Tarrar Enterprises, Inc. v. Associated Indemnity Corp.
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Tarrar operated “a utility consultant business” in Contra Costa County. Associated issued Tarrar a comprehensive commercial liability and property insurance policy to “pay for direct physical loss of or damage to Covered Property,” and in particular to “pay for the actual loss of Business Income you sustain due to the necessary suspension of your operations during the period of restoration." The suspension must be caused by direct physical loss of or damage to property at the described premises. The loss or damage must be caused by or result from a Covered Cause of Loss.
Based on the 2020 “shelter-in-place orders,” Tarrar made an unsuccessful claim for “business income loss.” The trial court dismissed Tarrar’s subsequent suit without leave to amend. While several California courts of appeal have resolved this issue against the insureds, one court held for the insured on the basis it had pled the element missing from earlier cases: it “adequately alleged direct physical loss or damage.” While Tarrar’s complaint did not allege the necessary “direct physical loss of or damage to property,” Tarrar should be permitted to amend. A plaintiff need not even request leave to amend an original complaint. Unless the complaint shows on its face that it is incapable of amendment, denial of leave to amend constitutes an abuse of discretion.
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