Court of Appeal issues groundbreaking opinion on COVID insurance coverage in favor of policyholders – Insurance Claims


In an opinion that is the first of its kind before the California Courts of Appeals, the Court of Appeals for the Second District, Division 7, has ruled that certain business losses related to COVID-19 may be covered by the provisions of the policy. business interruption insurance (BII). .
Marina Pacific Hotels & Suites, LLC v Fireman’s Fund Ins.n° B316501, 2022 WL 2711886 (Cal. Ct. App. July 13, 2022) (slip op.), available on

The groundbreaking opinion gives a head start to policyholders struggling with debt and business losses in the age of the pandemic. The ruling may also inspire the California Supreme Court, other California Courts of Appeals, and the United States Court of Appeals for the Ninth Circuit (among other nationwide reviewing courts) to give policyholders the possibility of proving BII coverage in the context of the pandemic.

Marina Pacific is an exciting development in the law regarding COVID-19 BII coverage. Other important decisions are expected to be made in the coming months and will be carefully watched by insurance practitioners, business owners and the public as the courts continue to grapple with the fallout from the pandemic.

The Marina Pacific Court Unanimously Rules Insureds May Proceed with COVID-19 Commercial Claims

In Marina Pacificthe owners of a group of restaurants and hotels in Venice Beach, California, suffered virus-related losses due to the pandemic. ID. to *1, op. to 5. Their insurance policy provided: “[W]We will pay for direct physical loss or damage to [the insured property] caused by or resulting from a covered cause of loss during the period of insurance. »
ID. to *1, op. at 3. The policy included separate “communicable disease coverage,” defined as “any disease, bacteria, or virus that can be transmitted directly or indirectly from a human or animal to a human.” Identifier. to *2, op. at 4. The policy also contained a “mortality and illness exclusion”, although it did not contain the ISO standard “virus or bacteria loss exclusion”.
Identifier. to *10-11, op. At 25 years.

When their insurance company denied coverage, the plaintiffs sued for breach of contract, bad faith and related legal claims. Identifier. to *2, op. at 5. The trial court upheld the insurer’s objection, citing MRI Healthcare Center of Glendale, Inc. v. State Farm General Ins. Co.187 Cal.App.4th 766 (2010), and plaintiffs appealed. Marina Pacific, 2022 WL 2711886, at *4-5, op. at pp. 9-11.

In a published opinion, the California Court of Appeals (Second District, Division 7) reversed and held that the trial court erred in upholding the insurer’s objection without leave to amend.
ID. to *1, op. at 2-3. Rather, the trial court should have deferred its decision on the merits until summary judgment or the trial stage. Identifier. The Court of Appeal disagreed that
Health MRI required the opposite result, concluding that the plaintiffs in Health MRI have “unquestionably” pleaded direct physical loss or damage to their covered property in MRI Healthcare definition of this term, i.e. a distinct and demonstrable physical alteration of the property.
ID. to *7-8, op. at 17-18. For example, the COVID-19 virus “not only lives on surfaces but also binds to surfaces through physicochemical reactions involving surface cells and proteins, which transform the physical state of the property.” ID. to *8, op. at 18-19.

The Marina Pacific The court also determined that the plaintiff’s “communicable disease coverage” expressly provided coverage in the event of the spread of a virus.
ID. to *10, op. at 24. Further, the court held that the “mortality and disease exclusion” does not
not exclude coverage because the policy did not contain the ISO standard exclusion for “the exclusion of loss due to virus or bacteria”. ID. to *10-11, op. at 25-27.

The Court of Appeals acknowledged that it might be more “efficient” for trial courts to dismiss such cases on the basis of “common sense and experience”, but the civil justice system requires that Judges first review the evidence. ID. to *11, op. at 27 years old.

Immediate potential impact of Marina Pacific

Marina Pacific reflects an emerging trend allowing policyholders to advance their business interruption insurance claims in the wake of the coronavirus pandemic. Together with Cajun Conti LLC v Certain Lloyd’s Underwriters, LondonNo. 2021-0343, 2022 WL 2154863 (La. Ct. App. Jun. 15, 2022) (slip op.), and a growing number of trial court cases across the state and nation, continuing developments are expected. See (collection of nationwide cases regarding COVID-19 BII litigation).

These new cases go against an earlier trend favoring insurers, placing their stare decisis effect at the center of discussions.
See, for example, Mudpie, Inc. c. Travelers Case. Ins. Co. of Am.15 F.4th 885 (9th Cir. 2021) (pre-Marina Pacificcase making Erie assumes California law would not cover business losses related to COVID-19); Musso & Frank Grill Co., Inc. v. Mitsui Sumitomo Ins. United States Inc.., 77 Cal. App. 5th 753 (2022); United Talent Agency vs. Vigilant Ins. Co.77 Cal.App.5th 821, 830 (2022); Inns-by-the-Sea c. Cal. Mut. Ins. Co.71 Cal.App.5th 688, 706 (2021) (the “Musso and Franck business series”).

Marina Pacific Precedent Effect in California Courts of Appeal

Because there is no “horizontal stare decisis” in California, sister appellate courts are free to distinguish or deviate from the reasoning of another opinion of the California Court of Appeals. See In re Marriage of Shaban88 Cal. App. 4th 398, 409 (2001); In re KF Dairies, Inc., 224 F.3d 922, 924-25 (9th Cir. 2000). Therefore, future California Court of Appeals panels may follow Marina Pacificand may refuse to follow the Musso and Franck case line.

Marina Pacific Precedent Effect in California Superior Courts

Likewise, now that Marina Pacific introduces a division of authority between the California Courts of Appeal, the California trial courts are free to decide which line of authority to choose – that is, the Musso and Franck case line, or
Marina Pacific– the one that the Superior Court judge deems the most convincing. See Auto Equity Sales, Inc. c. Superior Ct.369 P.2d 937, 940 (Cal. 1962).

And of course, California courts are not obligated to follow the Ninth Circuit’s decision in Mudwhich is not binding on the courts of the State of California. See, for example, Venegas c. Cty. of the87 P.3d 1, 8-9 (Cal. 2004) (refusing to follow Ninth Circuit precedent with which the court disagreed).

Marina Pacific precedent effect in the Ninth Circuit

As a general rule, the Ninth Circuit adheres to the prior opinions of its three-judge panels. If this “circuit law rule” is followed, future Ninth Circuit three-judge panels will abide by Mud (when they deem it applicable), even if
Marina Pacific went the other way, until the full ninth homer revisited bench issues.

However, the circuit law rule is not exempt from exceptions, especially when it comes to the Federal Court’s decision
Erie guess the state law that is later challenged by that state’s appellate courts. See, for example, In re Watts298 F.3d 1077, 1083 (9th Cir. 2002); Stephan vs. Dowdle, 733 F.2d 642, 642 (9th Cir. 1984). Now that the second district of Marina Pacific ruled in favor of the insureds, the Ninth Circuit in future and pending COVID-19 BII appeals (and there are many) will not necessarily be bound by its own prior precedents dismissing such insurance claims under California law (i.e. under Mud and its companion cases).

Another possible outcome is that the Ninth Circuit, faced with a division of authority among the California appellate courts, may prefer to wait and see if the California Supreme Court will act. The Ninth Circuit can also certify the matter to the Supreme Court of California. See Cal. R.Ct. 8.548. At least,
Marina Pacific would allow the Ninth Circuit to reconsider the issue en banc. See Fed. R.App. P.35(a).

The public as well as the legal and insurance industries will be watching further developments in this area after theMarina Pacific, as the law regarding COVID-19 BII coverage continues to take shape.

And after? Beyond Marina Pacific

In addition to Marina Pacifica large number of business interruption appeals related to COVID-19 are pending before the California appellate courts.

In particular, the Court of Appeals for the First District has not yet issued an opinion on BII coverage for losses related to the coronavirus pandemic, but will have the opportunity to do so in the near future in a list of ongoing business. See, for example, Apple Annie LLC v. Ore. Mut. Ins. Co.No. A163300 (Cal. Ct. App. 1st Dist. Div. 2); Tarar enters. vs. Assoc. Indem. Corp.No. A162795 (Cal. Ct. App. 1st Dist. Div. 2); Anchors & Whales LLC c. Crusader Ins. Co.No. A164412 (Cal. Ct. App. 1st Dist. Div. 2); John’s Grill, Inc. c. The Hartford Fin. Serves. Grp., Inc.No. A162709 (Cal. Ct. App. 1st Dist. Div. 4);
Amy’s Kitchen, Inc. v. Fireman’s Fund Ins. Co.No. 163767 (Cal. Ct. App. 1st Dist. Div. 4); Peanut Wagon Inc. v. Allanz Global Corp. & SpecialtiesNo. A163136 (Cal. Ct. App. 1st Dist. Div. 5).

In addition, the California Supreme Court is currently considering a petition for review in Musso and Franck.77 Cal.App.5th 753, petition for review filed, No. S274791 (May 27, 2022) (extended time to grant or deny review to August 25, 2022), which, as mentioned earlier, is leading a series of cases favoring insurance companies . The division of authority that Marina Pacificcreated may inspire the Supreme Court of California (in Musso and Franck or another motion for review with similar issues presented) to grant a review – and possibly determine once and for all whether policyholders can outweigh the increase in BII claims as a result of the ongoing pandemic. See Cal. R.Ct. 8,500(b)(1).

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.


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