I recently wrote about lessons that could be learned from the ongoing insurance coverage jurisprudence related to the coronavirus / Covid-19 pandemic. That article discussed broad trends that had developed and cohered across this vast litigation landscape, through multiple decisions in many courts over the course of several months or more. Although descriptive, most of those trends have been and are anti-plaintiff, anti-policyholder, and anti-insurance recovery.
Is a pro-policyholder trend on the horizon?
This piece is different in two important respects. First, it focuses on a point that has not yet achieved a level of pervasiveness that could be fairly characterized as a trend, although it should and hopefully will reach that point soon. Second, this piece discusses a positive outcome for policyholders seeking to recover for their coronavirus- and Covid-19-related losses.
Amici curiae American Property and Casualty Insurance Association and the National Association of Mutual Insurance Companies seek to distinguish Marina Pacific on similar grounds. They also contend that allowing La Cava’s complaint to proceed would destabilize insurance markets by upholding claims for losses due to any regulation that limits a business’s operations, such as a noise ordinance mandating early closure or a fire regulation reducing occupancy and requiring reconfiguration. We are unpersuaded. These types of regulations would not involve allegations that “an external force acted on the insured property causing a physical change in the condition of the property,” as alleged by La Cava with respect to the COVID-19 virus contamination of its restaurant. (Marina Pacific, supra, 81 Cal. App.5 th at p. 107; accord, MRI Healthcare, supra, 187 Cal. App. 4th at p. 779.) Moreover, to the extent amici contend we should interpret the Century-National and similar policies not to apply to COVID-19 virus contamination for policy reasons, that is an argument best made to the Legislature, not directed to our review of the adequacy of the allegations in the first amended complaint.
So what are we talking about? Well, both of these different points can be found in a very recent and remarkable decision of a California intermediate state appellate court, captioned Shusha, Inc. v. Century-National Insurance Co., No. B313907, 2022 WL 17663238 (Cal. Ct. App. Dec. 14, 2022). In a footnote, the Shusha court rejected the insurance industry’s well-worn, “woe-is-me” argument that paying Covid-19 claims would lead the bankruptcy or insolvency of multiple insurance companies and perhaps the collapse of the entire first-party property insurance market. The court found that was an argument better left for the legislature, and that any cries of insolvency were overblown:
Finally, an appellate court addressed head on the insurance industry’s woe-is-me argument, which in addition to being a policy issue better left to state legislature, is also not empirically supportable in any respect. See, e.g., Richard Holober, Progressive Insurance Hoards Covid-19 Windfall Profits, Consumer Federation of California (Aug. 13, 2020); Claire Wilkinson, Chubb reports gains in Q3 profit, net premium written, Business Insurance (Oct. 28, 2020); Angela Childers, CNA Reports Higher Net Income Despite Cat Losses, Business Insurance (Nov. 2, 2020); J. Greenwald, Berkley Reports 161% Jump in Profits, Business Insurance (Jan. 26, 2021). Hopefully the Shusha court’s rejection of the insurance industry’s woe-is-me argument becomes a pro-policyholder trend in the Covid-19 jurisprudence.