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Home / Insurance / Louisiana Supreme Court Finds Coverage for Covid Business Losses | Property Insurance Law Team Blog

Louisiana Supreme Court Finds Coverage for Covid Business Losses | Property Insurance Law Team Blog



The Louisiana Supreme Court found that there is coverage for loss or damage caused by “direct physical loss of or damage to” the insured premises as a result of contamination with COVID-19.1 I have previously discussed the case after the trial in Chip At @ 2 will be at 2:30 with an update on the New Orleans Oceana COVID lawsuit won by the insurer, and attached panties and various deposits. John Houghtaling and other lawyers representing the policyholder deserve a big tribute for taking home a profit. That was not easy.

The opinion changed the district court’s decision and considered:

Upon review, we conclude that the insurance is ambiguous and can be interpreted as more than a reasonable interpretation when it comes to covering lost business income. Due to the existing ambiguity in the relevant policy language, the agreement should be interpreted in favor of the complainants.

Louisiana̵

7;s Supreme Court relied heavily on Louisiana precedent, which finds coverage when the insured property is “rendered unusable or uninhabitable.”

The Supreme Court of Louisiana has previously defined the meaning of “direct” in relation to “loss or damage” in an insurance contract, as to denote “immediate or near as opposed to distant.” Central Louisiana Elec. Co., Inc., 579 So. 2d at 985 n. 8 (quoting Lorio v. Aetna Ins. Co., 255 La. 721, 232 So. 2d 490 (1970)). The appellants discussed the Court’s examination of what constitutes “direct physical loss of or damage to property” in Aries v. Louisiana Citizens Prop. Ins. Corp.a case of residential lead pollution.

Further considered that physical damage was not necessary to trigger coverage in a homeowners policy because the insured property “was rendered unusable or uninhabitable”. Further11-0196, p. 4, 82 Thus. 3d at 296 (quoting) In Chinese-made plasterboard products, liability disputes, 759 F. Supp. 2d 822 (ED La. 2010); Ross v. C. Adams Construction & Design, 10-852 (La. App. 5 Cir. 6/14/11), 70 So. 3d 949). Furthers holdings rely on a series of defective drywall walls where drywall installed on the insured property was physically intact, but its inherent defects required that it be replaced in order for the property to be usable …

The Court also noted similar findings from other jurisdictions:

[M]all cases in other jurisdictions have … increased the coverage to losses arising from disease-causing agents with a marked physical form but which can still not be discerned with the naked human eye. Looks Port Authority of NY and NJ v. Affiliated FM Ins. Co., 311 F.3d 226, 235-36 (3d Cir. 2002) (who considers that “physical loss or damage” exists if asbestos fibers contaminate the insured property so that it is uninhabitable, or if there is an imminent threat of release of a amount of asbestos fibers that would cause a loss of usability ‘); Looks Farmers Ins. Co. of Or. v. Trutanich, 123 Or. App. 6, 858 P.2d 1332, 1335 (1993) (finds that odor is a “physical” property because it damaged the insured property and concludes that “the cost of removing the odor is a direct physical loss”); Looks Matzner v. Seaco Ins. Co., no. CIV. 96-0498-B, 1998 WL 566658, at * 4 (Mass. Super. 1998) (assesses that “carbon monoxide contamination constitutes” direct physical loss of or damage to “property”). This court, in Furtherjoined this series of cases that extend the scope for a wider range of losses caused by pathogens with a marked, but microscopic, physical form.

The Court further noted that reference to dictionary definitions emphasizes the ambiguous nature of the word “loss”.

References to external definitions of “loss” accentuate the ambiguity. Loss is defined in a dictionary as “the fact that you no longer have anything or have less of anything.” Another dictionary prescribes that loss is “destruction, ruin,” “the act or fact of being unable to maintain or maintain something or someone,” and “the partial or complete deterioration or absence of a physical ability or function.”

IN The insurance industry teaches that a cause of damage does not have to change propertyI recently challenged the concept that “physical loss” requires some modification of evidence because the insurance industry teaches its own adjusters that it does not.

The court also noted that the insurance industry formulated an exemption that would have eliminated the insurer’s liability, but the insurance could not include such an exemption:

Examination of the evidence adduced by the appellants reveals that, at the time the insurance was issued, there were viral exceptions which eliminated the insurer’s liability for loss or damage caused by a virus on the market. However, the complainant did not include a viral exclusion in the policy it developed and sold to the complainants.

Will this decision be the break in the dam that leads to additional policyholders’ profits? Who knows? Louisiana has precedent for this finding, and not all states do. In the state of Bayou, non-virus-covered business policyholders have a chance to get coverage.

Today’s thoughts

An American has not seen the United States until he has seen Mardi-Gras in New Orleans.
-Mark Twain

1 Cajun Conti v. Certain Underwriters at Lloyd’s, LondonNo. 2021-CA-0343 (La. June 15, 2022).


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