Louisiana Court of Appeals Denies Insurer’s Motion for Rehearing on COVID-19 Claim

After reversing the trial court’s denial of the insured’s petition for declaratory judgment on a business interruption claim, the Louisiana Court of Appeals denied the insurer’s motion for rehearing en banc. Cajun Conti LLC v. Certain Underwriters at Lloyd’s, 2022 La. App. LEXIS 1278 (La. Ct. App. Aug. 8, 2022).

Cajun Conti LLC d/b/a Oceana Grill was one of the first insureds to file a lawsuit after the denial of its business interruption claim caused by the pandemic. Oceana suspended operations to comply with government shut-down orders. It eventually reopened, but with reduced capacity to curtail the spread of COVID-19 particles on the premises. In addition to reducing its capacity, Oceana decontaminated its restaurant to clean surfaces of the viral particles.

Lloyd’s denied coverage because there was no “direct physical loss or damage.” Oceana filed suit. After a bench trial, the court denied Oceana’s petition for declaratory judgment. The court of appeals found the policy to be ambiguous and capable of more than one reasonable interpretation in regards to lost business income. The ambiguity was construed in Oceana’s favor and the trial court judgment was reversed. Lloyd’s now sought a rehearing.

The court noted that the policy provided coverage for the insured’s “period of restoration” following “direct physical loss of or damage to the property” due to a suspension of business operations. “Suspension” was defined in the policy as a cessation or slowdown of business activities. In defining “suspension” to include a slowdown of business activities, this provision did not appear to require that the property be completely uninhabitable or unusable in order for coverage to prevail.

There was also an ambiguity in the policy. Lloyd’s position that the insured must fully lose use of the property was one reasonable interpretation. However, another equally reasonable interpretation was that a covered loss was the inability to fully utilize the property, as argued by Oceana.

The motion for rehearing raised no new issues and the court did not err in reversing the trial court’s judgment.

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