On Monday, March 17, 2020, the Oceana Grill, a popular restaurant in the heart of the French Quarter in New Orleans, filed the first known business interruption lawsuit arising out of the COVID-19 pandemic. Oceana Grill alleges that it purchased an “all risk policy” from defendant Certain Underwriters at Lloyd’s London (“Underwriters”) which covers all direct physical losses to its property “unless the loss is specifically excluded or limited in the policy.” According to Oceana Grill, the coronavirus is “physically impacting public and private property, and physical spaces in cities around the world.” The coronavirus allegedly physically infects and stays on the surface of objects or materials (“fomites”) for up to 28 days. Notably, Oceana Grill does not allege that the coronavirus is or has been found on the insured premises or that it has filed a claim against the Underwriters. Instead, Oceana Grill seeks a declaration that its all risk policy should respond in the event of a future direct physical loss from the coronavirus. Oceana Grill also alleges that the “civil authority” provisions in its policy provides coverage in the event that Lousiana’s Governor or New Orleans’ Mayor orders all restaurants to shut down.
It is certainly unusual for an insured to file a lawsuit before it has suffered a covered loss, much less had its claim denied by its insurer. In order to proceed on its claims, at a minimum, Oceana Grill will likely have to demonstrate physical damage to its own property.
A typical “civil authority” provision in a commercial property policy provides in part: “We will pay for the actual loss of Business Income you sustain and necessary Extra Expense caused by action of civil authority that prohibits access to the described premises due to direct physical loss of or damage to property, other than at the described premises, caused by or resulting from any Covered Cause of Loss.” Therefore, in order to proceed on its claims under the “civil authority” coverage, Oceana Grill will likely have to prove that the coronavirus caused physical damage at another’s premises.
Locke Lord continues to monitor these developments.
The case is styled Cajun Conti, LLC et a. v. Certain Underwriters at Lloyd’s London et al., Civ. Dist. Ct. La. (2020). A copy of the Complaint can be viewed here.
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