Louisiana Court of Appeals prepares victory for restaurant in COVID business disruption case

An empty restaurant is pictured in New Orleans, Louisiana, USA, March 15, 2020. REUTERS / Jonathan Bachman

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  • Louisiana Split Court Finds Policy Ambiguous, Law in Favor of New Orleans’ Oceana Grill
  • First appeal victory for an insured company

(Reuters) – A Louisiana appeals court found that an all-risk real estate policy covered loss of business interruption caused by COVID-19 shutdown orders and other operating restrictions.

On Wednesday, in a 3-2 split, the Louisiana Fourth Circuit Court of Appeals overturned a bench verdict for Certain Underwriters at Lloyd’s, London, in a major declaratory action filed by Oceana Grill operators from 500 New Orleans places. It is the first appeal win for an insured firm according to a database from the University of Pennsylvania Carey Law School.

Two of the jury judges found the policy requirement of “direct physical damage” to be applied to a temporary suspension of operations to be ambiguous and read it in favor of the insured restaurant. A third judge agrees on other grounds.

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The two dissenters said the policy clearly required physical damage to property and that there was no “manifest error” in the trial judge’s factual finding that the presence of COVID-19 did not cause physical harm. They also claimed that the majority had ignored an express exclusion for “loss of use” in Lloyd’s policy and were wrong to rely on cases that interpreted homeowners’ policies.

In an email Thursday, Phelps Dunbar’s Lloyd Virginia (Ginger) Dodd attorney said the ruling was inconsistent with “ten federal circuit appeals courts and every other state appellate court” to address. the question. “We will pursue all options to address what we believe to be an anomalous decision,” said Dodd.

Oceana’s chief attorney, John Houghtaling of Gauthier, Murphy & Houghtaling, said in an interview Thursday that the decision “will drastically change the way federal courts have handled these cases.” In particular, judges should stop excluding evidence of industry development and the widespread use of standard virus exclusion, which he says shows insurers view contamination as “physical loss or damage.”

In a footnote, the Louisiana Court of Appeals acknowledged that such evidence is generally inadmissible for establishing coverage, but can be evidence of the parties’ intent once an ambiguity is found.

The appeals court did not order Lloyd’s to pay a specific amount to Oceana. Houghtaling refused to say how much he looks for the restaurant.

While Wednesday’s appeal decision is the first to find coverage for COVID-19 loss of income under an all risk property insurance policy, a New York state appeals court on Monday found affirmed the ruling of a Bronx judge that allowed the New York Botanical Garden to sue its pollution insurer, Allied World Assurance, for denying its claim for the loss of business income related to the COVID and for having violated the implicit pact of good faith and fairness.

Oceana’s appeal case is Cajun Conti LLC et al v. Certain Underwriters at Lloyd’s, London, et al., Louisiana Court of Appeal – Fourth Circuit, No. 2021-CA-0343.

For Cajun Conti et al: John Houghtaling and Jennifer Perez of Gauthier, Murphy & Houghtaling; Daniel Davillier of the Davillier Law Group

For some Lloyd’s underwriters, London: Kyle Schonekas of Schonekas Evans McGoey & McEachin; Phelps Dunbar’s Heather Duplantis and Virginia Dodd

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