Showa Hosp. v. Sentinel Ins. Co.
| Docket Number | D080008 |
| Decision Date | 30 May 2023 |
| Parties | SHOWA HOSPITALITY, LLC et al., Plaintiffs and Appellants, v. SENTINEL INSURANCE COMPANY, LIMITED, Defendant and Respondent. |
| Court | California Court of Appeals Court of Appeals |
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of San Diego County Super. Ct. No. 37-2020-00018311-CU-IC-CTL Ronald F. Frazier Judge. Affirmed.
LiMandri &Jonna, Charles S. LiMandri, Paul M. Jonna, and Milan L. Brandon II, for Plaintiffs and Appellants.
Steptoe &Johnson, Robyn C. Crowther, Sarah D. Gordon; Wiggin and Dana, Tadhg Dooley, and Jonathan M. Freiman, for Defendant and Respondent.
As with many businesses that suffered losses during the COVID-19 pandemic, Showa Hospitality, LLC and The Taco Stand Orange Corp. (together, Showa) brought suit against their insurer, Sentinel Insurance Company, Limited (Sentinel), after Sentinel declined a tender under a commercial property insurance policy. The superior court granted Sentinel's motion for judgment on the pleadings, finding there was no coverage under the subject policy for Showa's claimed business loss.
Showa appeals the ensuing judgment of dismissal, arguing this case is different from the dozens that have preceded this one. To this end, Showa points out that it has alleged a direct physical loss, which triggers coverage under the policy. Moreover, it emphasizes that the subject insurance policy contains a unique provision, specifically covering losses attributable to a virus. We reject these contentions. Showa's allegations of direct physical loss are mere legal conclusions and not based on any alleged facts. Further, the allegations in the operative complaint as well as Showa's arguments in its briefs make clear that the causes of Showa's business losses here are not attributable to the presence of the COVID-19 virus on the insured premises, but instead, the losses are the alleged result of certain government orders, community infection, and the assumption that the virus is ubiquitous. Because Showa cannot satisfy the threshold requirements to make a viable claim that there is coverage under the subject policy, we conclude the superior court did not err in granting Sentinel's motion for judgment on the pleadings. Accordingly, we affirm.
Showa operates a fast food casual Mexican restaurant (the Restaurant), offering both dine-in and take-out facilities with both indoor and outdoor dining areas. The Restaurant is located in downtown Orange, California, close to Disneyland, Knotts' Berry Farm, malls, and multiple state beaches.
In early 2020, Showa purchased a commercial property policy from Sentinel. The policy was a Spectrum Business Owner's Policy No. 72 SBA BC2838 (the Policy), which provided coverage for the Restaurant from March 4, 2020 to March 4, 2021.
The Policy, consisting of 110 pages, included provisions Showa argues are relevant here. For example, under the property coverage declarations, the Policy included coverage under a "Business Income" provision, which obligated Sentinel to "pay for the actual loss of [b]usiness [i]ncome [Showa] sustain[ed] due to the necessary suspension of 'operations'" during a "period of restoration" "caused by direct physical loss of or physical damaged to" the insured property.
The Policy also included an "Extra Expense" provision that required Sentinel to "pay reasonable and necessary" expenses Showa incurred during a" 'period of restoration'" that it "would not have incurred had there been no direct physical loss or physical damaged to the property." The Policy defined "Period of Restoration" as "the period of time" that "begins with the date of direct physical loss or physical damage" and ends when the property should be "repaired, rebuilt or replaced" or the "business is resumed at a new, permanent location."
In addition, the "Special Property Coverage Form" provided that Sentinel "will pay for direct physical loss of or physical damage" to the insured property "caused by or resulting from a Covered Cause of Loss." The Policy goes on to define "Covered Causes of Loss" as "risks of direct physical loss," except where otherwise excluded or limited.
The Policy also included an endorsement for "Limited Fungi, Bacteria, or Virus Coverage." That endorsement contained provisions that (1) added limited coverage in certain circumstances for "loss or damage" "caused by" "virus" (the Limited Virus Coverage), subject to certain conditions requiring that the virus was the "result of" one or more of a list of enumerated causes, and (2) excluded any "loss or damage caused directly or indirectly by" the "[p]resence, growth, proliferation, spread or any activity of 'fungi', wet rot, dry rot, bacteria or virus" (the Virus Exclusion), subject to an exception where the loss or damage fell within the Limited Virus Coverage.
Additionally, the Policy provided Business Income Coverage for losses caused by physical loss or damage at dependent properties "caused by or resulting from a Covered Cause of Loss." Further, the Policy defined a dependent property as
On or about March 23, 2020, Showa submitted a claim under the Policy, seeking coverage for "loss of business income due to the community spread and infection of coronavirus at the Insured Properties, and the civil response thereto."[1] Sentinel denied the claim. Showa then filed suit.
In the operative complaint, the first amended complaint, Showa alleged that, in March 2020, a series of government stay-at-home orders issued in response to the coronavirus "severely impacted commercial enterprises, including restaurants in Orange, California." Although acknowledging that restaurants and food services were deemed "Essential Critical Infrastructure," exempting them from governmental orders, Showa alleged that, in response to an executive order issued by California's governor, it was "forced to prohibit on-site dining, severely limiting the number of customers that [it] could service and effectuating a disastrous evaporation of [its] business income."
Showa also averred that "[b]eginning in March 2020, local and state governments across the country urged their citizens to act as if they were infected and as if everyone around them was infected with a novel and highly infectious coronavirus." As such, Showa claimed its properties "are, and continue to be, repeatedly infected by individuals coming and going from the premises until the virus is eliminated in the region."
Showa further alleged that the United States federal government issued travel bans, prohibiting "foreign nationals" from several countries from entering the United States. It also noted that, per a local order from the Orange County Health Officer, restaurants were only permitted to remain open for delivery or carry out.
In addition, Showa represented that "[i]n or about the early weeks of March 2020, the government, scientific community, and those personally affected by the virus recognized the coronavirus as a cause of real physical loss and damage." Moreover, Showa claimed the coronavirus pandemic was (Footnote omitted.) Showa alleged that the government closure orders as well as community infection in Orange County caused Disneyland, Knott's Berry Farm, nearby malls, state beaches, and other business located near Shona's restaurant to close down. These events "caused a precipitous decline in business income."
The operative complaint contained causes of action for breach of contract, breach of the implied covenant of good faith and fair dealing, declaratory relief, and professional negligence. These causes of action were based on Sentinel's denial of Showa's claim under the Policy.
Sentinel filed a motion for judgment on the pleadings.[2] Showa opposed that motion. The superior court granted the motion, finding that there was no coverage under the Policy for Showa's claims. The court subsequently entered a judgment in favor of Sentinel, dismissing the operative complaint with prejudice. Showa timely appealed.
In addition to the typical briefing in an appellate matter, we allowed Sentinel to file a supplemental respondent's brief to address three cases Showa cited in the reply brief, all of which were issued after Sentinel filed its original respondent's brief. Also, we permitted the parties to file supplemental briefs to address the impact, if any, of the recently decided case John's Grill, Inc. v. The Hartford Financial Services Group, Inc. (2022) 86 Cal.App.5th 1195, review granted March 29, 2023, S278481 (John's Grill).
" ...
To continue reading
Request your trial