McGonigle Law Collaborates with Covington in Potentially Groundbreaking COVID-19 Insurance Case

We recently shared an introduction to a case that could change the course of how businesses leverage their insurance coverage in the United States. Businesses and insurance companies are struggling to come to an agreement on what constitutes a covered loss in relation to COVID-19. Our current case, as well as other cases currently moving through the courts, are determining an answer to that crucial question.
Collaboration between Covington and McGonigle Law may revolutionize COVID-19 Insurance Coverage
We are pleased to share that Covington & Burling LLP, one of the nation’s leading law firms, is teaming up with our office on Tarrar Enterprises, Inc. v. Associated Indemnity Corp., a pioneering case in determining whether insurance companies must cover business losses related to COVID-19 and subsequent shutdowns.

Covington is a worldwide law firm with deep expertise in navigating complex legal issues. Our office is thrilled to collaborate with the Covington team and work together to illustrate Tarrar’s clear coverage under its policy from Associated Indemnity Corp. (AIC). Covington brings a deep bench of litigation experts and a unique ability to manage high-stakes disputes; with the potential ramifications of this case, the stakes could not be higher.
New authority could steer the case’s course
More businesses are challenging insurance coverage denials and taking their cases to court. These cases forge new legal pathways for insured companies to pursue the coverage they are rightly owed under their insurance policies.

One recent case, Marina Pacific Hotel & Suites, LLC et al. v. Fireman’s Fund Insurance Company, addresses this claim. Marina Pacific owns Hotel Erwin and an adjacent restaurant, Larry’s, in Venice Beach, CA.

On July 21, 2020, just four months after COVID-19 became a household concern, the insureds filed their complaint against Fireman’s Fund.
Marina Pacific alleged that the presence of COVID-19 on portions of their property constituted “direct physical loss or damage” that should have been covered under Fireman Fund’s first-party commercial property insurance policy.

The insured’s policy included:
● Business interruption coverage (with a $22 million limit)
● Communicable disease coverage (with a $1 million limit)

The Fireman’s Fund policy contained exclusions applicable to all coverages stating that it would not pay for any loss, damage or expense caused directly or indirectly by, or resulting from, “[m]ortality, death by natural causes, disease, sickness, any condition of health, bacteria, or virus.”

Marina Pacific faced an uphill battle after the trial court sustained Fireman’s Fund’s demurrer to the insureds’ first amended complaint without leave to amend and dismissed the lawsuit. The trial court ruled the COVID-19 virus cannot cause direct physical loss or damage to property for purposes of insurance coverage. But Marina Pacific’s fight didn’t stop there.

Upon appeal, the Second Appellate District in the State of California reversed the trial court’s judgment. The cause was remanded with directions to the trial court to vacate its order sustaining the demurrer without leave to amend and to enter a new order overruling the demurrer. Marina Pacific will also recover its costs on appeal.

This victory doesn’t just affect Marina Pacific – it could potentially affect the McGonigle Firm’s client, Tarrar Enterprises. This case provides new legal groundwork for Tarrar to bolster its claims against AIC.
As the pandemic’s effects evolve, so do the legal responsibilities related to COVID-19
The Court of Appeal stated that the trial court’s decision to dismiss this case occurred far too early in the judicial process. Because Marina Pacific adequately alleged losses covered by Fireman’s Fund’s policy, they are entitled to an opportunity to present their case either at trial or in opposition to a motion for summary judgment.

We are all navigating the fallout caused by a worldwide pandemic, and the ripple effects of COVID-19 will continue for quite some time. As new legal questions arise about the pandemic’s true impact, the courts are setting critical precedent that determines the course of future legal action.