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Novel Coronavirus Breeds Novel Litigation: Business Interruption Suits in the Age of COVID-19

Published on: April 17, 2020

The nation’s first suit seeking a declaration of coverage under a commercial property policy for business interruption and extra expenses incurred as a result of COVID-19 was filed in a Louisiana state court on March 20, 2020. Since then, similar suits have been filed across the nation by restaurants, casinos, dentists, dive shops, movie theatres, repertory theatre companies, etc. Clearly, the same coverage issues raised in the Louisiana case will be litigated throughout the nation.

The suit in Cajun Conti, LLC, et al v. Certain Underwriters at Lloyd’s, London, et al, Suit No. 2020-02558, was filed on March 16, 2020, in the Civil District Court for the Parish of Orleans, State of Louisiana. Plaintiffs, doing business as Oceana Grill, a restaurant in the French Quarter, allege coverage should be declared to exist because: 1) the property policy is an “all risks” policy such that all risks are covered unless the insurer can clearly and specifically establish an exclusion from coverage; 2) the policy does not contain any exclusion “for losses from a virus or global pandemic;” 3) the virus has “physically impact[ed] public and private property” as it “physically infects and stays on the surface of objects or materials, ‘fomites,’ for up to twenty-eight days;” 4) such “contamination … [is] a direct physical loss needing remediation;” and, alternatively and in addition, 5) the current and future state orders limiting its operations serve to trigger the civil authority provisions of its policy.

A key issue in Cajun Conti as well as in the other COVID-19 business interruption coverage litigation will be whether the existence of the novel coronavirus constitutes a “direct physical loss or damage” under the intendment of an all risks property policy. The Cajun Conti plaintiffs cite to Widder v. Louisiana Citizens Prop. Ins. Corp., 2011-0196 (La. App. 4 Cir. 8/10/11), 82 So.3d 294, writ denied, 2011-2336 (La. 12/2/11) for the premise that the existence of a hazardous condition that renders the insured property unusable or uninhabitable is sufficient to constitute a “physical loss or damage” sufficient to trigger coverage. Notably, in Widder, the actual presence of inorganic lead in the insured property was confirmed to exist and coverage was therefore available. Because policyholders have the burden to establish the existence of “physical loss or damage,” reliance on Widder may require the Cajun Conti plaintiffs to establish coronavirus was actually present in their property or that its presence otherwise caused their property to be unusable or uninhabitable. Presence in the community may not be sufficient to prove the coronavirus made the insured property uninhabitable or unusable.

One of the items of proof required for the triggering of coverage under the civil authority provisions of a commercial property policy is that the alleged business loss was caused by an action by the civil authority that prohibited access to the insured premises. Relying on out-of-state jurisprudence, one Louisiana federal court has determined this factor requires proof that access to the insured premises be “actually and completely prohibited,” which is not satisfied if the access is merely “limited or hampered.” Kean, Miller v. National Fire Ins. Co. of Hartford, C.A. No. 06-770 (M.D. La. Aug. 29, 2007), 2007 WL 2489711, *4-*6. The state orders expressly referenced in the Cajun Conti suit would appear not to satisfy this standard as they served only to limit occupancy and required earlier closures. Even the subsequent stay-at-home orders [Proclamation Number 33 JBE 2020 and 41 JBE 2020, issued respectively on March 22, 2020 and April 2, 2020], may likely be insufficient to satisfy this requirement as they do not expressly mandate closure of restaurants, but simply require restaurants to “reduce operations to continue minimum contact with members of the public,” expressly allow for curbside delivery, drive-thru, and delivery services, and only prohibit the consumption of food and beverages on site.

The specific facts of each business interruption claim and the terms of the relevant policy should be considered in every occasion. Yet, these suits may face problems of proof generally. For now, we expect the novel suits to continue.

John has been practicing over 30 years and is a Senior Partner with firm where he serves on the Management Committee. He has devoted attention to non-profit boards dedicated to assisting at risk children. He enjoys time with his three children and grandchildren. He also enjoys tennis and hiking.

Nancy B. Gilbert is a partner with Keogh Cox in Baton Rouge, Louisiana. She is a puzzle-solver by nature, and specializes in providing clear and in-depth analysis of complex litigation issues.

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Google Earth Images Ruled Admissible

Recently, a Louisiana appellate court found that images fromGoogle Earth images were admissible. In Walker v. S.G.B.C., LLC,2019-506 (La.App. 3Cir. 2/5/20); --- So.3d ---, 2020 WL 563818, theLouisiana Third Circuit rejected a challenge to the use of the images on thebasis that they were not properly authenticated.

In this case, the plaintiff sought recognition of ahistorical servitude of passage from his landlocked property. During the trial,the plaintiff offered Google Earth images of the property to show a gravelpathway on the alleged right of way. The images were dated January 2004,November 2005, and December 2017. Multiple witnesses identified the pathon the images. Thereafter, the trial court admitted the images into evidenceover the defendant’s objections.

On appeal, the defendant argued that the images were notproperly authenticated under La. C.E. art. 901 because the plaintiff did not:(1) have the creator of the images testify to their authenticity; (2) get acertification from Google that the images were what they purported to be; and(3) have an expert testify that the images were accurate depictions of whatthey claimed to be.

The Walker court affirmed the trial court ruling thatthese images were admissible. Louisiana Code of Evidence Article 901(B)(1)provides the testimony of a witness with personal knowledge may supply theauthentication of evidence required for its admission. Because the plaintiffidentified various landmarks on each image, and each image was subsequentlyrecognized by multiple witnesses (including the defendant’s witnesses), theCourt concluded there was sufficient support for finding the images authentic.

In Walker, the precise dates the photographs were taken were not critical. Under different facts, courts may choose to apply the authentication rules of Article 901 more stringently.

Chris Jones is a partner with Keogh Cox in Baton Rouge, LA. He focuses his practice on class actions and mass torts, and handles these matters in courts throughout the country. He is a life-long resident of Baton Rouge, where he lives with his wife and four children.

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Louisiana Supreme Court Now Allows Direct Negligence Claims Against Employer

In a previous blog, we outlined developing law in the Louisiana appeals courts, and federal district courts in Louisiana on the issue of whether a claimant may maintain a separate cause of action against an employer for independent negligence when it is stipulated that the employee was in the course and scope of employment.¹ Most courts held a claimant could not maintain a separate action against the employer under these circumstances, reasoning that the employee’s fault would impute to the employer, and therefore, additional inquiry was not appropriate. However, the Louisiana Supreme Court recently addressed the issue and stated:

“(A) plaintiff may pursue both a negligence cause of action against an employee for which the employer is vicariously liable and a direct claim against the employer for its own negligence in hiring, supervision, training, and retention as well as a negligent entrustment claim, when the employer stipulates that the employee was in the course and scope of employment at the time of the injury.” (Emphasis added) See Martin v. Thomas et al., 21-1490 (La. 12/21/21), 328 So. 3d 1164.

This holding notably overturned the 1^st Circuit Court of Appeal ruling in Elee v. White, - - So.3d - - (La. App. 1 Cir 7/24/20), 2020 WL 4251974 and other Louisiana 5^th Circuit Court of Appeals decisions. The Supreme Court in Martin reasoned that “the initial assessment of fault required by the law is not bypassed due to the employer-employee relationship” and “shielding a potential tortfeasor from liability is not compatible with a comparative negligence regime.” The Court further stated that the possibility that both the employee and employer may be at fault is not “subsumed” by the employer’s admission on course and scope. In fact, if the fault of the employee is shown, then the issue of whether there is also fault on the part of the employer remains and must be decided by the evidence on a case-by-case basis.

The consequences of this decision remain to be seen, but it is expected that claimants may also pursue employers separately on theories such as negligent hiring, supervision, and entrustment. The scope of such discovery will remain within the sound discretion of the trial judge.

By: John P. Wolff, III and Richard W. Wolff

¹Louisiana Appeal Courts Prohibit Direct Negligence Claims Against Employer; US District Court Uses Rule to Limit Discovery - Keogh Cox

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Uninsured Motorist Coverage: Making Smart People Feel Dumb

I have met smart, sophisticated “business” people whose eyes glass over when they try to explain their understanding of “UM” coverage. The picture becomes murkier when discussing “economic-only UM,” a form of UM coverage many people purchase without even knowing it. Through many years and conversations, I have come to conclude that there is a general fogginess that obscures this entire subject with many, if not most, people. This blog is an effort to improve understanding on the subject.What is “UM” Coverage?“UM” signifies “uninsured motorist” insurance coverage, but is more properly described as “uninsured/underinsured” motorist coverage. A person, family, business, or group purchases UM coverage to respond to damages caused in an accident by someone who has either no insurance or not enough to cover the loss. You purchase UM insurance to protect yourself or those connected to you. Without UM, you are gambling that the person who caused the accident (the “tortfeasor”) will have insurance coverage, and enough coverage, to respond to the injuries and damages they have caused.Why UM?This question is simply answered in a two-part response:#1- The roads are dangerous-Unless you are a crop duster or an undercover agent, the most dangerous thing you will likely do on any given day is to drive on a public road, even more so in the age of “smartphones” and distracted-driving.#2- Many drivers lack sufficient liability coverage- An unhealthy portion of drivers have either no insurance on insufficient insurance coverage to address an accident involving severe injuries or damages. The State of Louisiana requires motorists to obtain at least the minimum insurance of $15,000 “per person,” $30,000 “per accident,” and $25,000 to address property damage. If you do not purchase UM, you are trusting that these limits will be enough, as they might be in a minor accident. But what if the injuries are severe or you have multiple passengers in your car, van, or suburban?Often, the same people who reject UM, will buy “collision” coverage on their car to make sure they are not left paying for a car note after the car is destroyed in an accident. In this limited way, you can think of UM insurance as collision coverage on you, your family, passengers, or employees.While perfect statistics are not available, many drivers on the road have no insurance. Frequently, drivers will obtain minimum limits insurance through a “premium finance” arrangement, but will have stopped paying the premiums (thereby losing coverage) by the time of an accident.What is “Economic-Only” UM?In Louisiana, UM coverage will be afforded to you unless you “waive” the coverage under La. R.S. 22:1295. Louisiana residents are presented with a form that allows them to waive or select UM coverage. They are also allowed to select “economic-only” UM. People often choose this option because it is cheaper, but economic-only UM coverage will only pay for economic damages such as lost wages, medical bills, funeral costs, and other monetary damages. Economic-only UM will not pay money to compensate for pain and suffering/mental anguish, scarring and disfigurement, or other non-economic damages.FAQS

Can UM protect me from a hit-and-run driver? Yes.

What if another driver’s negligence caused the accident, but there was no physical contact with that driver’s vehicle and they fled? In this scenario, UM may be available under La. R.S. 22:1295(1)(f); however, you will need to identify an “independent and disinterested witness” to establish the actions of the unidentified driver.

Will UM protect me if I am at fault in an accident? No. The law would consider that a “moral hazard” and invite unscrupulous individuals to cause an accident in hopes of recovering under the policy they purchased.

Will UM protect me if I am a pedestrian? It may, depending upon the terms of your insurance policy.

What if an object falls from a vehicle and causes an accident? UM may be available in this circumstance. The ultimate answer may depend upon whether the “falling object” had come to rest before the accident. Rener v. State Farm Mut. Auto. Ins. Co., 99-1703 (La.App. 3 Cir. 4/05/2000), 759 So.2d 214, 215.

CONCLUSIONRational people may decide to reject UM to save money; and this decision may be the right one if they have health insurance, short-term disability, long-term disability, or others such protections. However, people often make such decisions with less than full information. Hopefully, you will make the smart choice.