Justia California Court of Appeals Opinion Summaries

Apex Solutions, Inc., a cannabis business, filed a lawsuit against Falls Lake Insurance Management Company, Inc., after the insurance company refused to pay the full amount of a claim Apex filed following a burglary at its facility. The burglars stole a large portion of Apex's cannabis inventory from two separate vaults. Apex claimed that the thefts constituted two separate occurrences, each subject to a $600,000 per occurrence limit under its insurance policy. Falls Lake, however, contended that the thefts constituted a single occurrence, subject to a single $600,000 limit.The Superior Court of California, County of Alameda, granted summary judgment in favor of Falls Lake, ruling that a single per occurrence limit applied. The court also rejected Apex's claim for additional payments under its business interruption coverage.On appeal, the Court of Appeal of the State of California, First Appellate District, Division Four, affirmed the lower court's ruling on the per occurrence limit, agreeing that the thefts constituted a single occurrence. However, the appellate court found that Apex had raised a triable issue of fact regarding the calculation of its lost business income. The court therefore reversed the judgment in part and remanded the case for further proceedings on that issue. View "Apex Solutions v. Falls Lake Insurance Management Co., Inc." on Justia Law

In this case, the Court of Appeal of the State of California was asked to determine a dispute over an insurance claim between Apex Solutions, Inc. (Apex), a cannabis business, and Falls Lake National Insurance Company (Falls Lake). In June 2020, burglars broke into Apex's facility and stole the contents of two vaults containing cannabis inventory, leading to property and business income losses. Apex claimed over $2.5 million for the loss from Falls Lake. The disagreement between the parties centered on whether the theft constituted one or two occurrences under the insurance policy, which would determine the payout limit.The court held that the theft was a single occurrence, based on the evidence that it was a coordinated raid. However, it also concluded that there was a disputed issue concerning the proper calculation of Apex’s claim of lost business income. This issue was remanded for further proceedings in the lower court.In reaching its decision, the court applied existing principles of contractual and insurance law, with a focus on the interpretation of the term "occurrence" in the insurance policy. The court emphasized the importance of considering the cause of the loss and the coordination of the activities leading to the loss in determining whether it was a single occurrence.In conclusion, the court partially reversed the judgment, affirming the single occurrence ruling but remanding the case for further proceedings on the lost business income claim. View "Apex Solutions, Inc. v. Falls Lake Ins. Management Co., Inc." on Justia Law

The case concerns Brooklyn Restaurants, Inc., a company that operates a local diner in California. The company filed a lawsuit against its insurer, Sentinel Insurance Company, Limited, after the insurer declined a claim under a commercial property insurance policy following a partial shutdown of the diner during the COVID-19 pandemic. The lower court granted Sentinel’s motion for judgment on the pleadings, ruling there was no coverage under the policy for Brooklyn’s claimed business loss. However, Brooklyn appealed, asserting that its case was unique from other COVID-19 related insurance cases filed in the state, as it had alleged a direct physical loss which should trigger coverage under the policy.Brooklyn also pointed out that their insurance policy contained a unique provision specifically covering losses attributable to a virus. Therefore, they argued, physical loss should include the cleaning of an area infected by the coronavirus. The Court of Appeal, Fourth Appellate District Division One State of California, agreed that the policy was reasonably susceptible to that interpretation. They also determined that Brooklyn had adequately alleged a direct physical loss or damage under the policy, which raised the possibility of coverage.However, the policy also included certain exclusions and conditions applicable to coverage for a loss or damage resulting from a virus. Brooklyn argued that these exclusions and conditions rendered the policy illusory. The court agreed that at the pleading stage, Brooklyn had done enough to raise the issue that its policy might be illusory, which in turn raised factual questions that required further discovery and evidence collection. Therefore, the court reversed the judgment and remanded the case back to the lower court with instructions to enter an order denying Sentinel’s motion for judgment on the pleadings. View "Brooklyn Restaurants, Inc. v. Sentinel Insurance Co., Ltd." on Justia Law

In this case, the Court of Appeal, Fourth Appellate District Division One State of California decided on a matter concerning an automobile insurance policy. The plaintiffs, Silvia Escarcega and Alberto Molinar, who are the parents of Tania Molinar, filed a lawsuit against 21st Century Insurance Company (defendant) for refusal to defend or indemnify their daughter in a lawsuit brought against her following a car accident she caused. The insurer denied coverage on the grounds that the policy had been cancelled due to nonpayment of premiums prior to the accident. The plaintiffs argued that the insurer had a duty to give advance notice of cancellation not only to them as policyholders but also to their adult daughter who was named as an insured driver on their policy and whose vehicle was also insured under the policy.The court held that under Insurance Code section 662, subdivision (a), the insurer was required to give advance notice of cancellation to the adult daughter. Because the insurer did not give notice to the adult daughter, the policy was still legally in effect when she got into the accident driving her covered vehicle without knowledge of the purported cancellation. Therefore, the court reversed the trial court's summary judgment in favor of the insurer on claims arising out of its refusal to defend or indemnify the daughter. The court remanded the case for further proceedings. View "Molinar v. 21st Century Insurance Co." on Justia Law

A dispute arose between The Pep Boys — Manny, Moe & Jack and The Pep Boys Manny Moe & Jack of California LLC (collectively, Pep Boys) and their insurers, Old Republic Insurance Company (Old Republic); Executive Risk Indemnity Company, formerly known as American Excess Insurance Company (American Excess); and Fireman’s Fund Insurance Company (Fireman’s Fund). Pep Boys had been sued by hundreds of people claiming harm from exposure to asbestos in products sold by Pep Boys. Following these claims, Pep Boys sought coverage from their insurers who had sold them a "tower" of commercial general liability policies providing coverage between February 1, 1981, and July 1, 1982.The insurers claimed that their respective policies provided only a single aggregate annual limit, while Pep Boys filed a declaratory judgment action against them, arguing that each policy provided two aggregate annual limits, one for the first 12 months and one for the remaining period. The trial court ruled in favor of the insurers, holding that the policies each provided only a single aggregate limit.In the appeal, the Court of Appeal of the State of California First Appellate District Division Four held that Old Republic's and Fireman’s Fund's policies, which were for terms longer than 12 months, contained two separate annual periods for the purposes of the annual aggregate limits of liability. However, it agreed with the trial court that the American Excess policy, which had different language, had only one period for purposes of that policy’s annual aggregate limits. Therefore, the appellate court reversed the trial court’s judgment in part. View "The Pep Boys v. Old Republic Insurance Company" on Justia Law

The plaintiff, Kathryn Tornai, filed a lawsuit against her insurance company, CSAA Insurance Exchange, alleging breach of contract and bad faith for not paying her underinsured motorist claim. In response, CSAA filed a motion to compel arbitration, in line with a provision in Tornai's automobile policy. The trial court denied the motion, leading to CSAA's appeal. The Court of Appeal of the State of California First Appellate District Division Two reversed the trial court's decision. It concluded that the parties disagreed over the amount of underinsured motorist damages owed to Tornai, leading to the requirement for arbitration under section 11580.2, subdivision (f) and the terms of the policy. The appellate court found that the trial court erred in denying CSAA's motion to compel arbitration. Therefore, it instructed the lower court to grant CSAA's motion to compel arbitration of the underinsured motorist damages. View "Tournai v. CSAA Insurance Exchange" on Justia Law

This is a coverage dispute between Pep Boys and their insurers, Old Republic Insurance, Executive Risk Indemnity, and Fireman’s Fund Insurance, over the interpretation of their insurance policies' annual aggregate limits. The policies were for terms longer than 12 months. The core issue was whether the policies contained two separate annual periods for the purposes of the annual aggregate limits of liability.The Court of Appeal of the State of California, First Appellate District, Division Four, held that for Old Republic and Fireman’s Fund's policies, which had similar language, the phrase "each annual period" within the policy term created two separate aggregate limits of liability, one for the first 12 months and another for the remaining period. The court reasoned that both the language of the policies and the parties' reasonable expectations supported this interpretation. The court noted that the policies' language could not be applied literally because it would either dilute the benefits or create a gap in coverage, neither of which were the insured's intention when extending the policies.However, the court agreed with the trial court that the American Excess policy, which had different language, had only one period for the purpose of that policy’s annual aggregate limits. The court noted that American Excess's policy unambiguously set its limits for the entire duration of the policy, not based on annual periods within the policy term.In conclusion, the court reversed the trial court's judgment in part, ruling in favor of Pep Boys for Old Republic and Fireman’s Fund's policies, and in favor of American Excess regarding its policy. View "The Pep Boys v. Old Republic Ins. Co." on Justia Law

In this case, the National Hockey League and associated parties (plaintiffs) sued their insurer, Factory Mutual Insurance Company (defendant), over losses incurred due to the COVID-19 pandemic under a commercial insurance policy. The plaintiffs claimed that their policy covered physical loss or damage to property due to COVID-19 and sought to overturn a lower court order that struck down most of their coverage theories.The Court of Appeal of the State of California, Sixth Appellate District, found that while the plaintiffs had adequately alleged physical loss or damage from the coronavirus, their insurance policy's contamination exclusion unambiguously excluded coverage for losses due to viral contamination. The court concluded that the policy excluded both the physical loss or damage caused by viral contamination and the associated business interruption losses.The plaintiffs had alleged that the virus physically damaged their property by changing the chemical composition of air and altering the molecular structure of physical surfaces. They also claimed that they had to close their hockey arenas, cancel games, limit fan access, and undertake various remedial measures to mitigate the virus's impact. However, under the terms of their insurance policy, the court found that these losses were not covered because they resulted from viral contamination, which was excluded from coverage under their policy. Thus, the court denied the plaintiffs' petition for review. View "San Jose Sharks, LLC v. Super. Ct." on Justia Law

JRK Property Holdings, Inc. appealed from the order of dismissal entered after the trial court granted a motion for judgment on the pleadings filed by primary insurer Ironshore Specialty Insurance Company (Ironshore) and excess insurers RSUI Indemnity Company (RSUI), Evanston Insurance Company (Evanston), and others (collectively, Insurers). JRK sued Insurers for breach of contract and declaratory judgment after Insurers denied coverage for JRK’s lost business income that resulted from the  COVID-19 pandemic and associated government orders. The trial court entered an order of dismissal in favor of Insurers. JRK appealed.   The Second Appellate District reversed the trial court’s order of dismissal except as to RSUI and Evanston. The court remanded for the trial court to vacate its order granting the motion for judgment on the pleadings and to enter a new order granting the motion without leave to amend as to RSUI and Evanston and denying the motion as to all other defendants. The court explained that under MacKinnon v. Truck Ins. Exchange (2003), the historical background of the pollution exclusion shows its inclusion in insurance policies was intended to address only traditional sources of environmental pollution. The court rejected Insurers’ argument that inclusion of the term “virus” in the definition of a contaminant transforms an exclusion that applies to “pollution” into one that encompasses the spread of a virus due to the normal human activities of breathing and touching surfaces. The court further concluded that the RSUI pathogen exclusion applies because it bars coverage for “losses or damage” caused by the discharge or dispersal of “pathogenic” material. The Evanston pathogen exclusion specifically bars loss or damage caused by the spread of an organic pathogen, defined to include a virus. View "JRK Property Holdings, Inc. v. Colony Ins. Co." on Justia Law

Endeavor Operating Company, LLC (Endeavor) is a “holding company” that owns “various subsidiaries in the entertainment, sports, and fashion business sectors.” Endeavor sued the insurers for (1) declaratory relief and (2) breach of contract related to COVID-19 closures. The insurers demurred to the complaint. The trial court issued a ruling (1) sustaining the demurrer without leave to amend and (2) denying Endeavor’s motion for a new trial. The court modified its initial ruling to find that the “actual” or “threatened presence” of COVID-19 or the SARS-CoV-2 virus “does not constitute a physical loss or damage required to trigger coverage for property insurance coverage” but reaffirmed its initial ruling that the contamination/pollution exclusion applied, which in the court’s view obviated its need to address the argument Endeavor raised for the first time in its new trial motion. Endeavor appealed.   The Second Appellate District affirmed. The court concluded that the insurance policy unambiguously requires “direct physical loss or damage to property” before Endeavor may recover under the business interruption clauses. The court held that Endeavor failed as a matter of law to plead “direct physical loss or damage to property.” The court explained that California courts are in accord that the phrase “direct physical loss or damage to property” means a “‘distinct, demonstrable, physical alteration’” of the insured property. This is the default definition to be applied where a policy does not provide a different definition of “direct physical loss or damage.” The policy here provides no different definition. View "Endeavor Operating Co., LLC v. HDI Global Ins. Co." on Justia Law