The Court of Appeal of California has reversed the dismissal of a COVID-related lawsuit filed by Amy's Kitchen (Amy's) against Fireman's Fund Insurance Company (Fireman's). The case is Amy's Kitchen, Inc. v. Fireman's Fund Ins. Co., 83 Cal. App. 5th 1062 (Cal. Ct. App. 2022). 

Amy's, a company that produces organic and vegetarian meals, has facilities across the Pacific Northwest that employ more than 2,500 individuals. At the outset of the COVID-19 pandemic in early 2020, Amy's made several changes at its facilities in order to continue operations while also adhering to social distancing and similar guidelines to protect employees. Amy's had purchased a comprehensive property policy from Fireman's in 2019, which extended the policy to provide coverage for communicable diseases as well as loss avoidance and mitigation. There was no definition for "direct physical loss or damage" anywhere in the policy, only specifications for three distinct categories of costs covered "if incurred as a result of a covered communicable disease event." The types of costs Amy's had incurred in mitigating the effects of COVID-19, as described above, were included in those categories. Amy's filed a claim to recover the money spent to "[m]itigate, contain, remediate, treat, clean, detoxify, disinfect, neutralize, cleanup, remove, dispose of, test for, monitor, and assess the effects [of] the communicable disease."

Fireman's agreed COVID-19 was a communicable disease, but argued that the virus had not physically altered any of the Amy's facilities, and therefore the coverage extension did not apply. They denied the claim on the basis that none of the facilities had suffered actual physical damage. (Internal quotes omitted). Amy's sued Fireman's in spring 2021, and Fireman's filed a demurrer. The court granted the demurrer and refused to allow Amy's to amend its complaint because, allegedly, there wasn't anything in the complaint Amy's could change that would fix the original complaint. Amy's appealed.