Jenner & Block

"Property Damage Is Not Necessarily Physical In Calif.," Insurance Law Update

In a recent decision, Thee Sombrero Inc. v. Scottsdale Insurance Company,[1] a California appellate court ruled against insurers seeking to limit coverage for loss of use damages related to an ownership interest in tangible property. The appellate court held that the “loss of use” need not be a loss of all possible uses of the property and recognized that the loss of a particular use was sufficient to constitute the required property damage. In addition, the appellate court authorized the use of economic loss calculations as an appropriate measure of this covered property damage. In so holding, the appellate court challenged the reasoning of other opinions in a sister state and elsewhere in California, and its detailed analyses of the more insurer-friendly holdings may provide persuasive support for policyholders facing similar issues throughout the country. We suggest that policyholders facing similar situations familiarize themselves with this opinion when advocating for coverage for loss of a particular use of tangible property, resulting in economic losses.

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