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Monday, October 14, 2019

Calif. court: Property owner's loss of ability to operate as nightclub after shooting is property damage


By Takesha Thomas | Nov 7, 2018

SAN DIEGO (Legal Newsline) – A California appeals court has reversed a previous decision in an insurance claim involving the owner of the property that housed the former El Sombrero nightclub in Colton.

On Oct. 25, the California 4th Appellate District, Division Two reversed the San Bernardino County Superior Court's ruling that granted summary judgment to Scottsdale Insurance Co. after Thee Sombrero Inc. filed a direct action over property damage claims.

"We will hold that 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," the ruling stated.

According to the court filing, Sombrero’s lessees operated the commercial property in Colton as the El Sombrero nightclub. 

"In 2007, after a fatal shooting at the nightclub, the conditional use permit was revoked and replaced with a modified use permit, which provided that the property could be operated only as a banquet hall," the ruling states. 

Sombrero argued that due to the modification of the use permit in 2007, the property's value declined to $1.8 million from $2.7 million.

Sombrero initially filed a negligence claim against Crime Enforcement Services in 2009, which provided security guard services at the club. The company had a corporate general liability policy issued by Scottsdale that allegedly covered CES’s liability for “property damage” caused by an “occurrence,” the ruling states.

"Sombrero sued CES, alleging that CES's negligence caused the shooting, which in turn caused the revocation of the use permit, which in turn caused a diminution in value of the property," according to the ruling.

In 2015, Sombrero filed suit against Scottsdale. 

"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 ruling states.

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