COVID-19 Claim Can be Amended To Consider Endorsements
Although the court agreed the insured’s complaint did not trigger coverage under provisions for business income losses and business access prevention by civil authority, the policy contained other provisions under which the trial court should have granted leave to amend. Boffo Cinemas, LLC v. Fireman’s Fund Ins. Co., 2023 Cal App. Unpub. LEXIS 250 (Cal. Ct. App. Jan. 13, 2023).
Boffo owned and operated five movie theatres containing on-site restaurants, cafes and bars. It was insured by a commercial business policy issued by Fireman’s Fund. When the local government orders at the outset of the pandemic forced Boffo to close its theatres, Boffo submitted a claim for business losses to Fireman’s Fund. The claim was denied because there was no direct physical loss of or damage to property.
Boffo sued Fireman’s Fund for breach of contract. Fireman’s Fund demurred. Boffo argued the complaint stated a claim under the crisis management and event cancellation and postponement provisions by alleging that its losses were caused by the presence of COVID-19 contamination, causing the shut-down of its theaters. Boffo sought leave to amend in the event the court was inclined to sustain the demurrer to address any deficiencies the court identified. The court granted the demurrer because it did not see how an amended complaint would cure the complaint.
On appeal, the court agreed the complaint did not state a cause of action for coverage under the policy’s business income or civil authority provisions. Further, Boffo could not allege facts implicating a scenario triggering coverage under the business income and civil authority provisions of its policy.
The trial court, however, should have granted Boffo leave to amend to attempt to state a cause of action for coverage. The crisis management coverage endorsement provided that Fireman’s Fund would pay for the actual loss of crisis event business income sustained due to the necessary suspension of operations during the crisis event period of restoration. The policy defined a covered crisis event to include “premises contamination.” This included premises contamination by communicable disease. The court could not say conclusively it was impossible for Boffo0 to make out a factual scenario sufficient to trigger coverage.
The same conclusion was reached with respect to Boffo’s ability to allege coverage under the policy’s event cancellation and postponement expense reimbursement endorsement. This endorsement covered non-refundable expenses incurred in connection with a covered special event cancelled due to acts of civil authority that prevented access to the described premises. The trial court erred by denying Boffo live to amend to attempt to state a cause of action for coverage under this provision
