agree on the meaning of the phrase “complete interruption of your operations.”

Defendant contends that “complete interruption of your operations” required that all of Plaintiff’s operations must have been stopped for coverage to be triggered.  And because Plaintiff maintained certain operations – such as online worship services and donation programs – coverage was not triggered.

For its part, Plaintiff argues that “interruption” means something less than “cessation” – that is, less than a complete stoppage.  The problem with Plaintiff’s argument is that it impermissibly ignores the word “complete.”

As a matter of plain usage, “complete interruption” means an across-the-board halt to operations.  “Interruption” suggests a temporary rather than a permanent halt, but does not negate the meaning of “complete” for however long the interruption endures.

“The court's holding here, that a complete cessation of [the insured's] business was required to trigger coverage under the Business Income coverage provision, is consistent with the vast majority of cases from other jurisdictions that have examined the question of what constitutes a ‘suspension’ or ‘interruption’ of operations for the purposes of business interruption insurance. [Citations.]” (Home Indem. Co. v. Hyplains Beef, L.C., supra, 893 F.Supp. at pp. 991–992, italics added.) Another court has described the term “necessary suspension” as “unqualified language [that] unambiguously refers to a total cessation of [the insured's] business activities.” (American States Ins. Co. v. Creative Walking, Inc. (E.D.Mo.1998) 16 F.Supp.2d 1062, 1065, italics added, affd. mem. (8th Cir.1999) 175 F.3d 1023.)

Buxbaum v. Aetna Life & Casualty Co. (2002) 103 Cal.App.4th 434, 444.

Indeed, if the parties wished to provide for insurance in the case of a partial interruption of operations, they could have written such a policy:

The critical phrase to be considered is “loss resulting directly from necessary interruption of business, whether total or partial.” (Emphasis added.) The Excess Insurers argue “interruption” is most frequently defined as “stoppage” or “cessation,” while Aztar points to other dictionary definitions that define the term as “to hinder or stop.” For our purposes, we consider a standard, common sense definition to include the following: “1: to stop or hinder by breaking in 2: to break the uniformity or continuity of.” Merriam–Webster's Collegiate Dictionary 611 (10th ed.2001). Thus, either party's definition of “interruption” is reasonable in this setting.

The addition of the phrase “total or partial” also makes it plain that any stoppage, or hindrance, need not impact the entire “business” but only a portion.

Aztar Corp. v. U.S. Fire Ins. Co. (Ariz. Ct. App. 2010) 223 Ariz. 463, 469 (bold added).

Finally,

 “Suspension” or “interruption” of operations: Some policy forms require a “suspension” of operations, which means a temporary, but complete, cessation of activity. There is no coverage merely for a slowdown or reduction in operations. Likewise, if the insured's business as a whole continues, there is no coverage for interruption of work on a particular project. [Buxbaum v. Aetna Life & Cas. Co. (2002) 103 CA4th 434, 448-449, 126 CR2d 682, 692 (citing text); see also Winters v. State Farm Fire & Cas. Co., supra, 73 F3d at 229 (applying Calif. law)]

Most recent policy forms define “suspension” to include a slowdown of the insured's business activities, as well as complete cessation of operations. [See ISO Form CP 00 30 06 07, ¶ F.6¶ F.6.]

Other forms provide coverage for an “interruption, whether total or partial,” and cover a slowdown of business activities in addition to complete cessation of all operations. [See Aztar Corp. v. U.S. Fire Ins. Co. (AZ App. 2010) 224 P3d 960, 966-968 (collecting cases); compare Forestview The Beautiful, Inc. v. All Nation Ins. Co. (MN App. 2005) 704 NW2d 773, 775-776 (reciting policy language that did not refer to “total or partial”)]

Note: Many higher-end property insurance policies have eliminated the suspension or interruption of business requirement and simply provide coverage for the period beginning at the start of the damage and ending when operations are restored to preloss conditions.

California Practice Guide: Insurance Litigation Ch. 6B-C §6:266.

The Court finds that insurance coverage under the business interruption/Civil Authority provision in Plaintiff’s policy is triggered only by “complete interruption” – that is, across-the-board stoppage of all – of Plaintiff’s operations.

The evidence presented here is that Plaintiff did not stop all operations but continued to conduct and provide online worship services, as well online donations. [UMF #14; Horton Decl., ¶ 15; Mrowka Decl., Exs. G, M, N, O, P.]

As a result, Plaintiff has not shown a triable issue of fact on an element essential to both its breach of contract and bad faith causes of action.  Accordingly, Defendant’s motion for summary judgment is granted.

Defendant is ordered to give notice.

If all parties wish to submit on the tentative ruling, they shall promptly notify the Court’s clerk by telephone.

If any party wishes oral argument on the tentative, the argument is continued to Thursday, January 5, 2023 at 1:30 p.m. due to a conflict on the Court’s calendar.