90 Cal.App.5th 1064
Cal. Ct. App.2023Background:
- Chumash Casino & Resort closed March–June 2020 after evidence staff had COVID-19 and the tribal business committee ordered closure, alleging COVID-19 caused "physical loss or damage" to the property.
- Chumash submitted an insurance claim under an ‘‘All Risk’' Lexington policy that covered "direct physical loss or damage" and business interruption tied to such loss.
- Chumash’s experts (a physician/researcher and a biochemist) opined the virus was present on surfaces and that surfaces "were physically altered" and "may be permanently altered." Chumash installed plexiglass barriers and other pandemic precautions before reopening.
- Lexington’s expert (a microbiologist) testified SARS‑CoV‑2 does not damage property surfaces and is removable by standard disinfection; Lexington denied coverage and moved for summary judgment.
- The trial court granted summary judgment for Lexington, ruling COVID‑19 does not cause "direct physical loss or damage"; the Court of Appeal affirmed, holding Chumash failed to present sufficient evidence identifying specific damaged property, showing physical impairment, or proving economic loss from property damage.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether COVID‑19 presence on surfaces constitutes "direct physical loss or damage" under the policy | Virus contamination physically altered surfaces, causing property damage and thus covered loss | Virus does not physically damage property; contamination is removable and not a covered loss | Court: Plaintiff failed to prove the virus caused compensable physical damage; mere presence/alteration allegations insufficient |
| Whether Chumash’s expert evidence created a triable issue on property damage | Experts said surfaces were "physically altered" and "may be permanently altered" | Experts’ assertions are conclusory; opposing expert says no damage and contamination is remediable | Court: Experts’ generalized statements were insufficient—plaintiff had to identify specific damaged items and show they were unusable or required replacement |
| Whether loss of use/closure alone supports coverage | Closure and lost income resulted from virus presence and orders; that reflects physical loss/damage | Closure and lost income without proof of property damage do not trigger coverage | Court: Business interruption requires underlying physical loss; shutdown orders alone do not create coverage absent proof of property damage |
Key Cases Cited
- Simon Marketing, Inc. v. Gulf Ins. Co., 149 Cal.App.4th 616 (establishes threshold requirement of physical loss or damage for property insurance recovery)
- Marina Pacific Hotel & Suites, LLC v. Fireman's Fund Ins. Co., 81 Cal.App.5th 96 (rejects blanket rule that COVID‑19 cannot cause property damage; courts should evaluate evidence of alteration and damage)
- United Talent Agency v. Vigilant Ins. Co., 77 Cal.App.5th 821 (held COVID‑19 does not cause physical damage as a matter of law; discussed by other courts)
- Brown Jug, Inc. v. Cincinnati Ins. Co., 27 F.4th 398 (federal court found complaint sufficient where plaintiff alleged COVID‑19 materially altered property)
- Los Angeles Lakers, Inc. v. Federal Ins. Co., 591 F.Supp.3d 672 (federal court accepted pleadings alleging virus presence materially altered property as sufficient at early stage)
- Abdelhamid v. Fire Ins. Exchange, 182 Cal.App.4th 990 (requires identification of damaged property and proof of loss amount in opposing summary judgment on property damage claims)