The Louisiana Court of Appeals won a restaurant in the COVID lawsuit

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

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  • The court in Split Louisiana finds the policy ambiguous, reads it in favor of Oceana Grill from New Orleans
  • First appellate profit for an insured business

(Reuters) – The Louisiana Court of Appeals has found that the policy on all risky properties covers losses from business interruptions caused by orders to suspend COVID-19 and other operating restrictions.

In a 3-2 split on Wednesday, the Fourth Louisiana District Court of Appeals overturned the verdict for certain insurers at Lloyd’s, London, in a declarative relief lawsuit filed by operators of the 500-seat Oceana Grill in New Orleans. This is the first appellate gain for an insured business according to a database at the Kerry School of Law at the University of Pennsylvania.

Two of the judges of the commission found that the requirement of the policy for “direct physical loss or damage” was ambiguous regarding the temporary suspension of operations, and read it in favor of the insured restaurant. A third judge agreed 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 judge’s factual finding that the presence of COVID-19 did not cause physical damage. They also said that the majority had ignored the explicit exclusion of “loss of use” in Lloyd’s policy and had erred in relying on cases interpreting homeowners’ policies.

In an email Thursday, Lloyd’s lawyer (Ginger) Dodd of Phelps Dunbar said the decision was incompatible with “ten federal district courts of appeal and every other state court of appeals” to resolve the issue. “We will pursue every opportunity to deal with what we consider to be an emergency solution,” Dodd said.

Oceana’s lead lawyer, John Houtaling of Gauthier, Murphy & Houghtaling, said in an interview Thursday that the decision “will dramatically change the way federal courts handle these cases.” In particular, judges must stop banning evidence of industry development and the widespread use of standard virus exclusion, which he says insurers consider pollution to be “physical loss or damage”.

In a footnote, the Louisiana Court of Appeals acknowledged that such evidence is generally inadmissible to establish coverage, but may be evidence of the parties’ intent once ambiguity has been established.

The Court of Appeals did not order Lloyd’s to pay a specific amount to Oceana. Houtaling declined to say how much the restaurant was asking.

While Wednesday’s appeal decision was the first to cover COVID-19’s loss of income under a property insurance policy for all risks, the New York State Court of Appeals on Monday upheld a decision by a judge in the Bronx that allowed the Botanical Garden to New York to judge its pollution. Liability insurer, Allied World Assurance, for dismissing its claim for loss of business income related to COVID and for breach of the implied contract of good faith and fair dealing.

Oceana’s appeal is Cajun Conti LLC and others. v. Certain Insurers at Lloyd’s, London, et al., Louisiana Fourth County Court of Appeal, № 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 insurers at Lloyd’s, London: Kyle Schonekas of Schonekas Evans McGoey & McEachin; Heather Duplantis and Virginia Dodd from Phelps Dunbar

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