Exhibit 22
1 Michael J. Reiser (Bar. No. 133621) 

2 Michael J. Reiser, Jr. (Bar No. 320452) 

Matthew W. Reiser (Bar. No. 315301) 

3 Isabella Martinez (Bar No. 315299) 

REISER LAW, p.c. 

4 1475 N. Broadway, Suite 300 

Walnut Creek, California 94596 

5 Telephone: (925) 256-0400 

6 michael@reiserlaw.com 

michaeljr@reiserlaw.com 

7 matthew@reiserlaw.com 

8 

isabella@reiserlaw.com 

9 Tyler Meade (Bar No. 160838) 

Sam Ferguson (Bar No. 270957) 

10 Seena Forouzan (Bar No. 317777) 

THE MEADE FIRM p.c. 

11 12 Funston Ave., Suite A 

San Francisco, California 94129 

12 Telephone: (415) 724-9600 

13 tyler@meadefirm.com 

sam@meadefirm.com 

14 seena@meadefirm.com 

15 Attorneys for Plaintiff, 

The Inns by the Sea 

16 

ELECTRONICALLY FILED BY 

Superior Court of California, 

County of Monterey 

On 4/20/2020 4 :45 PM 

By: Christina Flores, Deputy 

17 

18 

SUPERIOR COURT OF THE STATE OF CALIFORNIA 

FOR THE COUNTY OF MONTEREY 

19 THE INNS BY THE SEA, a California 

20 corporation, 

21 

22 v. 

Plaintiff, 

23 CALIFORNIA MUTUAL INSURANCE 

COMP ANY, a California Corporation, and 

24 DOES I to 25, Inclusive, 

25 

Defendants. 

26 t----------------__J 

27 

28 

- 1-

Case No.: 20CV00127 4 

COMPLAINT FOR: 

1) DECLARATORY RELIEF; 

2) BREACH OF CONTRACT; 

3) BREACH OF THE IMPLIED 

COVENANT OF GOOD FAITH 

AND FAIR DEALING; AND 

4) BADFAITHDENIALOF 

INSURANCE COVERAGE 

COMPLAINT FOR DECLARATORY RELIEF AND DAMAGES 
Plaintiff The Inns by the Sea ("Plaintiff') brings this action against California Mutual 

2 Insurance Company ("California Mutual" or "Defendant" or, together with the DOES, 

3 "Defendants") based upon the investigation of counsel and information and belief. 

4 INTRODUCTION 

5 1. Plaintiff The Inns by the Sea is a California corporation formed in 1975 that 

6 operates four inns in the heart of Carmel-by-the-Sea, including the Carriage House Inn (Junipero 

7 between 7th & 8th Avenue), the Wayside Inn (7th Avenue & Mission Street), the Candle Light Inn 

8 (San Carlos between 4th and 5th Avenue), the Svendsgaard's Inn (Corner of 4th and San Carlos); 

9 and one inn located in Half Moon Bay, the Cypress Inn on Miramar Beach (407 Miranda Road). 

10 (Collectively, the five inns are referred to herein as the "Inns"). 

11 2. On March 17, 2020, the Inns were forced to cease operations based on the 

12 COVID- 19 coronavirus and orders from the County of Monterey and the County of San Mateo 

13 ordering cessation of all non-essential travel and directing all businesses and governmental 

14 agencies to cease non-essential operations at physical locations. These orders and/or the virus 

15 itself ( collectively, the "Closure Orders"), prohibited Plaintiff from selling any rooms to the 

16 public. Since the forced shutdown, Plaintiff has had to lay off nearly all of its workers, including 

17 front desk staff, maintenance workers and room cleaners, as the occupancy rate at the Inns has 

18 dropped to zero. 

19 3. To insure against this type of disaster (as it had for close to forty-five years), 

20 Plaintiff purchased an insurance policy from Defendant California Mutual, Policy Number No. 

21 CPP602654-06, covering each of the Inns. Plaintiff paid extra for business interruption coverage 

22 and coverage for losses caused by civil authority orders. Plaintiffs total annual premium was 

23 $38,353. 

24 4. Plaintiff is forced to bring this lawsuit to obtain insurance coverage improperly 

25 and unlawfully denied by California Mutual at a time when Plaintiff is at its most vulnerable. For 

26 decades, Plaintiff has been a staple of the central coast tourism industry, providing hundreds of 

27 local jobs and accommodations. Without the promised coverage, Plaintiff may not survive its 

28 loss of business owing to the Closure Orders. 

-2-

COMPLAINT FOR DECLARATORY RELIEF AND DAMAGES 
1 

2 5. 

PARTIES AND JURISDICTION 

Plaintiff The Inns by the Sea is a California corporation formed in 1975 under the 

3 laws of the State of California, with its principal place of business in Carmel-by-the-Sea, 

4 California, and at all relevant times herein has been operating the Inns. 

5 6. Defendant California Mutual Insurance Company is a corporation formed in 1920 

6 under the laws of the state of California, with a principle place of business in Hollister, 

7 California. California Mutual sells insurance, and represents on its website to be rated "A8 Excellent" by A.M. Best Company. 

9 7. Plaintiff is ignorant of the true names and capacities of Defendants sued herein as 

10 DOES 1 through 25, and therefore sues said Defendants by fictitious names. Plaintiff will amend 

11 this Complaint to allege the true names and capacities when the same have been ascertained. 

12 Plaintiff is informed and believes and thereon alleges that each of the fictitiously named 

13 Defendants is responsible in some manner for the acts or omissions alleged herein and Plaintiffs 

14 injuries as herein alleged were proximately caused by those acts or omissions. 

15 8. At all times mentioned herein, each of the Defendants was the agent, servant or 

16 employee, joint venture, or alter ego of each of the remaining Defendants, and in doing the 

17 things hereinafter alleged were acting within the course and scope of such agency and 

18 employment. 

19 9. The conduct, acts and omissions of Defendants, and each of them, as described 

20 herein, were undertaken by California Mutual's officers, directors, or managing agents, 

21 identified as DOES 1- 10, who were responsible for claims operations, underwriting, 

22 communications, investigations and decisions. The conduct of the managing agents and 

23 .individuals was, therefore, undertaken on behalf of California Mutual. Further, Defendants, and 

24 each of them, had advance knowledge of the actions and conduct of those individuals, whose 

25 actions and conduct were ratified, authorized and approved by managing agents and by other 

26 corporate officers, directors or managing agents whose precise identities are unknown to Plaintiff 

27 at this time. Plaintiff thus identifies and designates those individuals as DOES 15-20. 

28 

-3-

COMPLAINT FOR DECLARATORY RELIEF AND DAMAGES 
1 10. This Court has jurisdiction over this dispute, and venue lies within this district 

2 because: (a) the amount in controversy exceeds the jurisdictional minimum; (b) four of the five 

3 properties at issue are located in Monterey County; ( c) Plaintiff has its principal place of 

4 business and sustained damages within Monterey County; and (d) California Mutual breached its 

5 legal and contractual duties to perform services within Monterey County. 

6 GENERAL ALLEGATIONS 

7 The Inns' Policy: 

8 11. On January 9, 2020 Plaintiff renewed its policy of insurance with California 

9 Mutual, policy number of CPP602654-06 (hereinafter the "Policy"), with a Policy Term from 

10 1/9/2020 to 1/9/2021. Plaintiff agreed to make an annual premium payment of $38,353.00 in 

11 exchange for California Mutual's promise to indemnify Plaintiff for losses and expenses, 

12 including, but not limited to, Business Interruption Coverage (including Extra Expense 

13 Coverage) and Civil Authority Coverage. The Policy is attached hereto as Exhibit A and 

14 incorporated herein by reference. 

15 12. Plaintiff's Policy includes "Business Income (and Extra Expense) Coverage 

16 Form," number CP 00 30 04 02, which states, in part: "We will pay for the actual loss of 

17 Business Income you sustain due to the necessary 'suspension' of your 'operations' during the 

18 'period of restoration.' The 'suspension' must be caused by the direct physical loss of or damage 

19 to property at premises . . . " 

20 13. Plaintiff's Policy also includes additional coverage for "Civil Authority," which 

21 provides that California Mutual "will pay for the actual loss of Business Income you sustain and 

22 necessary Extra Expense caused by action of civil authority that prohibits access to the described 

23 premises due to direct physical loss of or damage to property, other than at the described 

24 premises, caused by or resulting from any Covered Cause of Loss." 

25 14. Plaintiff faithfully paid California Mutual the premiums owed for the Policy ( as it 

26 had done for prior policies over nearly forty-five years), and the Policy has been in full force and 

27 effect at all times pertinent herein. 

28 

-4-

COMPLAINT FOR DECLARATORY RELIEF AND DAMAGES 
15. The Policy sets forth limits on the Business Interruption and Extra Expense 

2 coverage separately for each of the five inns, as follows: $1,375,000 for Carriage House Inn; 

3 $1,681,000 for the Wayside Inn; $1,370,000 for the Candle Light Inn; $1,755,000 for the 

4 Svendsgaard's Inn; and $1,740,000 for the Cypress Inn on Miramar Beach. 

5 16. The Policy also separates the limits of Civil Authority coverage as follows: (a) 

6 "The coverage for Business Income (Civil Authority) will begin 72 hours after the time of that 

7 action and will apply for a period ofup to three consecutive weeks after coverage begins"; and 

8 (b) "The coverage for Extra Expense (Civil Authority) will begin immediately after the time of 

9 that action and will end: (1) 3 consecutive weeks after the time of that action; or (2) When your 

10 Business Income coverage ends; whichever is later." 

11 17. Plaintiffs Policy does not provide any exclusion due to losses, business or 

12 property, from a virus or global pandemic. 

13 

14 

The COVID-19 Coronavirus and the Closure Orders: 

18. On March 11, 2020, the World Health Organization declared that the threat from 

15 the novel coronavirus - otherwise known as COVID-19 - constituted a global pandemic 

16 19. Emerging research on the virus and recent reports from the Center for Disease 

17 Control indicate that COVID-19 strains physically infect and can stay alive on surfaces for 

18 extended periods, a characteristic that renders property exposed to the contagion potentially 

19 unsafe and dangerous. 

20 20. On March 17, 2020, the Inns were forced to cease operations based on orders 

21 from both the County of Monterey and the County of San Mateo ordering cessation of all non22 essential travel and directing all businesses and governmental agencies to cease non-essential 

23 operations at physical locations. These Closure Orders were issued in direct response to these 

24 dangerous physical conditions, and prohibit Plaintiff from selling any rooms to the public, 

25 thereby forcing Plaintiff to close the Inns and to lay off nearly all of its workers and triggering 

26 California Mutual' s coverage responsibilities. 

27 21. The Closure Orders were made in direct response to the continued and increasing 

28 presence of the coronavirus on Plaintiff property and/or around its premises. 

-5-

COMPLAINT FOR DECLARATORY RELIEF AND DAMAGES 
1 

2 

California Mutual's Wrongful Denial of Coverage: 

22. On March 17, 2020, as a direct and proximate result of the Closure Orders, 

3 Plaintiff ceased operations at the Inns, as its rooms could no longer be rented to the public and 

4 the Inns could not be used for any purpose. The occupancy rate at the Inns has dropped to zero. 

5 As a further direct and proximate result of the Closure Orders, Plaintiff effectively furloughed all 

6 of its non-manager employees. 

7 23. On March 24, 2020, Plaintiff sought coverage for its loss of business income, 

8 including by providing California Mutual notice of a claim under the Policy coverages set forth 

9 above. 

10 24. On the same day, California Mutual sent a form letter acknowledging that the 

11 Policy included "Business Interruption Coverage Form CP 00 30 04 02." Without apparently 

12 launching an investigation into or review of Plaintiffs claims, California Mutual denied 

13 Plaintiffs claim, stating as the exclusive reason for the denial of coverage that: "Loss of business 

14 due to reasons other than covered physical damage is beyond the scope of the insurance policy." 

15 This letter is attached hereto as Exhibit B and incorporated herein by reference. 

16 25. California Mutual' s denial additionally acknowledged that Plaintiff included 

17 "additional coverage for Civil Authority." However, California Mutual also denied Plaintiffs 

18 claim under the Civil Authority coverage based only on the following generalized statement: 

19 "[T]he Civil Authority actions are not due to physical damage to property from a covered loss." 

20 26. California Mutual's conclusory denials of the above coverages are contradicted by 

21 the terms of the Policy and applicable case law. 

22 27. The COVID-19 coronavirus has caused a physical loss of and/or damage to the 

23 Inns within the meaning of the Business Interruption coverage. Alternatively, because all of 

24 Plaintiffs business operations are "non-essential," the Closure Orders caused Plaintiff to suffer 

25 "the direct physical loss of ... the [Plaintiff] premises," within the meaning of the Business 

26 Interruption coverage. As indicated, the Inns can no longer be used for any purpose. 

27 28. Among other reasons, the Civil Authority coverage applies because the Closure 

28 Orders were "action[s] of civil authorities that prohibits access to [Plaintiffs] premises due to 

-6-

COMPLAINT FOR DECLARATORY RELIEF AND DAMAGES 
1 direct physical loss of or damage to [other] property .. . caused by or resulting from" the COVID2 19 coronavirus. 

3 29. Moreover, unlike many commercial property policies available in the market, the 

4 Policy sold by California Mutual does not include an exclusion for loss caused by a virus. The 

5 Policy has rules and conditions regarding bacteria, but a virus is not bacterium. 

6 30. Plaintiff reasonably expected that the insurance it purchased from California 

7 Mutual included coverage for business interruption and civil authority losses and extra expenses 

8 caused by viruses like the COVID-19 coronavirus. 

9 31. If California Mutual had wanted to exclude pandemic-related losses under 

10 Plaintiffs Policy it could have done so with an express exclusion. Instead, California Mutual 

11 waited until after it collected Plaintiffs premiums, and after a pandemic and the resulting 

12 Closure Orders caused catastrophic business losses to Plaintiff, to try to limit its exposure on the 

13 backend through its form denial, based on the erroneous assertion that there was no "physical 

14 damage" or "physical loss." 

15 32. The insurance industry has created specific exclusions for pandemic related losses 

16 under similar commercial property policies, but that exclusion was not part of the parties' 

17 bargain in this case. 

18 33. Likewise, the insurance industry has created specific exclusions for physical 

19 damage and/or physical loss caused by a virus, but that exclusion was not part of the parties' 

20 bargain in this case. 

21 34. Plaintiffs Policy clearly indicates that it covers damages on account of physical 

22 contamination and physical intrusion; the coverage is not limited to indemnity for structural 

23 damage. Amongst the many exclusions dealing with micro-particles and biological agents, there 

24 are specific exclusions for loss or damage owing to volcanic effusion, but coverage for volcanic 

25 dust and particulate matter; specific exclusions for radiation and radioactive material; and 

26 specific exclusions for loss or damage caused by fungus or bacteria. 

27 

28 

-7-

COMPLAINT FOR DECLARATORY RELIEF AND DAMAGES 
1 35. Critically, the insurance industry maintains a standard form exclusion loss or 

2 damage owing to viruses and/or pandemics, but those forms were not included here, meaning the 

3 parties intended the Policy to cover loss or damage owing to viruses. 

4 36. There is also a specific exclusion for loss or damage caused by "dispersal or 

5 application of pathogenic or poisonous biological or chemical materials," but only when 

6 connected to an act of terrorism. This terrorism exclusion suggests that other types of 

7 "dispersal. .. of pathogenic" materials is a covered cause of loss. 

8 37. California Mutual's wholesale, cursory coverage denial was arbitrary and 

9 unreasonable and inconsistent with the law, the facts and the plain language of the Policy it 

10 issued. This denial appears to be driven by California Mutual's desire to reduce its own financial 

11 exposure to the economic fallout resulting from the COVID- 19 related Closure Orders and the 

12 physical damage and/or loss of property occasioned by COVID-19. California Mutual failed to 

13 comply with its obligation to do a full and fair investigation of the claims and a careful review of 

14 the Policy it sold to Plaintiff in exchange for valuable premium. 

15 38. As a result of California Mutual' s wrongful denial of coverage, Plaintiff files this 

16 action for a declaratory judgment establishing that it is entitled to receive the benefit of the 

17 insurance it purchased, for indemnification and damages in the form of the business losses and 

18 extra expenses it has sustained, for bad faith breach of contract and for bad faith claims handling 

19 under California law. 

20 

21 

22 39. 

FIRST CAUSE OF ACTION 

(Declaratory Relief) 

Plaintiff incorporates by reference the allegations contained in the preceding and 

23 subsequent paragraphs as if fully set forth herein. 

24 

25 

40. As alleged in detail above, California Mutual and Plaintiff entered into the Policy, 

i.e., the insurance contract attached as Exhibit A. Plaintiff has made all premium payments and 

26 otherwise performed its obligations under the contract, including giving timely notice of its claim 

on or about March 24, 2020. 

27 

28 

-8-

COMPLAINT FOR DECLARATORY RELIEF AND DAMAGES 
1 41. Plaintiff paid the premiums in exchange for California Mutual' s promise to pay 

2 Plaintiffs losses for claims covered by the Policy as described herein, including for business 

3 losses incurred as a result of the Closure Orders forcing it to close the Inns and/or the direct 

4 physical damage and/or loss caused by COVID-19. 

5 42. Plaintiff has complied with all applicable provisions of the Policy, including 

6 payment of the premiums in exchange for coverage under the Policy. 

7 

43. California Mutual and the DOE Defendants have arbitrarily and without 

justification denied coverage and refused to reimburse Plaintiff for any losses incurred by it in 

8 

9 

10 

11 

12 

13 

connection with the covered business losses related to the Closure Orders and the necessary 

interruption of Plaintiffs business stemming from the COVID-19 pandemic. On information and 

belief, California Mutual did not review the Closure Orders before denying coverage, nor did 

California Mutual conduct any independent investigation of the Premises and their environs for 

the presence ofCOVID-19. 

44. An actual case or controversy exists regarding Plaintiffs rights and California 

14 Mutual's obligations under the Policy to reimburse Plaintiff for the full amount of the losses 

15 incurred by it in connection with the Closure Orders and the necessary interruption of its 

16 business stemming from the COVID-19 pandemic. 

17 45. Pursuant to Code of Civil Procedure § 1060, Plaintiff seeks a declaratory 

18 judgment from this Court declaring the following: (a) Plaintiffs losses in connection with the 

19 Closure Orders and the necessary interruption of its business stemming from the COVID-19 

20 pandemic are insured losses under the Policy; (b) California Mutual and the DOE Defendants 

21 have waived any right it may have had to assert defenses to coverage or otherwise seek to bar or 

22 limit coverage for Plaintiffs losses by issuing a blanket coverage denial without conducting a 

23 claim investigation as required under California law; and (c) California Mutual and the DOE 

24 

Defendants are obligated to pay Plaintiff for the full amount of the losses incurred and to be 

25 

incurred in connection with the covered business losses related to the Closure Orders during the 

necessary interruption of its business stemming from the CO VID-19 pandemic. 

26 

27 

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-9-

COMPLAINT FOR DECLARATORY RELIEF AND DAMAGES 
1 

2 

3 46. 

SECOND CAUSE OF ACTION 

(Breach of Contract) 

Plaintiff incorporates by reference the allegations contained in the preceding and 

4 subsequent paragraphs as if fully set forth herein. 

5 47. The Policy is an insurance contract under which California Mutual was paid 

6 premiums in exchange for its promise to pay Plaintiff's losses for claims covered by the Policy, 

such as business losses incurred as a result of the Closure Orders forcing it to close the Inns and 

7 

the direct physical loss and damage caused by COVID-19. 8 

9 

10 

11 

12 

48. Plaintiff has complied with all applicable provisions of the Policy, including 

payment of the premiums in exchange for coverage under the Policy, and yet California Mutual 

has abrogated its insurance coverage obligations pursuant to the Policy's clear and unambiguous 

terms. 

49. By denying coverage for any business losses incurred by Plaintiff in connection 

13 with the Closure Orders and the COVID-19 pandemic, California Mutual and the DOE 

14 Defendants have breached their coverage obligations to Plaintiff. 

15 50. As a result of these breaches of the Policy, Plaintiff has sustained millions of 

16 dollars in damages for which California Mutual and the DOE Defendants are liable, in an amount 

1 7 to be determined at trial. 

18 

19 

20 51. 

THIRD CAUSE OF ACTION 

(Breach of Implied Covenant of Good Faith and Fair Dealing) 

Plaintiff incorporates by reference the allegations contained in the preceding and 

21 subsequent paragraphs as if fully set forth herein. 

22 

23 

52. The conduct of California Mutual and the DOE Defendants described in this 

Complaint violated the implied covenant of good faith and fair dealing, including by failing to 

conduct a full, thorough and complete investigation with reasonable diligence into the facts and 

24 

25 

circumstance of the claim made by Plaintiff and then arbitrarily refusing to pay for losses 

covered by the insurance Policy despite lacking a basis for doing so. 26 

27 

28 

53. As a result of these breaches of the implied covenant of good faith and fair 

dealing, Plaintiff has sustained millions of dollars in damages, the exact amount of which will be 

determined at trial. 

-10-

COMPLAINT FOR DECLARATORY RELIEF AND DAMAGES 
1 

2 

3 54. 

FOURTH CAUSE OF ACTION 

(Bad Faith Denial of Insurance Coverage) 

Plaintiff incorporates by reference the allegations contained in the preceding and 

4 subsequent paragraphs as if fully set forth herein. 

5 55. California Mutual and the DOE Defendants have breached their obligations 

6 under the insurance Policy including by: (a) by failing to conduct a full, thorough and complete 

investigation, based on all available information, into the facts and circumstance of the claim 

7 

made by Plaintiff; (b) by unreasonably delaying in processing the claim or paying benefits due 

8 

9 

10 

11 

12 

Plaintiff; (c) by denying Plaintiffs claim based on standards known by Defendant to be 

improper; (d) by doing each of the acts and omissions set forth above as though set fully herein 

at length. 

56. Defendants, and each of them, failed and refused to conduct a thorough 

investigation into the facts and circumstances of the claim asserted, and by failing to consider the 

13 physical damage to Plaintiffs property, as well as to the property surrounding Plaintiff's 

14 property, all in an effort to relieve California Mutual from having to pay promptly, fairly and 

15 reasonably, benefits under the Policy. 

16 57. As a result of Defendants' bad faith breach of the Policy, Plaintiff has sustained 

17 millions of dollars in damages, the exact amount of which will be determined at trial. 

18 58. The conduct of California Mutual and the DOE Defendants was malicious and in 

19 conscious and reckless disregard for the rights and financial well-being of Plaintiff. Moreover, 

20 Plaintiff is informed and believes and, on that basis, alleges that California Mutual' s upper 

21 management has ratified the conduct described herein. California Mutual seeks punitive damages 

22 to the maximum extent allowed by law. 

23 

24 

25 

26 

27 

28 

WHEREFORE, Plaintiff prays as follows: 

1. That the Court enter a declaratory judgment in favor of Plaintiff on the First Cause of 

Action and against Defendants, declaring: (a) Plaintiff's losses in connection with the 

Closure Orders and the necessary interruption of its business stemming from the 

COVID-19 pandemic are insured losses under the Policy; (b) Defendants have 

waived any right they may have had to assert defenses to coverage or otherwise seek 

-11-

COMPLAINT FOR DECLARATORY RELIEF AND DAMAGES 
I 

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to bar or limit coverage for Plaintiff's losses by issuing a blanket coverage denial 

without conducting a claim investigation as required under California law; and ( c) 

Defendants are obligated to pay Plaintiff for the fulJ amount of the losses incurred and 

to be incurred in connection with the covered business losses related to the Closure 

Orders during the necessary interruption of its business stemming from the COVID19 pandemic. 

2. For general and special damages according to proof; 

3. For punitive damages to the maximum extent alJowcd by law. 

4. For any and all appropriate equitable relief, including but not limited to disgorgement 

of the premiums Plaintiff paid to California Mutual. 

S. For attorney's fees, including "Brandt Fees", in an amount to be determined at trial; 

6. For costs of suit; and 

7. For any and all other relief to which Plaintiff is entitled. 

DA TED: April 20, 2020 Respectfully submitted, 

REISER LAW P.C. 

Bx 

~ 

,,£ ,u ' _ 

Attorneys for Plaintiff, 

The Inns by the Sea 

COMPLAINT FOR DECLARATORY RELIEF AND DAMAGES