Landmark Ruling in John’s Grill Covid-19 Lawsuit

Court of Appeal rejects The Hartford’s “heads I win, tails you lose” interpretation of Business Interruption Insurance Policy

On Tuesday, the California Court of Appeal issued a surprise unanimous ruling in John’s Grill’s lawsuit against The Hartford and its affiliate Sentinel Insurance Company over their decision to deny insurance coverage for business interruptions during the Covid-19 pandemic. The decision in favor of John’s Grill diverges from dozens of prior cases that dismissed policy holder claims, finding “those cases involve very different policy provisions.”

As previously announced, the parties had settled the case for an undisclosed amount.  However, the Court of Appeal declined to dismiss the case, finding the appeal raises issues “of continuing public interest which are likely to recur.”

In a sweeping 44-page decision, the court found the business interruption insurance policy provided coverage, including the costs of cleaning the restaurant’s surfaces and testing to see if the virus is present.  The Court rejected The Hartford’s argument that the policy was limited to unlikely scenarios, such as when the virus is the result of a tornado, vandalism, water damage or equipment breakdown, finding those circumstances “exceedingly rare, even freakish,” stating: “We fail to see what these oddball scenarios have to do with this case.”

Applying established California law that requires courts to read insurance policies broadly in favor of coverage and exclusions to coverage narrowly, the Court of Appeal found that the virus policy “is indecipherable” as written and that The Hartford failed “to demonstrate a realistic prospect of John’s Grill ever benefitting” from the virus policy and that transformed the Policy’s virus coverage into “an empty promise” and rendered it "virtually illusory.”

John’s Grill is represented by Cotchett, Pitre & McCarthy LLP in Burlingame, California.

John Konstin, John’s Grill’s owner, responded to the surprise ruling: "Covid was and continues to be incredibly disruptive to the hospitality industry. The restaurant closures were unprecedented and gravely impacted the livelihood of those working at restaurants. We had settled this case, but this is an even better result."

Nanci Nishimura, of Cotchett, Pitre & McCarthy, representing John Konstin and John’s Grill, stated: “The Court of Appeal decision will help thousands of businesses impacted by the COVID 19 pandemic and future outbreaks.” 

Brian Danitz, a partner at Cotchett, Pitre & McCarthy, representing John Konstin and John’s Grill, stated: “This landmark decision should send a strong message to insurers that they cannot avoid coverage based on hidden language and technicalities.  It is an outrage how big insurance companies spent years collecting huge premiums from small businesses like John’s Grill and then refused to pay out claims when the Covid-19 pandemic hit. It is important to hold these insurers to account.”

Andrew Kirtley, also at Cotchett, Pitre & McCarthy, representing John Konstin and John’s Grill, noted: “Thousands of small businesses suffered through the pandemic only to have their business interruption claims denied with little recourse. This was a hard-fought result.”

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