Thee Sombrero, Inc. v. Scottsdale Ins. Co.

Thee Sombrero, Inc. (Sombrero) owned commercial property. Pursuant to a conditional use permit (CUP), Sombrero’s lessees operated the property as a nightclub called El Sombrero. Crime Enforcement Services (CES) provided security guard services at the club. In 2007, after a fatal shooting, the CUP was revoked and replaced with a modified CUP, which provided that the property could be operated only as a banquet hall. In a previous action, Sombrero sued CES, alleging that CES’s negligence caused the shooting, which in turn caused the revocation of the CUP, which in turn caused a diminution in value of the property. It won a default judgment against CES. Sombrero then filed this direct action against Scottsdale Insurance Company (Scottsdale), CES’s liability insurer. The trial court granted summary judgment in favor of Scottsdale, ruling that Sombrero’s claim against CES was for an economic loss, rather than for “property damage” as defined in and covered under the policy. The Court of Appeal held Sombrero’s loss of the ability to use the property as a nightclub constituted property damage, which was defined in the policy as including a loss of use of tangible property. View "Thee Sombrero, Inc. v. Scottsdale Ins. Co." on Justia Law