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Appeals Court First to Rule in Favor of Coverage for COVID Shutdown

Insurance Journal

  • June 17, 2022

The attorney who filed the first U.S. lawsuit seeking insurance coverage for a business shut down because of coronavirus won the first policyholder victory in a state or federal appellate court that interpreted the meaning of “direct physical loss or damage.”

The Louisiana 4th Circuit Court of Appeals on Wednesday reversed a trial court decision that dismissed a lawsuit filed by Cajun Conti, the owner of a 500-seat restaurant in the New Orleans French Quarter.

All 77 federal and 44 state court appellate decisions so far have held that the coronavirus did not cause tangible damage to property that was covered under standard-form commercial property policies. But the Louisiana appeals court ruled in a 3-2 decision that a Lloyd’s of London syndicate owed coverage to Cajun Conti because its policy was ambiguous, so must be interpreted in favor of the policyholder.

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Rhonda D. Orin, an insurance recovery attorney for the Anderson Kill law firm in Washington, D.C., said the fact that five appellate court judges wrote three opinions to explain their reasoning demonstrates the ambiguity that Cajun Conti was trying to prove. She said business owners who buy all-risk policies with no virus exclusions expect to be covered in circumstances where they are not allowed to use their property for the intended purpose.

Both Houghtaling and Orin pointed out that most of the decisions so far were decided in federal court at the summary judgment stage, meaning federal judges are interpreting state laws.

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