APPELLANT’S OPENING BRIEF: IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA Sixth District, THE INNS BY THE SEA, Appellant, v. CALIFORNIA MUTUAL INSURANCE CO., Appellee.

 

https://drive.google.com/file/d/12yZKlCu30WGSFfuOeQFebyf0g6dQUWov/view?usp=sharing 

NO. H048443 

IN THE COURT OF APPEAL 

OF THE STATE OF CALIFORNIA 

Sixth District 

THE INNS BY THE SEA, Appellant, 

v. 

CALIFORNIA MUTUAL INSURANCE CO., Appellee. 

On Appeal from the Superior Court for Monterey County 

Hon. Lydia M. Villareal 

Case No. 20CV001274 

APPELLANT’S OPENING BRIEF 

December 23, 2020 

STATEMENT OF THE CASE 

The Inns by the Sea (“Inns”) purchased an “all-risk” standard form insurance policy from Insurer California Mutual Insurance Co. to protect itself from “direct physical loss of or damage to” its property. When COVID-19 struck, and governmental stay-in-place orders were issued, like many small businesses, Inns was forced to close, incurring substantial and continuing loss. Reasonably believing its loss was covered because (1) COVID-19 on site caused “damage,” as well as (2) COVID-19 and/or the governmental stay-in-place orders prevented the property from being used for its intended purpose and thereby caused substantial “loss,” Inns timely submitted an insurance claim and sought coverage. 

In the litigation below, the trial court granted California Mutual’s motion to dismiss, providing no reasoning in its order. In doing so, the trial court mistakenly failed to apply long-standing California rules of policy interpretation: that every term in an insurance policy be accorded a meaning, and where standard form policy terms are subject to multiple reasonable constructions, a court must accept the construction that achieves the purpose of the transaction – providing insurance. 

California courts, like courts across the country, construe ambiguities in favor of coverage because it is “the insurer [that] typically drafts policy language, leaving the insured little or no meaningful opportunity or ability to bargain for modifications.”1 Said another way, the insurer carries the heavy burden of proving that the insured’s construction is unreasonable. Inns alleged there was a “continuing and increasing presence of the coronavirus on Plaintiff’s property and/or around its premises.” (1 AA 21 ¶ 21.) This is sufficient to establish “damage” under any construction of the term — a lethal substance invaded Inns’ properties, rendering them unfit for human use. And Inns alleged that it was “forced to cease operations based on orders issued from both the County of Monterey and the County of San Mateo … issued in direct response to … dangerous physical conditions,” caused by COVID-19 (1 AA 21 ¶ 20), causing “loss” under any definition of that term. Having satisfied both the “loss” and “damage” requirements, Inns showed two separate and distinct bases for securing coverage. 

Here, the only reasonable meanings of “loss” or “damage” support coverage. But Inns need not prove this — it is California Mutual that must prove Inns’ construction is unreasonable. Not only is California Mutual unable to do so based on the plain meaning of the words, its position is undermined by (1) other language in the policy that clearly signifies virus-related losses are covered, (2) its failure to use exclusions specifically designed to exclude virus-related losses (1 AA 21 ¶ 17), and (3) decisions by other courts that agree with Inns’ construction, rendering it reasonable per se. 

Nor can California Mutual carry its high burden to invoke any exclusion. Exclusions must be construed narrowly, and none apply to the facts here. California Mutual’s arguments on the ordinance or law, loss of use, and acts or decisions exclusions also would, among other things, render certain coverages illusory and must be rejected for these reasons as well. In short, California Mutual bears a heavy burden in conclusively establishing there is no potential for coverage and falls far short of carrying this burden. The trial court erred in granting California Mutual’s motion to dismiss, and Inns respectfully requests that this ruling of dismissal be reversed.

CONCLUSION 

As the drafter of the Policy, seeking dismissal at the earliest stage of the litigation, California Mutual was tasked with conclusively establishing that there was no possibility of coverage under the Policy. This required that California Mutual show that (1) its interpretation is the only reasonable interpretation; and (2) even under its interpretation, the allegations would not create a possibility of coverage. For the reasons set forth above, California Mutual did not meet this burden. As a result, Inns respectfully requests that this Court reverse the Superior Court’s judgment and remand for decision on the remaining issues or to allow Inns to amend its Complaint. Dated: December 23, 2020