Attorneys for underwriters at Lloyd's of London lost some legal skirmishes earlier this month in a closely watched New Orleans case that will determine whether a restaurant’s business-interruption coverage applies during COVID-19 pandemic.
The insurer’s lawyers lost a motion for summary judgment Nov. 4 after Judge Paulette Irons of the Civil District Court for the Parish of New Orleans ruled against it, meaning that the case seems headed for trial.
“It is also a genuine issue of material fact whether the suspension of Oceana Grill’s operations was caused by physical loss or damage to its property,” Irons said in her reasons for judgment. “If COVID constitutes a physical loss or damage, it is clear that the question of how COVID impacts the environment is a genuine issue of material fact.”
Law professor Tom Baker
Irons also rejected a subsequent motion by the defendant’s attorneys to subpoena one of the plaintiff’s lawyers, Roderick “Rico” Alvendia, by alleging that the attorney engaged in a manipulation of New Orleans Mayor LaToya Cantrell’s March 16 coronavirus order. The defense alleged that the COVID-19 order included a reference to the virus attaching to surfaces and causing property loss.
In denying the defense attorneys’ interpretation of events surrounding the COVID-19 proclamation, the judge struck the allegations in the motion from the record.
In response to a query from the Louisiana Record, Lloyd’s said it cannot comment on active court proceedings. The attorney for the French Quarter restaurant Oceana Grill, John Houghtaling II, did not immediately respond to a request for comment.
But a University of Pennsylvania Carey Law School professor who tracks coronavirus-related insurance litigation, Tom Baker, called the New Orleans case a bellwether since it could produce a ground-breaking verdict if it goes to jury trial.
“By far, the largest number of such cases involve restaurants and bars,” Baker told the Louisiana Record. “(The Oceana Grill’s) situation is going to be like, I assume, many, many others.”
One point emphasized by plaintiff’s attorneys in the New Orleans case is that the restaurant’s business-interruption policy does not contain an exclusion for a virus outbreak, as many such policies include.
The COVID Coverage Litigation Tracker that Baker oversees indicates 82 percent of business-interruption lawsuits that have virus exclusions have been dismissed. And among those that lack virus exclusions in the insurance policies, only about half are denied.
In the future, insurers may seek some kind of government backstop to reduce their loss risks in such situations, Baker said.
“If carriers start losing some of these (cases), they’re going to put more of their own skin in the game to get a deal with Congress going forward,” he said.