An appeals court in Louisiana refuses to dismiss litigation for policyholders in a case of covid-19-related business interruption is an important ruling and is expected to be influential, the policyholder’s lawyers say.
In a divided opinion, the Louisiana Court of Appeal for the 4th Circuit overturned a lower court last Wednesday, ruling that a restaurant in New Orleans is entitled to business interruption protection for pandemic-related losses due to ambiguous policy language, according to the ruling in Cajun Conti LLC et al. v. Some underwriters at Lloyds, London et al.
In February 2021, after a bench trial, which was the first trial in the case, a judge in the state of Louisiana ruled in favor of Lloyd̵7;s of London underwriters in a case filed by the owner and operator of Oceana Grill in New Orleans. French Quarter. The policyholder appealed the judgment.
The Louisiana verdict came a day after an appeals court in New York also ruled in favor of a policyholder. The New York State Supreme Court Appellate Division, First Judicial Department, upheld a lower court decision and ruled that the New York Botanical Garden is entitled to covid-19-related coverage of business interruptions from an Allied World Assurance Co. Holdings Ltd. unit.
In the New Orleans case, the majority decision in the 5-2 decision said that the policy “covers loss of business income due to necessary” closure “of the business caused by” direct physical loss of or damage to property. ”
The dissenting opinion stated: “While the majority claims that the language is open to more than a reasonable meaning and is ambiguous, the policy’s case law and plain language do not support that assertion.”
Courts in many other covid-19-related cases have ruled that companies that closed their operations during government closures in 2020 did not suffer physical damage and therefore coverage of business interruptions was not triggered. Many federal appellate courts have upheld the rulings, although relatively few state appellate courts have so far ruled on the matter.
Lawyers in the case did not respond to requests for comment.
The policyholder’s attorneys who are not involved in the case said the Louisiana ruling is significant.
Attorney Scott D. Greenspan, senior lawyer at Pillsbury Winthrop Shaw Pittman LLP in New York, said this is the first policyholder’s victory from any state appellate court focusing on the issue of physical loss or injury, “so it’s a huge victory for policyholders and is likely to result in further appeals decisions in favor of policyholders. “
Bradley Dlatt, an associate of the Perkins Coie LLP in Chicago, said: “State courts are ultimately the arbitrators of state laws and for a while now, courts have been hesitant to rule in favor of policyholders because many federal courts, with no benefit of discovery and full developed case records, began to decide whether a new virus could cause loss or physical damage to property.
The Louisiana case “is particularly significant because it came with a fully developed index of facts,” said Mr. Dlatt.
Peter A. Halprin, a partner with Pasich LLP in New York, said in a statement that the Louisiana Court of Appeal “applied a basic principle to the interpretation of insurance policies, and considered that the phrase” direct physical loss of or damage to “was ambiguous and should therefore be interpreted against the author and for the benefit of coverage. “
The verdict will affect other courts of appeal, he said.
Craig Stanfield, a partner with King & Spalding LLP in Houston, said that although the decision is a bit mixed because it was not unanimous, it is still significant and gives policyholders “something to hang their hats on.”