Judge: Peter Wilson, Case: 2020-01169032, Date: 2022-09-29 Tentative Ruling
Plaintiff Goodwill Industries of Orange County, California (Plaintiff) seeks reconsideration of the orders sustaining, without leave to amend, the demurrers of Defendants Philadelphia Indemnity Insurance Company and Certain Underwriters at Lloyd’s, London pursuant to Code of Civil Procedure § 1008(a). ROA 502, NOM, p. 2:9.
For the reasons set forth below, Plaintiff’s Motion is GRANTED, and the demurrers are OVERRULED.
Marina Pacific Warrants Reconsideration.
Code of Civil Procedure § 1008(a) permits a party to request reconsideration of an order “based upon new or different facts, circumstances, or law” within 10 days of notice of entry of the order. A court may also reconsider a prior order on its own motion if there has been a “change of law” that warrants reconsideration. (Code Civ. Proc. § 1008(c).)
Two days after this Court sustained Defendants’ demurrers to the First Amended Complaint (FAC), Marina Pacific Hotel and Suites, LLC v. Fireman’s Fund Insurance Co. (2022) 81 Cal.App.5th 96 (Marina Pacific) was published. The Marina Pacific court reversed a trial court’s order sustaining a demurrer, on the ground that the plaintiff had sufficiently plead “direct physical loss or damage” caused by the Covid-19 virus.
Defendants contend that Marina Pacific is not a “change of law” that permits this Court to reconsider its order sustaining their demurrers. The Court disagrees.
First, Plaintiff moved for reconsideration under CCP §1008(a), which requires “new or different” law. Additionally, whether there is a “change of law” that warrants reconsideration is a decision left to the trial court’s discretion and it is not necessary that the “controlling rules of law have been altered or clarified [so that] adherence to the previous decision would result in [the defeat of] a just cause”. (Int'l Ins. Co. v. Superior Ct. (Rhone- Poulenc Basic Chemicals Co.) (1998) 62 Cal. App. 4th 784, 787–88.) “An appellate decision published during an action’s pendency may be a change of law under section 1008, subdivision (c), and requires a trial court to reconsider its earlier ruling if the decision materially changed the law.” (State of California v. Superior Ct. (Flynn) (2016) 4 Cal. App. 5th 94, 100–01.)
Marina Pacific satisfies these requirements. Marina Pacific is a “new” or “different” law that was not available at the time the Court issued its prior orders and is also a material change in the law.
At the time the Court issued its prior orders, there were only three California Appellate cases that had considered whether there was insurance coverage for damages due to Covid-19: Inns-by-the-Sea v. California Mut. Ins. Co. (2021) 71 Cal.App.5th 688 (Inns-by-the-Sea), Musso v. Frank Grill Co., Inc. v. Mitsui Sumitomo, Ins. USA Inc. (2022) 77 Cal.App.5th 753 (Musso & Frank) and United Talent Agency v. Vigilant Insurance Co. (2022) 77 Cal.App.5th 821 (United Talent).
As this Court explained in its prior orders:
The Inns-by-the-Sea court actually held that “despite Inns’ allegation that the Covid-19 virus was present on its premises, it has not identified any direct physical damage to property that caused it to suspend its operations”. (71 Cal.App.5th 688. See also Musso v. Frank Grill Co., Inc. v. Mitsui Sumitomo, Ins. USA Inc. (2022) 77 Cal.App.5th 753, 759 [“Inns-by-the-Sea holds, without equivocation, that a policy requiring physical loss or damage does not cover losses incurred by reason of the pandemic.”]) In reaching this conclusion the Inns-by-the-Sea court discussed a hypothetical scenario where COVID-19 may cause “direct physical loss” because an employee got COVID-19 requiring the business to shut down (Inns-by-the-Sea, supra, 71 Cal.App.5th at 704-705), but that was dicta and not binding. “[A] discussion of a hypothetical scenario is not a statement of California law.” (United Talent Agency, supra, 77 Cal.App.5th at 839.)
ROA 492, 6/30/2022 Minute Order. The Inns-by-the-Sea court was careful to explain that it was not deciding whether commercial property coverage might be triggered when a “business has alleged it was the target of an order requiring its particular premises to close for a period of time due to the demonstrated presence of a person infected with the COVID-19 virus. For example, such an order hypothetically might be issued to allow a particular business to undertake disinfection procedures or to allow time for the virus to dissipate.” (Inns-by-the-Sea, supra, 71 Cal.App.5th at 699 fn. 12.)
United Talent appeared to foreclose this possibility. The United Talent court held that, as a matter of law, the “presence or potential presence of the virus does not constitute direct physical damage or loss.” (Id. at 835-846.)
The Marina Pacific court disagrees with United Talent. The Marina Pacific court found that under certain circumstances, a plaintiff may indeed adequately plead that COVID-19 constitutes direct physical loss or damage. (81 Cal. App. 5th at 109.)
Marina Pacific Requires Reversal of the Court’s Prior Order.
Plaintiff argues that its allegations are sufficiently similar to the allegations in Marina Pacific to require reversal here. The Court agrees.
Central to the Court’s decision here is a principle often repeated in demurrer rulings, but which is seldom as apposite and important as applied here. “In considering the merits of a demurrer, however, ‘the facts alleged in the pleading are deemed to be true, however improbable they may be.’” Hacker v. Homeward Residential Inc. (2018) 26 Cal.App.5th 270, 280.
Plaintiff here alleges that it closed its doors "because of physical loss and damage" (FAC ¶ 1), that COVID-19 "caused direct physical loss or damage . . . to Goodwill's own properties and surrounding properties, by altering the physical conditions of properties” and "physically alters and damages the air within buildings such that the air is no longer safe to breathe . . . and attaches itself to surfaces and properties and causes a physical change in the condition of the surfaces and properties” (FAC ¶ 3), that "based in part on this physical loss and damage to property, starting in March 2020, the state of California and Orange County issued orders prohibiting Goodwill from accessing and operating its stores and other properties,” (FAC ¶ 4), that the virus, "which has a material existence and is contained in respiratory droplets, adheres to, attaches to, and alters the surfaces of the property and surfaces upon which these physical droplets land, and physically changes these once safe services to ‘fomites.’ Fomites are objects, previously safe to touch, that now serve as agents and mechanisms for transmissions of deadly, infectious viruses and diseases." (FAC ¶ 24) “Thus, the COVID-19 virus physically changes properties and surfaces such that contact with these properties and surfaces, which previously would have been safe, are now deadly and dangerous. This constitutes real and severe damage to and loss of the properties.” (FAC ¶ 25.)
In compliance with Marina Pacific, this Court cannot as a matter of common sense or lay opinion conclude that these allegations are so demonstrably wrong that they are not entitled to the rule that for purposes of demurrer they are “deemed to be true, however improbable they may be.” In the language of Marina Pacific, the Court reverses its earlier ruling (which had been based on United Talent) because it finds that Plaintiff has “adequately alleged losses covered by [Defendants’ policies]” and “[Plaintiff is ] entitled to an opportunity to present [its] case, at trial or in opposition to a motion for summary judgment.” Marina Pacific at 114.
Plaintiff is ordered to give notice.