Insights

The first lawsuit pertaining to business interruption claims and interpretation under insurance policies for same has been filed in the Civil District for the Parish of Orleans.  Cajun Conti, LLC, Cajun Cuisine 1 LLC, Cajun Cuisine LLC d/b/a Oceana Grille filed a Petition for Declaratory Judgment against Certain Underwriters at Lloyd’s, London (“Lloyd’s”), Governor John B. Edwards in his official capacity as Governor of the State of Louisiana, and the State of Louisiana as it pertains Oceana - Petition for Dec J (executed) insurance coverage under a policy issued by Lloyd’s to the plaintiffs, which operate a restaurant in the French Quarter area in the City of New Orleans.  The suit was filed by John Houghtaling of the Gauthier, Murphy and Houghtaling firm, which was heavily involved in both the Hurricane Katrina and tobacco litigation. It is alleged that the Lloyd’s policy at issue provides coverage for property, business personal property, business income, and extra expense for the relevant policy period at issue.  Plaintiffs further allege that the policy premiums paid to Lloyd’s were to specifically provide all risk coverage, and in particular, the extension of coverage in the event of business closure by order of Civil Authority.  
 
The crux of the plaintiff’s argument centers around the policy not having any exclusion due to losses, business, or property, from a virus or global pandemic. Instead, the policy allegedly only excludes losses due to “biological materials such as pathogens in connection with terrorism or malicious use, therefore, providing coverage to other viruses or global pandemic.” The plaintiffs’ argument further is premised on what they claim is recognition by the scientific community and those personally affected by the virus that the Coronavirus is a cause of real physical loss and damage. Plaintiffs are further asserting that the “deadly virus physically infects and stays on the surface of objects or materials, ‘formites’, for up to twenty-eight days, particularly in humid areas below eighty-four degrees” and thus, the contamination of the premises would be a direct physical loss needing remediation to clean the surfaces of the establishment. They cite Widder v. Louisiana Citizens Proper. Ins. Corp., 2011-0196 (La.App. 4 Cir. 8/10/11); 82 So.3d 294, 296, writ denied, 2011-2336 (La. 12/2/11), which was in regard to the intrusion of lead or gaseous fumes, to support that proposition that the contamination caused by the pandemic would constitute a direct physical loss that would need to be remediated. 
 
The Petition goes on further to reference the Orders issued by both the Governor of the State of Louisiana and the Mayor of New Orleans pertaining to the restriction placed on businesses and in particular, restaurants. Please keep in mind that this suit was filed prior to the subsequent orders issued by both the Governor and the Mayor, and thus you can expect the plaintiffs to supplement this Petition to address what is contained in any subsequent orders.

The plaintiffs are seeking a Declaratory Judgment, in pertinent part, on (1) whether the Governor’s March 13, 2020 Civil Authority Order applies to restaurants whose capacity exceeds 250 people; (2) whether the Governor’s March 13, 2020 Civil Authority Order and the Mayor’s March 15, 2020 restrictions trigger the civil authority provisions of the policy issued to plaintiffs; and (3)  an affirmation by the Court that because the policy issued by Lloyd’s does not contain an exclusion for a viral pandemic, the policy provides coverage to plaintiffs for any future civil authority shutdowns of restaurants in the New Orleans area due to direct physical loss from the coronavirus contamination and that the policy provides business income coverage in the event that the coronavirus has contaminated the insured premises.
 
This is an ever evolving set of issues for which we expect to see a litany of suits begin to be filed state and nationwide.  We will certainly keep you updated in regard to new suits, new arguments and how the courts are dealing with these issues.

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