Two days ago, an interesting decision came out of a California Appeals Court. Intriguing enough to us, maybe not to many others, that we put aside this week’s intended blog posting and scribbled this one instead. Though we fear the subject may only appeal to insurance wonks, we’re predicting that the court’s reasoning may leach into non-insurance areas as well.
In a decision that can be seen by clicking: HERE, the California Court of Appeal tells us that a leasehold is “tangible property.” Though the court doesn’t need our blessing, and that’s for sure, Ruminations thinks the court got it right. Before reading this decision, we would have said that “tangible” meant you could touch it.
There’s a little story that will give the context for the court’s decision. By reason of a conditional use permit, a property could be used (and was being) as a nightclub. A third-party security provider failed to screen certain “VIP” patrons for guns while screening others. One unscreened patron shot and killed another. One of the fallouts was that the conditional use permit was canceled and a new one was issued. The new permit eliminated a nightclub as a permitted use and now allowed use of the property as a catering hall. The property owner sued the security company alleging that the security company’s failure reduced the value of the property by a little more than $900,000 and got a judgment in that amount. Then, to collect on the judgment, it sued the security company’s liability insurance carrier. As readers might have guessed, the carrier responded that there was no coverage under the policy. Its specific defense was that loss of the right to use the property for the more valuable use, that of a nightclub, was neither bodily injury nor property damage; thus the security company’s policy did not cover such a claim. [Read more…]
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