In a brief filed on Friday, Plan Check said the lower court violated California rules of insurance policy construction when it ruled in favor of AmGuard after acknowledging that Plan Check's policy interpretation was "conceivable."
"Not only did the district court's decision rest on an inappropriate legal basis, its imagined consequences, when analyzed in detail, are not in fact threats in policy or reality," Plan Check said.
The American comfort food restaurant sued AmGuard last June, seeking to force the insurer to cover its financial losses from state-mandated closures during the pandemic, and hoping to represent all California restaurants that held a policy with AmGuard and experienced similar coverage denials. Last September, a California federal judge tossed the suit, siding with the insurer that the restaurant did not incur property damage.
Federal district courts across the country "appear to have given in to certain analytical errors out of concern for imposing a heavy burden on the insurance industry," Plan Check argued in its appellate brief.
The restaurant said its loss was physical in nature because its properties could not be used for diners to eat in. And although it experienced a temporary loss during the lock-down orders, the policy does not require a permanent loss but only "dispossession," exactly as it experienced.
"The loss of the property vis-à-vis indoor dining is physical — corporeal restaurant patrons used to sit at tables and now they do not," it said. "The absence of diners who would have entered Plan Check's restaurant but for the restrictions imposed by the city and state is, by these definitions, a physical phenomenon."
Kathryn Lee Boyd, an attorney representing Plan Check, told Law360 on Monday that the restaurant is not planning to ask the court to certify insurance coverage questions in California's high court as some businesses from other states have done on appeal, saying that "questions regarding policy interpretation can be decided by the 9th Circuit."
"Although we are aware that request has been made in an appeal on similar grounds as Plan Check's, and we would not oppose certification," she said, "the Ninth Circuit has long interpreted insurance policies under California law, so we see no necessity to certify the case."
According to court records, the downtown location of Plan Check closed last March due to the pandemic. While Plan Check's West L.A. location has since reopened for takeout and delivery, the downtown location is still closed, according to its proposed class action filed in June.
In the brief, the restaurant said AmGuard's insistence that Plan Check must show "a tangible alteration of the property's structure" is not necessary and wrongly combines the policy definition of "loss" with "damage" and deprives the terms of different meanings.
Additionally, the restaurant argued, the Ninth Circuit is not required and should not make a decision regarding the policy's virus exclusion because the district court did not address it.
"There is no question in the case at bar that COVID-19 is at least a contributing factor in the proximate causation chain leading to Plan Check's losses," Plan Check said. "Yet California law gives policyholders the opportunity to prove at trial that an excluded cause was not the predominant cause of a loss."
Counsel for the insurer could not be immediately reached for comment on Monday.
Plan Check is represented by Kathryn Lee Boyd of Hecht Partners LLP.
AmGuard is represented by Chet A. Kronenberg of Simpson Thacher & Bartlett LLP.
The case is Plan Check Downtown III LLC v. AmGuard Insurance Company et al., case number 20-56020, in the U.S. Court of Appeals for the Ninth Circuit.
--Editing by Emily Kokoll.
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