{"id":895287,"date":"2018-12-12T14:41:43","date_gmt":"2018-12-12T21:41:43","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=895287"},"modified":"2018-12-12T14:41:43","modified_gmt":"2018-12-12T21:41:43","slug":"california-court-finds-coverage-property-damage-doesnt-require-physical-injury-definition","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/california-court-finds-coverage-property-damage-doesnt-require-physical-injury-definition\/","title":{"rendered":"California Court Finds Coverage When \u201cProperty Damage\u201d Doesn\u2019t Require Physical Injury By Definition"},"content":{"rendered":"<p>Tamara Boeck | <a href=\"https:\/\/www.aheadofschedulelaw.com\/2018\/11\/articles\/insurance\/california-court-finds-coverage-when-property-damage-doesnt-require-physical-injury-by-definition\/\" target=\"_blank\" rel=\"noopener\">Ahead of Schedule<\/a> | November 7, 2018<\/p>\n<p>Although it may seem strange at first, the recent ruling by the California Fourth Appellate District Court in\u00a0<em>Thee Sombrero, Inc. v. Scottsdale Co<\/em>., (2018 EL 5292072), holding that an insurer must pay for a claim where there was no actual physical property damage, is not as odd as it may seem to non-insurance coverage lawyers.\u00a0 The reason?\u00a0 It all depends on the policy language and the definition of \u201cProperty Damage\u201d where there is an \u201coccurrence.\u201d<\/p>\n<p>The underlying facts are noteworthy in that there was no dispute that the plaintiff-claimant, Thee Sombrero, Inc. (Sombrero), lost revenue and the value of its real estate (diminished value) when the security company it hired to provide security guards failed to keep guns out of Sombrero\u2019s nightclub.\u00a0 A fatal shooting due to that alleged negligence (\u201can occurrence\u201d) resulted in a lost ability by Sombrero to operate its property as a nightclub.\u00a0 That specific loss of use totaled almost a million dollars in diminished value of the Sombrero property.\u00a0 Sombrero sued the security company for the lost value, and the security company defaulted.\u00a0 Sombrero then pursued the security company\u2019s insurer, Scottsdale, under California Insurance Code section 11580, which allows a prevailing claimant to file a direct action against the insurer for coverage under the applicable insurance policy.<\/p>\n<p>Scottsdale filed a motion for summary judgment not long after the section 11580 action was filed against it, arguing that the loss of the \u201cuse permit\u201d for a nightclub was not lost use of tangible property, but merely the loss of an intangible right to use property in a certain way, and really economic loss that is not covered as property damage under the policy. The trial court agreed.\u00a0 Sombrero appealed and argued in essence that \u201c[t]he loss of the ability to use the property as a nightclub is, by definition, a \u2018loss of use\u2019 of \u2018tangible property.\u2019\u201d To which the appellate court commented, \u201cIt defies common sense to argue otherwise.\u201d\u00a0 At the same time, however, the appellate court identified contrary authority involving Scottsdale (albeit in Washington State) that was \u201cstrikingly similar\u201d to the present case, yet distinguished the prior Scottsdale decision on three grounds:\u00a0 1) the focus should be on the loss of use of the tangible property that results from the loss of the entitlement, not just the entitlement, 2) the loss is not defined in the policy as requiring a \u201ctotal loss\u201d and therefore under normal interpretation standards \u201c<em>any<\/em>\u00a0significant use\u201d lost would be within the reasonable expectation of the insured for coverage, and 3) acknowledging that a leasehold of a specific type of property is an actual property right, and the loss of such use of a property right is therefore a loss of use of tangible property.\u00a0\u00a0 In stating the \u201ccorrect principal,\u201d the appellate court held that \u201closses that are\u00a0<em>exclusively\u00a0<\/em>economic, without any accompanying physical damage or loss of use of tangible property, do not constitute property damage.\u201d\u00a0 Here, because the Scottsdale policy \u201cexpressly defined property damage as including\u201d \u2018[l]oss of use of tangible property\u00a0<em>that is not physically injured<\/em>\u2019<em>,<\/em>\u201d the appellate court disregarded the distinguishable California cases with differing policy language under consideration.<\/p>\n<p>While this case did not arise out of a construction defect dispute, the points of insurance coverage may be applicable in a future construction defect context where there has been an \u201coccurrence\u201d but no physical injury to the property, only a valuable loss of use of that property.\u00a0 Of course, it will always depend on the specific language of the insurance policy, which is why it is so important to understand the insurance policies and potential for coverage in any dispute.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Tamara Boeck | Ahead of Schedule | November 7, 2018 Although it may seem strange at first, the recent ruling by the California Fourth Appellate District Court in\u00a0Thee Sombrero, Inc. v. Scottsdale Co., (2018 EL 5292072), holding that an insurer must pay for a claim where there was no actual physical property damage, is not&hellip; <a class=\"more-link\" href=\"https:\/\/www.myconstructionexpert.com\/blog\/california-court-finds-coverage-property-damage-doesnt-require-physical-injury-definition\/\">Continue reading <span class=\"screen-reader-text\">California Court Finds Coverage When \u201cProperty Damage\u201d Doesn\u2019t Require Physical Injury By Definition<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[3,9721],"tags":[9895,88,23,10682,56],"class_list":["post-895287","post","type-post","status-publish","format-standard","hentry","category-insurance-claims","category-property-damage","tag-advise-consult","tag-california","tag-insurance-coverage","tag-physical-injury","tag-property-damage","entry"],"jetpack_publicize_connections":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v25.0 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>California Court Finds Coverage When \u201cProperty Damage\u201d Doesn\u2019t Require Physical Injury By Definition - Advise &amp; Consult, Inc.<\/title>\n<meta name=\"description\" content=\"holding an insurer must pay for a claim where there was no actual physical property damage, is not as odd as it may seem to non-insurance coverage lawyers\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.myconstructionexpert.com\/blog\/california-court-finds-coverage-property-damage-doesnt-require-physical-injury-definition\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"California Court Finds Coverage When \u201cProperty Damage\u201d Doesn\u2019t Require Physical Injury By Definition - Advise &amp; Consult, Inc.\" \/>\n<meta property=\"og:description\" content=\"holding an insurer must pay for a claim where there was no actual physical property damage, is not as odd as it may seem to non-insurance coverage lawyers\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.myconstructionexpert.com\/blog\/california-court-finds-coverage-property-damage-doesnt-require-physical-injury-definition\/\" \/>\n<meta property=\"og:site_name\" content=\"Advise &amp; Consult, Inc.\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/Advise-Consult-Inc-126949043996790\/\" \/>\n<meta property=\"article:published_time\" content=\"2018-12-12T21:41:43+00:00\" \/>\n<meta name=\"author\" content=\"admin\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@adviseconsult\" \/>\n<meta name=\"twitter:site\" content=\"@adviseconsult\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"admin\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"3 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/california-court-finds-coverage-property-damage-doesnt-require-physical-injury-definition\/#article\",\"isPartOf\":{\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/california-court-finds-coverage-property-damage-doesnt-require-physical-injury-definition\/\"},\"author\":{\"name\":\"admin\",\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/#\/schema\/person\/0a11abe008083d5fb19c2b0feefe7bd7\"},\"headline\":\"California Court Finds Coverage When \u201cProperty Damage\u201d Doesn\u2019t Require Physical Injury By Definition\",\"datePublished\":\"2018-12-12T21:41:43+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/california-court-finds-coverage-property-damage-doesnt-require-physical-injury-definition\/\"},\"wordCount\":620,\"commentCount\":0,\"publisher\":{\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/#organization\"},\"keywords\":[\"Advise &amp; Consult\",\"california\",\"insurance coverage\",\"Physical Injury\",\"property damage\"],\"articleSection\":[\"Insurance Claims\",\"Property Damage\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/www.myconstructionexpert.com\/blog\/california-court-finds-coverage-property-damage-doesnt-require-physical-injury-definition\/#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/california-court-finds-coverage-property-damage-doesnt-require-physical-injury-definition\/\",\"url\":\"https:\/\/www.myconstructionexpert.com\/blog\/california-court-finds-coverage-property-damage-doesnt-require-physical-injury-definition\/\",\"name\":\"California Court Finds Coverage When \u201cProperty Damage\u201d Doesn\u2019t Require Physical Injury By Definition - Advise &amp; Consult, Inc.\",\"isPartOf\":{\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/#website\"},\"datePublished\":\"2018-12-12T21:41:43+00:00\",\"description\":\"holding an insurer must pay for a claim where there was no actual physical property damage, is not as odd as it may seem to non-insurance coverage lawyers\",\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/www.myconstructionexpert.com\/blog\/california-court-finds-coverage-property-damage-doesnt-require-physical-injury-definition\/\"]}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/#website\",\"url\":\"https:\/\/www.myconstructionexpert.com\/blog\/\",\"name\":\"Advise &amp; Consult, Inc.\",\"description\":\"Construction Expert Witnesses\",\"publisher\":{\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/#organization\"},\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/www.myconstructionexpert.com\/blog\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"},{\"@type\":\"Organization\",\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/#organization\",\"name\":\"Advise & Consult\",\"url\":\"https:\/\/www.myconstructionexpert.com\/blog\/\",\"logo\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/#\/schema\/logo\/image\/\",\"url\":\"https:\/\/www.myconstructionexpert.com\/blog\/wp-content\/uploads\/2015\/11\/AC-Red-Logo.png\",\"contentUrl\":\"https:\/\/www.myconstructionexpert.com\/blog\/wp-content\/uploads\/2015\/11\/AC-Red-Logo.png\",\"width\":162,\"height\":75,\"caption\":\"Advise & Consult\"},\"image\":{\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/#\/schema\/logo\/image\/\"},\"sameAs\":[\"https:\/\/www.facebook.com\/Advise-Consult-Inc-126949043996790\/\",\"https:\/\/x.com\/adviseconsult\",\"https:\/\/www.linkedin.com\/company-beta\/204526\/\",\"https:\/\/www.youtube.com\/user\/MrConstructionExpert\"]},{\"@type\":\"Person\",\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/#\/schema\/person\/0a11abe008083d5fb19c2b0feefe7bd7\",\"name\":\"admin\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/#\/schema\/person\/image\/\",\"url\":\"https:\/\/secure.gravatar.com\/avatar\/b01e71b7acadd7657af782b7ad1a30cc?s=96&d=mm&r=pg\",\"contentUrl\":\"https:\/\/secure.gravatar.com\/avatar\/b01e71b7acadd7657af782b7ad1a30cc?s=96&d=mm&r=pg\",\"caption\":\"admin\"},\"sameAs\":[\"http:\/\/www.expertwitnessinconstruction.com\"]}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"California Court Finds Coverage When \u201cProperty Damage\u201d Doesn\u2019t Require Physical Injury By Definition - Advise &amp; Consult, Inc.","description":"holding an insurer must pay for a claim where there was no actual physical property damage, is not as odd as it may seem to non-insurance coverage lawyers","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/www.myconstructionexpert.com\/blog\/california-court-finds-coverage-property-damage-doesnt-require-physical-injury-definition\/","og_locale":"en_US","og_type":"article","og_title":"California Court Finds Coverage When \u201cProperty Damage\u201d Doesn\u2019t Require Physical Injury By Definition - Advise &amp; Consult, Inc.","og_description":"holding an insurer must pay for a claim where there was no actual physical property damage, is not as odd as it may seem to non-insurance coverage lawyers","og_url":"https:\/\/www.myconstructionexpert.com\/blog\/california-court-finds-coverage-property-damage-doesnt-require-physical-injury-definition\/","og_site_name":"Advise &amp; Consult, Inc.","article_publisher":"https:\/\/www.facebook.com\/Advise-Consult-Inc-126949043996790\/","article_published_time":"2018-12-12T21:41:43+00:00","author":"admin","twitter_card":"summary_large_image","twitter_creator":"@adviseconsult","twitter_site":"@adviseconsult","twitter_misc":{"Written by":"admin","Est. reading time":"3 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"Article","@id":"https:\/\/www.myconstructionexpert.com\/blog\/california-court-finds-coverage-property-damage-doesnt-require-physical-injury-definition\/#article","isPartOf":{"@id":"https:\/\/www.myconstructionexpert.com\/blog\/california-court-finds-coverage-property-damage-doesnt-require-physical-injury-definition\/"},"author":{"name":"admin","@id":"https:\/\/www.myconstructionexpert.com\/blog\/#\/schema\/person\/0a11abe008083d5fb19c2b0feefe7bd7"},"headline":"California Court Finds Coverage When \u201cProperty Damage\u201d Doesn\u2019t Require Physical Injury By Definition","datePublished":"2018-12-12T21:41:43+00:00","mainEntityOfPage":{"@id":"https:\/\/www.myconstructionexpert.com\/blog\/california-court-finds-coverage-property-damage-doesnt-require-physical-injury-definition\/"},"wordCount":620,"commentCount":0,"publisher":{"@id":"https:\/\/www.myconstructionexpert.com\/blog\/#organization"},"keywords":["Advise &amp; Consult","california","insurance coverage","Physical Injury","property damage"],"articleSection":["Insurance Claims","Property Damage"],"inLanguage":"en-US","potentialAction":[{"@type":"CommentAction","name":"Comment","target":["https:\/\/www.myconstructionexpert.com\/blog\/california-court-finds-coverage-property-damage-doesnt-require-physical-injury-definition\/#respond"]}]},{"@type":"WebPage","@id":"https:\/\/www.myconstructionexpert.com\/blog\/california-court-finds-coverage-property-damage-doesnt-require-physical-injury-definition\/","url":"https:\/\/www.myconstructionexpert.com\/blog\/california-court-finds-coverage-property-damage-doesnt-require-physical-injury-definition\/","name":"California Court Finds Coverage When \u201cProperty Damage\u201d Doesn\u2019t Require Physical Injury By Definition - Advise &amp; Consult, Inc.","isPartOf":{"@id":"https:\/\/www.myconstructionexpert.com\/blog\/#website"},"datePublished":"2018-12-12T21:41:43+00:00","description":"holding an insurer must pay for a claim where there was no actual physical property damage, is not as odd as it may seem to non-insurance coverage lawyers","inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/www.myconstructionexpert.com\/blog\/california-court-finds-coverage-property-damage-doesnt-require-physical-injury-definition\/"]}]},{"@type":"WebSite","@id":"https:\/\/www.myconstructionexpert.com\/blog\/#website","url":"https:\/\/www.myconstructionexpert.com\/blog\/","name":"Advise &amp; Consult, Inc.","description":"Construction Expert Witnesses","publisher":{"@id":"https:\/\/www.myconstructionexpert.com\/blog\/#organization"},"potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/www.myconstructionexpert.com\/blog\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"},{"@type":"Organization","@id":"https:\/\/www.myconstructionexpert.com\/blog\/#organization","name":"Advise & Consult","url":"https:\/\/www.myconstructionexpert.com\/blog\/","logo":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.myconstructionexpert.com\/blog\/#\/schema\/logo\/image\/","url":"https:\/\/www.myconstructionexpert.com\/blog\/wp-content\/uploads\/2015\/11\/AC-Red-Logo.png","contentUrl":"https:\/\/www.myconstructionexpert.com\/blog\/wp-content\/uploads\/2015\/11\/AC-Red-Logo.png","width":162,"height":75,"caption":"Advise & Consult"},"image":{"@id":"https:\/\/www.myconstructionexpert.com\/blog\/#\/schema\/logo\/image\/"},"sameAs":["https:\/\/www.facebook.com\/Advise-Consult-Inc-126949043996790\/","https:\/\/x.com\/adviseconsult","https:\/\/www.linkedin.com\/company-beta\/204526\/","https:\/\/www.youtube.com\/user\/MrConstructionExpert"]},{"@type":"Person","@id":"https:\/\/www.myconstructionexpert.com\/blog\/#\/schema\/person\/0a11abe008083d5fb19c2b0feefe7bd7","name":"admin","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.myconstructionexpert.com\/blog\/#\/schema\/person\/image\/","url":"https:\/\/secure.gravatar.com\/avatar\/b01e71b7acadd7657af782b7ad1a30cc?s=96&d=mm&r=pg","contentUrl":"https:\/\/secure.gravatar.com\/avatar\/b01e71b7acadd7657af782b7ad1a30cc?s=96&d=mm&r=pg","caption":"admin"},"sameAs":["http:\/\/www.expertwitnessinconstruction.com"]}]}},"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/p2ztG6-3KU7","jetpack_likes_enabled":true,"_links":{"self":[{"href":"https:\/\/www.myconstructionexpert.com\/blog\/wp-json\/wp\/v2\/posts\/895287","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.myconstructionexpert.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.myconstructionexpert.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.myconstructionexpert.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.myconstructionexpert.com\/blog\/wp-json\/wp\/v2\/comments?post=895287"}],"version-history":[{"count":1,"href":"https:\/\/www.myconstructionexpert.com\/blog\/wp-json\/wp\/v2\/posts\/895287\/revisions"}],"predecessor-version":[{"id":895288,"href":"https:\/\/www.myconstructionexpert.com\/blog\/wp-json\/wp\/v2\/posts\/895287\/revisions\/895288"}],"wp:attachment":[{"href":"https:\/\/www.myconstructionexpert.com\/blog\/wp-json\/wp\/v2\/media?parent=895287"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.myconstructionexpert.com\/blog\/wp-json\/wp\/v2\/categories?post=895287"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.myconstructionexpert.com\/blog\/wp-json\/wp\/v2\/tags?post=895287"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}