Despite Misapplying California Law, Federal Court Acknowledges Virus May Cause Physical Alteration to Property

Statute of liberty weighing scales

Judge Stephen V. Wilson of the Central District of California, entered the latest ruling in the ongoing saga of the COVID-19 business interruption coverage dispute between celebrity plaintiff’s attorney Mark Geragos and Insurer Travelers.

October 26, 2020
Scott P. DeVries, Michael S. Levine & Michael L. Huggins - Hunton Insurance Recovery Blog

On August 28, Judge Stephen V. Wilson of the Central District of California, entered the latest ruling in the ongoing saga of the COVID-19 business interruption coverage dispute between celebrity plaintiff’s attorney Mark Geragos and Insurer Travelers.

The case, 10E, LLC v. The Travelers Indemnity Co. of Connecticut, was filed in state court. Travelers removed to federal court, where Geragos sought remand and Travelers moved to dismiss. Judge Wilson denied remand and granted the Motion to Dismiss, finding plaintiff did not satisfactorily allege the actual presence of COVID-19 on insured property or physical damage to its property. This holding is inconsistent with long standing principles of California insurance law and appears to improperly enhance the minimal pleading threshold under Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (To survive a motion to dismiss, a complaint need only allege a claim “that is plausible on its face.”).

After rejecting Geragos’ attempt to have the case remanded based on a finding that Geragos had fraudulently joined a defendant to avoid removal, the Judge proceeded to the Motion to Dismiss which raised three issues: (1) the effect of the Virus Exclusion in the Travelers’ Policy, (2) whether plaintiff failed to allege that the governmental orders prohibited access to its property, and (3) whether plaintiff could “‘plausibly allege that it suffered ‘direct physical loss or damage to property’ as required for civil authority coverage.’” Rather than address the effect of the exclusion, which would be the narrowest issue (this exclusion is not present in all policies), the Court proceeded directly to the third issue, which has the broadest potential application.

Reprinted courtesy of Scott P. DeVries, Hunton Andrews Kurth, Michael S. Levine, Hunton Andrews Kurth and Michael L. Huggins, Hunton Andrews Kurth

Mr. DeVries may be contacted at sdevries@HuntonAK.com
Mr. Levine may be contacted at mlevine@HuntonAK.com
Mr. Huggins may be contacted at mhuggins@HuntonAK.com



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