Insurance

Restaurant benefiting from the operating loss guarantee: State Court of Appeal

A Louisiana state appeals court on Wednesday overturned a lower court in a split opinion and ruled that a New Orleans restaurant was entitled to coverage for COVID-19-related business interruptions in due to ambiguous political language.

In February 2021, following a trial en banc, which was the first trial to be held on the issue, a Louisiana state judge ruled in favor of Lloyd’s of London underwriters in a case filed by the owner and operator of Oceana Grill in New Orleans. French Quarter, in Cajun Conti LLC and. Al.v. Some underwriters at Lloyds, London et al.

This is the second state appeals court ruling in as many days to rule for policyholders, following dozens of federal appeals court rulings that have been in favor of insurers, including several by the 5th United States Circuit Court of Appeals based in New Orleans.

On Tuesday, a New York appeals court upheld a lower court ruling and ruled that the New York Botanical Garden was entitled to coverage against COVID-19-related business interruptions of a plant unit. ‘Allied World Assurance Co. Holdings Ltd.

The majority decision in Decision 5-2 said the policy “covers loss of business income due to the necessary ‘suspension’ of operations caused by ‘direct physical loss for damage to property'”.

“‘Suspension’ is defined in the policy as the ‘slowing down or cessation of your business activities’. Therefore, under the terms of the contract, complete cessation of operations and uninhabitable property are not preconditions for payment of business losses incurred due to suspension of operations caused by “direct physical loss or damage to property. ‘” the ruling said.

“The suspension includes the downturn in business activity, which has occurred here, as well as the complete cessation of business activity that occurs when a property is entirely uninhabitable,” the ruling said.

“The policy under consideration in this case is an ‘all perils’ policy, ‘where all perils are covered unless clearly and specifically excluded'”, states the majority opinion.

“The terms of the policy provide for a situation where business losses can be covered by less than complete destruction of the property or less than complete loss of utility of the property,” he said.

“The presence of this ambiguity and the existence of two equally reasonable interpretations as to what constitutes ‘direct physical loss or damage’ to insured property compels the court to interpret the provision liberally in favor of coverage for appellants and against the respondent, who drafted the vague provision,” the opinion stated, reversing the trial court’s decision and ruling in favor of the restaurant.

Lawyers handling the case did not respond to requests for comment.

Marshall Gilinsky, insurance recovery attorney and shareholder of Anderson Kill PC in New York, who is not involved in the case, said in a statement that “although the federal appeals courts have ruled that the virus does not constitute physical loss or damage, case law in many state courts suggests otherwise, and state courts have been more responsive to COVID-19 claims from businesses.