One of the threshold issues in cases of COVID-19 insurance coverage brought across the country is whether the policyholder’s claims meet the applicable pleading standard of claiming that the virus caused bodily loss or harm. In many cases, the courts have erred, effectively holding policyholders to higher standards than required. Recently, however, a California federal judge corrected these wrongs by acknowledging the standard for valid pleading in this case, which is whether the claims provide for a reasonable claim for damages. Ashcroft v. Iqbal556 US 662, 679 (2009). The Court here correctly recognized that the policyholder, the Los Angeles Lakers, met this standard of pleading when it alleged that the COVID-19 virus could cause material loss or damage by physically altering property.
In its complaint, the Los Angeles Lakers alleged that the virus physically altered its properties by altering the properties’ chemical and physical conditions, creating viral vectors that required remedial measures before the drug could be safe again. Los Angeles Lakers, Inc. against Fed. ins. a company591 F. Supp. 3d 672 (CD Cal. 2022), Adhere to it when reviewing2022 WL 16571193 (CD Cal. Oct. 26, 2022). The court agreed that these claims by the Lakers sufficiently pledge material change to support the property damage claim. The insurance company requested a reconsideration of the decision, and the court categorically affirmed its previous decision, explaining its reasons as follows:
The Court lacks the necessary scientific expertise to conclude, based solely on the allegations in the FAC. . . that it is not plausible that the Lakers’ property could be physically altered by the virus, which the Lakers have adequately claimed. Thus, the court concluded, in its March 17 order, that the Lakers’ theory was plausible. Whether the Lakers can actually prove their theory will be determined at summary judgment or a trial.
In supporting its rationale, the Court considered developing California appeals law, ultimately focusing on a more recent decision where the California Court of Appeals for the Second District reached the same conclusion as here in Marina Pack. Hotel and Suites, LLC v. Fireman’s Fund Ins. Share. , 81 cal. Application. V 96 (2022). Similar to the Los Angeles Lakers, the document holder in the Marina Pacific He claimed that COVID-19 “not only lives on surfaces but also binds to surfaces through physical and chemical interactions involving cells and surface proteins, which alter the physical condition of the property.” The court held that the policyholder “unquestionably pleaded direct material loss or damage to property covered within the detailed definition [by California courts]A distinct, demonstrable physical change to the property. ID. at 109. In its conclusion, and Los Angeles Lakers Court recognized Marina Pacificcriticism of an earlier appeals decision in California, United Talent Agency v. Vigilant Ins. Share. , 77 cal. Application. 5 821 (2022). The court was critical United Talent AgencyReport “without evidence” that COVID-19 does not damage property even though the policyholder claimed it did.
These decisions show why state law development is still important even though the state pleading standard is lower than the federal pleading standard. The state of California, unlike the federal courts, does not have a standard of defense of admissibility, but instead requires the court to deem the facts alleged in the pleading to be true, “however improbable they may be.” Marina Pack., 81 cal. Application. V at 110. This is important, particularly in the context of COVID-19 insurance cases, because the threshold can provide policyholders with the opportunity to overrule a motion of denial and move forward to substantiate their claims. In hindsight, this has proven to be wise because scientific evidence, when it can be presented, has shown it can support policyholders’ claims. See Baylor Cole. from Med. v. XL Ins. Am., Inc.2020-53316-A (Texas County, Harris County, August 31, 2022) (The jury determined that COVID-19 caused property loss or damage after presenting expert evidence).
These recent decisions should be encouraging for policyholders with COVID-19 insurance claims. This California decision follows other recent cases that have acknowledged the need for scientific evidence to evaluate these claims, and that asking for a denial based solely on pleadings is improper when there are allegations that the virus has physically altered property. See, for example, Huntington Ingalls Indus, Inc. against Ace Am. ins. Share., 2022 VT 45, 45-46 (Vt. Sept. 23, 2022) (retention of scientific evidence is necessary to assess whether a virus can alter characteristics physically).
Although previous cases held policyholders to have higher pleading standards than required in COVID-19 insurance cases, the most recent decisions reflect a change in course, providing reason for optimism. Now the ball is really in the courts’ “court” to properly apply and allow medical and scientific evidence to be discovered before making a decision on the ability of COVID-19 to cause loss or harm.
full opinion on Los Angeles Lakers, Inc. against Fed. ins. a company2022 WL 16571193 (CD Cal. Oct. 26, 2022) can be found over here.
 We have previously covered the Baylor College of Medicine Referee in a previous job.
 The Huntington Ingalls The decision was also discussed in a previous post.
Copyright © 2022, Hunton Andrews Kurth LLP. All rights reserved.National Law Review, Volume XII, Number 325