Insured Granted Right to Amend COVID-19 Complaint

    The California Court of Appeal determined the insured’s complaint was properly dismissed, but the lower court erred in not granting leave to amend. Tarrar Enterprises, Inc. v. Associated Indemn. Corp., 2022 Cal. App. LEXIS 811 (Cal. Ct. App. Sept. 22, 2022).

    Tarrar Enterprieses, Inc. operated a utility consultnat business. The premises were closed in March 2020 due to local government orders. This caused Tarrar to suffer loss of business income. Its insurer, Associated, denied Tarrar’s claim for “business income loss.” Tarrar sued, but the trial court granted Associated’s general demurrer without leave to amend. Tarrar appealed.

    The appellate court noted another Court of Appeal in Marina Pacific Hotel& Suites, LLC v. Fireman’s Fund Ins. Co., 81 Cal. App. 5th 96 (2022), ruled for the insured because it pled “direct physical loss or damage” and state a claim for breach of the insurance policy. The trial court’s disbelief of the allegations, whether ultimately reasonable or not, were reversed. 

    Here, Tarrar’s complaint did not allege the necessary “direct physical loss of or damage to property,” so the demurrer was properly granted. However, Tarrar argued in the trial court that if the demurrer was sustained, it should be granted leave to amend. The trial court ruled to the contrary.

    The Court of Appeal held that denial of leave to amend was approriate only when it conclusively appeared that there was no possiblity of alleging facts under which recovery could be obtained. Thus, denail of leave to amend was error.