Wade Clark Mulcahy LLP

<p style="text-align: justify;">A prominent California law firm, along with two commercial property owners and a restaurant have sued their insurer in Los Angeles County Superior Court seeking coverage for losses related to the coronavirus pandemic.</p>
<p style="text-align: justify;">The four suits, filed on April 9 and April 10, 2020, seek declarations that Travelers Indemnity Co. of Connecticut is obligated to provide coverage under the policyholders’ “all-risk” policies. According to the plaintiffs, Travelers has accepted their premium payments with no intention of covering loss and shutdown from a virus pandemic under the civil-authority coverage section of the Travelers policies.</p>
<p style="text-align: justify;">Los Angeles Mayor Eric Garcetti ordered all nonessential businesses in the city to close on March 15. The order followed a similar statewide order from California Governor Gavin Newsome issued on the same day. The plaintiffs also name the Los Angeles Mayor as a defendant in the suits.</p>
<p style="text-align: justify;">According to the plaintiffs’ complaints, Mayor Garcetti’s order specifically referenced “dire risks of exposure with the contraction of Covid-19 and evidence of physical damage to property.” All four plaintiffs have used this language to couch their argument for coverage under the business income and extra expense coverage parts for closures by order of civil authority. In addition, the civil authority coverage parts of the policies here include “direct physical loss” and indirect damage.</p>
<p style="text-align: justify;">Notably, it appears, the plaintiffs will argue that the global scientific community’s consensus is that the coronavirus is a cause of “real physical loss and damage.” According to the complaints, Covid-19 has physically affected the plaintiffs’ property since the virus can remain on surfaces or objects for up to 28 days. Each lawsuit seeks a declaratory judgment that Mayor Garcetti’s order triggers coverage under the policies.</p>
<p style="text-align: justify;">Though in their early stages, these suits offer a glimpse into what insureds will likely argue in order to trigger coverage under their policies. The particularly noteworthy argument is making use of both the shutdown civil authority order, as well as the scientific consensus on the ability of the virus to remain on surfaces and objects for a substantial period of time.  We’ll continue to keep you posted on this emerging area of law.</p>
<p style="text-align: justify;">Thanks to Joseph Anzalone for his contribution to this post.  If you have any questions or comments, please contact <a href="mailto:chayes@wcmlaw.com">Colleen Hayes</a>.</p>