Cajun Conti LLC v Certain Underwriters at Lloyds was the first lawsuit filed in March 2020 in response to COVID-19 shutdown orders. Oceana Grill, a 500-seat restaurant in New Orleans' French Quarter, is owned by the plaintiff. A bench trial in late 2020 rejected Oceana's request for declaratory judgment, prompting the appeal.
Two of the five appellate judges found the Lloyd's syndicate's all-risks policy language relating to "direct physical loss or damage" to be ambiguous, both in terms of the type of damage required and the definition of "business suspension."
"The policy's words anticipate a situation in which business losses can be covered by less than total destruction of the property or less than total loss of the property's utility," wrote Chief Judge Terri F. Love in the majority decision. According to the Court, the term "loss" has multiple definitions.
The judges also pointed out that the insurer could have included a virus exclusion in the policy.
"The general manager of the appellants testified that he would not have purchased a policy that excluded coverage for viruses or bacteria because the company sold raw oysters to customers." "His testimony sheds light on how the appellants reasonably interpreted the policy at the time of purchase," wrote Judge Love.
Another judge agreed, but on the grounds that COVID-19, rather than ambiguity, can cause direct physical harm.
Judges Roland Belsome and Lynn Luker sided with the district court, concluding that it had not erred. At the lower court level, expert testimony revealed that the property had not been tested for coronavirus particles and that there was no evidence that particles on a surface could harm individuals or cause long-term damage.
Oceana Grill based its argument on two cases: Widder v. Louisiana Citizens Prop. Ins. Corp., a 2011 residential lead contamination case, and In re Chinese Manufactured Drywall Prods. Litig., a 2010 case. According to Belsome, who wrote the Widder decision, both required "a physical alteration of the insured's property that rendered the property uninhabitable or useless, which did not occur in this case." In addition, the dissenters point to a specific exclusion in the Lloyd's policy for loss or damage caused by delay or loss of use.
The Cajun Conti decision comes on the heels of another victory for policyholders in a New York state appellate court. A New York botanical garden was granted permission to pursue business interruption losses under a pollution legal liability policy.