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First U.S. Business Files Suit Against Insurance Carrier for Losses Resulting From Coronavirus (COVID-19)

On Monday, March 16, 2020, a prominent New Orleans restaurant became the first business nationwide to file suit against an insurance carrier for losses sustained as a result of the novel coronavirus (“COVID-19”). In Cajun Conti, LLC et al. v. Certain Underwriters at Lloyd’s of London, et al. (La. Dist. Court, Orleans Parish), the Plaintiff, Oceana Grill (“Oceana”), seeks a declaratory judgment requiring Lloyd’s of London (“Lloyd’s”) to provide coverage under an “all risk” policy for losses incurred as a result of the closure of the restaurant in an effort to curb the spread of COVID-19.

Where There Is Loss, There May Be Insurance Coverage

Oceana Grill is a restaurant located on the corner of Bourbon and Conti Streets in the heart of the French Quarter of New Orleans. On a busy day, the restaurant can accommodate up to 500 guests, and often hosts weddings and other private events. Oceana Grill is open from 8:00 a.m. to 1:00 a.m. every day of the year.

In light of the COVID-19 crisis, the Governor of Louisiana has issued an order banning gatherings of 250 or more people in a single space. Additionally, the Mayor of New Orleans has directed that all full-service restaurants must close by 9 p.m. daily and limit the number of guests to 50% of the restaurant’s overall seating capacity. Oceana Grill anticipates that further limitations on their operations will be enacted in the coming days and weeks. Clearly, Oceana Grill (like many other restaurants across the country) is expecting to incur a significant loss of revenue. As a result, Oceana is looking to its insurance carriers for coverage.

An “all risk” insurance policy is a type of policy that automatically covers any risk that is not specifically excluded. In its’ Complaint, Oceana argued that because their policy did not exclude losses that arise as a result of a virus or global pandemic, the restaurant is entitled to coverage. Specifically, Oceana asked that the Court “affirm that because the policy provided by Lloyd’s does not contain an exclusion for a viral pandemic, the policy provides coverage to plaintiffs for any future civil authority shutdowns of restaurants in the New Orleans area due to physical loss from Coronavirus contamination.”

One of the key issues in the Oceana Grill lawsuit will be whether the restaurant incurred “direct physical loss or damage” as a result of COVID-19. Typically, “all risk” policies only provide coverage for physical property damage.

Insurance Coverage for New Jersey Coronavirus Losses

New Jersey businesses seeking coverage under similar types of policies may be in luck: several recent decisions have broadly interpreted the term “physical damage” in favor of coverage. For example, in Wakefern Food Corp. v. Liberty Mutual Fire Ins. Co., the Court determined that the term “physical damage” was ambiguous and should be construed in favor of coverage where a grocery store suffered loss following a blackout. Similarly, in Gregory Packaging Inc. v. Travelers Prop. Cas. Co. of Am., the District Court for the District of New Jersey found that “courts considering non-structural property damage claims have found that buildings rendered uninhabitable by dangerous gasses or bacteria suffered direct physical loss or damage.”

While it is too early to determine whether the court in Louisiana will side with the restaurant or the carrier, this case highlights the need for all businesses to take immediate steps to carefully evaluate their insurance coverage. If there is a possibility that coverage is available, companies should promptly notify their carriers, take steps to minimize damage (where possible), and diligently quantify and categorize their losses.

©2020 Norris McLaughlin P.A., All Rights Reserved

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About this Author

Margaret Raymond-Flood Litigation Attorney Norris McLaughlin
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Margaret Raymond-Flood devotes her practice to general litigation with an emphasis on complex commercial matters.  Margaret has appeared in the federal and state courts of New Jersey, as well as the federal courts of other jurisdictions. She has considerable experience in the defense of environmental litigation. Margaret also serves as panel counsel in a variety of professional liability claims, including legal, medical and environmental matters.

Margaret has extensive litigation experience, including pretrial procedure, motion practice, and taking and defending depositions of...

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Martha N. Donovan Environmental Law and Complex Litigation Attorney Norris McLaughlin New Jersey
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Martha N. Donovan is Co-Chair of the Environmental Law Group.  She devotes her practice to environmental law and complex litigation with an emphasis on the defense of environmental property damage and toxic tort claims.  She also has considerable experience working on related insurance coverage matters.

Martha has represented clients in administrative and judicial proceedings before state and federal courts and agencies, including the New Jersey Department of Environmental Protection and the Environmental Protection Agency.

Martha regularly counsels clients on a variety of environmental issues, including ISRA compliance, lender liability, underground storage tank laws, and permits and approvals for hazardous waste storage, transportation, and disposal.

Martha has litigated matters relating to the generation, storage, discharge, or release of hazardous substances, including representation under CERCLA and Superfund, and has defended actions filed by adjoining, predecessor, and successor property owners alleging physical injuries, emotional distress, or lost property values.  In addition, she aids in the resolution of matters involving air emissions, wastewater discharges, noise pollution, and responses to spill events.

Martha has authored articles and has made presentations to various trade groups and associations on issues ranging from lender liability under Superfund to the availability of insurance coverage for various aspects of business-related accidents.

Martha has been recognized by Chambers USA in the Environment Section.  She has been selected for inclusion on the list of New Jersey Super Lawyers in the Environmental Section and Best Lawyers in the Environmental Law section every year since 2010. Martha was also named the Best Lawyers Litigation-Environmental “Lawyer of the Year” in the Woodbridge New Jersey, Metro Area for 2018 and 2016.

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Jessica L. Palmer Environmental Law and Complex Litigation Attorney Norris McLaughlin New Jersey
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Jessica L. Palmer devotes her practice to environmental law and complex litigation.  Jessica has experience representing clients in administrative and judicial proceedings before state and federal courts, as well as agencies, such as the New Jersey Department of Environmental Protection.  Jessica also has experience assisting clients in environmental due diligence efforts and counseling clients with regard to a variety of issues, including site remediation laws, New Jersey’s Spill Act, ISRA, and urban redevelopment.

Jessica served as law clerk to the Hon. Robert P. Contillo, P.J.Ch...

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