Implausibility Is No Barrier

Marina Pac. Hotel & Suites, LLC v. Fireman’s Fund Ins. Co., No. B316501 (D2d7 Jul. 13, 2022)

An insurance dispute over COVID coverage brought by a Hotel. The policy says, basically, that there is coverage when there’s some kind of physical damage. Hotel claims COVID causes that kind of damage because, basically, the virus can physically affix to the structure of the building and make it unusable. 

That’s not really true under the current science. Maybe it was unclear in July 2020, when Hotel filed is complaint. But by October 2021, when the trial court sustained the Carrier’s demurrer, pretty much everyone agreed that some fresh air, a little time without occupancy, and perhaps a disinfecting wipe down are all that are needed to make a space safe from the virus.

But the Court of Appeal says it does not matter. The complaint alleged facts sufficient to get into the coverage definition. On a demurrer, those facts are deemed true, even if most people would know they were wrong. In reaching that result the Court differentiates pleading practice in California with that in federal court:

[T]he pleading rules in federal court are significantly different from those we apply when evaluating a trial court order sustaining a demurrer. In Ashcroft v. Iqbal (2009) 556 U.S. 662 the Supreme Court held, to survive a motion to dismiss under the Federal Rules of Civil Procedure, “a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Unlike in federal court, the plausibility of the insureds’ allegations has no role in deciding a demurrer under governing state law standards, which, as discussed, require us to deem as true, “however improbable,” facts alleged in a pleading—specifically here, that the COVID-19 virus alters ordinary physical surfaces transforming them into fomites through physicochemical processes, making them dangerous and unusable for their intended purposes unless decontaminated.

(emphasis added; some citations omitted).

So absent judicially noticeable facts, the Carrier needed to wait till summary judgment.

Reversed.