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Novel Coronavirus Breeds Novel Litigation: Business Interruption Suits in the Age of COVID-19

Published on: April 17, 2020

The nation’s first suit seeking a declaration of coverage under a commercial property policy for business interruption and extra expenses incurred as a result of COVID-19 was filed in a Louisiana state court on March 20, 2020. Since then, similar suits have been filed across the nation by restaurants, casinos, dentists, dive shops, movie theatres, repertory theatre companies, etc. Clearly, the same coverage issues raised in the Louisiana case will be litigated throughout the nation.

The suit in Cajun Conti, LLC, et al v. Certain Underwriters at Lloyd’s, London, et al, Suit No. 2020-02558, was filed on March 16, 2020, in the Civil District Court for the Parish of Orleans, State of Louisiana. Plaintiffs, doing business as Oceana Grill, a restaurant in the French Quarter, allege coverage should be declared to exist because: 1) the property policy is an “all risks” policy such that all risks are covered unless the insurer can clearly and specifically establish an exclusion from coverage; 2) the policy does not contain any exclusion “for losses from a virus or global pandemic;” 3) the virus has “physically impact[ed] public and private property” as it “physically infects and stays on the surface of objects or materials, ‘fomites,’ for up to twenty-eight days;” 4) such “contamination … [is] a direct physical loss needing remediation;” and, alternatively and in addition, 5) the current and future state orders limiting its operations serve to trigger the civil authority provisions of its policy.

A key issue in Cajun Conti as well as in the other COVID-19 business interruption coverage litigation will be whether the existence of the novel coronavirus constitutes a “direct physical loss or damage” under the intendment of an all risks property policy. The Cajun Conti plaintiffs cite to Widder v. Louisiana Citizens Prop. Ins. Corp., 2011-0196 (La. App. 4 Cir. 8/10/11), 82 So.3d 294, writ denied, 2011-2336 (La. 12/2/11) for the premise that the existence of a hazardous condition that renders the insured property unusable or uninhabitable is sufficient to constitute a “physical loss or damage” sufficient to trigger coverage. Notably, in Widder, the actual presence of inorganic lead in the insured property was confirmed to exist and coverage was therefore available. Because policyholders have the burden to establish the existence of “physical loss or damage,” reliance on Widder may require the Cajun Conti plaintiffs to establish coronavirus was actually present in their property or that its presence otherwise caused their property to be unusable or uninhabitable. Presence in the community may not be sufficient to prove the coronavirus made the insured property uninhabitable or unusable.

One of the items of proof required for the triggering of coverage under the civil authority provisions of a commercial property policy is that the alleged business loss was caused by an action by the civil authority that prohibited access to the insured premises. Relying on out-of-state jurisprudence, one Louisiana federal court has determined this factor requires proof that access to the insured premises be “actually and completely prohibited,” which is not satisfied if the access is merely “limited or hampered.” Kean, Miller v. National Fire Ins. Co. of Hartford, C.A. No. 06-770 (M.D. La. Aug. 29, 2007), 2007 WL 2489711, *4-*6. The state orders expressly referenced in the Cajun Conti suit would appear not to satisfy this standard as they served only to limit occupancy and required earlier closures. Even the subsequent stay-at-home orders [Proclamation Number 33 JBE 2020 and 41 JBE 2020, issued respectively on March 22, 2020 and April 2, 2020], may likely be insufficient to satisfy this requirement as they do not expressly mandate closure of restaurants, but simply require restaurants to “reduce operations to continue minimum contact with members of the public,” expressly allow for curbside delivery, drive-thru, and delivery services, and only prohibit the consumption of food and beverages on site.

The specific facts of each business interruption claim and the terms of the relevant policy should be considered in every occasion. Yet, these suits may face problems of proof generally. For now, we expect the novel suits to continue.

John has been practicing over 30 years and is a Senior Partner with firm where he serves on the Management Committee. He has devoted attention to non-profit boards dedicated to assisting at risk children. He enjoys time with his three children and grandchildren. He also enjoys tennis and hiking.

Nancy B. Gilbert is a partner with Keogh Cox in Baton Rouge, Louisiana. She is a puzzle-solver by nature, and specializes in providing clear and in-depth analysis of complex litigation issues.

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The New Home Warranty Act: Protections and Pitfalls

Louisiana’s New Home Warranty Act (“NHWA”) provides remedies to homeowners forcertain construction defects once the new home construction is complete. La. R.S. 9:3141 et seq. These protections can prove crucial to a homeowner’s ability to remedy defects that appear in their home, but the statutes providing these remedies establish strict guidelines that must be followed for the protections to apply. This generally post sets forth some of the key protections and obstacles/defenses that often arise. However, each specific claim should be considered under its own facts.

PROTECTIONS

The NHWA provides specific protections to homeowners. Each protection expires if not advanced within a set time-period.

Noncompliance/Defects- The NHWA protects against “any defect due to noncompliance with the building standards or other defects in materials or workmanship not regulated by building standards.” La. R.S. 9:3144(A)(1). This category includes defective construction or materials used in the construction. Even seemingly minor issues such as cracked plaster, yellowing paint, and “rubbing off” of new paint can give rise to a valid claim for recovery under this portion of the NHWA. See Bynog v. MRL, LLC, 05-122 (La. App. 3 Cir. 6/1/05), 903 So.2d 1197. Deviations from the “plans and specifications” for a home may also be recoverable. See Thorn v. Caskey, 32-310 (La. App. 2 Cir. 9/22/99), 745 So.2d 653.

Because this first protection is so broad, it also provides the shortest time-period to assert a claim: one year from the “warranty commencement date,” which is either the date legal title to the home is conveyed to its initial purchaser or the date the home is first occupied, whichever occurs first. La. R.S. 9:3142(7).

Plumbing/Electrical/HVAC- The NHWA also protects the homeowner from defects in the plumbing, electrical, heating, cooling, and ventilating systems. These protections exclude equipment or appliances. A homeowner must bring a claim under this second category within two years of the warranty commencement date. La. R.S. 9:3144(A)(2).

Major Structural Problems- the NHWA allows recovery for major structural defects up to five years following the warranty commencement date. La. R.S. 9:3144(A)(3). For instance, recovery was allowed for a failing foundation under this provision in Campo v. Sternberger, 15-53 (La. App. 5 Cir. 11/19/15),179 So.3d 908.

PITFALLS

The most obvious – and probably most prevalent – pitfall is the timeliness of the claim. Courts do not hesitate to dismiss a claim if it is not timely filed.

The NHWA also requires that the homeowner give the builder written notice (via certified mail) of the defect before the homeowner attempts a repair, or before filing suit under the NHWA. La. R.S. 9:3145(A). This notice must be sent to the builder within one year after the homeowner has knowledge of the defect. Therefore, the one-year “clock” may begin to run when the homeowner gains knowledge of the problem even if the NHWA provides a longer time-period to advance the claim.

A failure by the homeowner to give timely notice can also diminish the claim even if it is brought within the deadlines. Under La. R.S. 9:3144(B)(4)(c), any damages caused by the homeowner’s failure to give the builder notice of the defect are not recoverable. In that circumstance, builders often contend that the severity of the problem could have been lessened had they been made aware.

RECOVERABLE DAMAGES

With some exceptions, damages under the NHWA are limited to the actual damages incurred by the homeowner, including attorney fees and court costs arising out of the builder’s violation. La. R.S. 9:3149. The actual damages cannot exceed the reasonable cost of repair or replacement necessary to cure the defect. If there are multiple defects across the home, damages are limited to the original purchase price of the home.

Consequential damages such as pain and suffering, mental anguish, or loss of use are generally not recoverable. See La. R.S. 9:3144(B); Iteld v. Four Corners Const., L.P., 12-1504 (La. App. 4 Cir. 6/5/13), 157 So.3d 702. However, there may be exceptions to this general rule under certain factual circumstances beyond the scope of this post.

CONCLUSION

The NHWA provides important remedies to homeowners. But, the New Home Warranty Act is complex and balances the competing interests of the homeowners and the builders. For this reason, a failure to follow the notice and timeliness requirements will often defeat the claim.

John Grinton, is a partner at Keogh Cox whose practice areas include commercial and construction litigation. When he is not practicing law, John spends most of his time with his wife and son, and their two dogs.

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Louisiana First Circuit Finds for State Trooper in Fatal Shooting

On July 27, 2023, the Louisiana First Circuit entered judgment in favor of Louisiana State Trooper Andre Bezou in the shooting death of Coltin LeBlanc. The case was defended by Keogh Cox attorneys Drew Blanchfield, Brian Butler, and Collin LeBlanc. In support of its ruling, the First Circuit cited La. R.S. 9:2798.1 which provides qualified immunity for an officer’s actions, unless their action constituted “criminal, fraudulent, malicious, intentional, willful, outrageous, reckless, or flagrant misconduct.” The court found Trooper Bezou was entitled to qualified immunity under the facts of this case.

After midnight in an area of Hammond, La. dotted with bars and restaurants, Trooper Bezou spotted LeBlanc driving a large Ford truck. Trooper Bezou testified that he witnessed two traffic violations and initiated a stop. “Bodycam” footage captured the interaction. LeBlanc exited the vehicle, and when the trooper asked for identification, LeBlanc indicated it was in his truck. LeBlanc moved to the cab of the truck, and Trooper Bezou followed, stopping within the open driver’s side door. Based upon his observations during this interaction, Trooper Bezou suspected LeBlanc was intoxicated. Later testing confirmed that LeBlanc had a blood alcohol level more than two times the legal limit.

But LeBlanc was not attempting to retrieve his license. Instead, he revved the engine and attempted to flee with Trooper Bezou immediately next to the vehicle. Trooper Bezou later testified he feared that LeBlanc would steer the vehicle to run him over with the back left wheel. In reaction, Trooper Bezou latched onto the truck and LeBlanc sped around a corner and down the roadway. Trooper Bezou was able to draw his weapon and gave multiple orders to stop. Trooper Bezou testified that he feared he would be thrown from the vehicle or scraped against parked cars in the area. When the trooper received no indication LeBlanc would relent, he opened fire. Thereafter, the truck came to a rest.

In the subsequent litigation, plaintiffs argued that Trooper Bezou used “excessive force” and should have attempted to move away and allow LeBlanc to flee the scene. In response, Keogh Cox cited Harmon v. City of Arlington, 16 F.4th 1159 (5th Cir. 2021), where the federal Fifth Circuit held that no “clearly established precedent” would prohibit an officer from firing while perched on the running board of a fleeing vehicle. Finding no excessive force under the facts of the case, Harmon acknowledged the simple truth that “there is an obvious threat of harm to an officer” who is “on the side of a fleeing vehicle.” The facts presented to the First Circuit showed that Trooper Bezou gave more warning to relent than was given in Harmon.

The New York Times covered this incident in an article titled, “Before the Final Frame: When Police Missteps Create Danger.” 11/17/21. In its coverage, the New York Times reported that Trooper Bezou “appeared to be in grave danger.” It then suggested that the trooper could have just backed away. However, courts are instructed not a gauge questions of immunity from an out-of-context application of “20/20 hindsight.” Because the facts in this case showed Trooper Bezou was in grave danger “at the moment” force was used and was faced with a split-second decision, he was protected from liability.

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Supreme Court Settles Circuit Split on Right to Appeal Summary Judgment

The Louisiana Supreme Court recently ruled that a co-defendant who pleads comparative fault as an affirmative defense may appeal a summary judgment that dismisses a co-defendant, even when the plaintiff did not file an appeal. The Court’s decision in Amedee v. Aimbridge Hospitality resolved a circuit split among the Louisiana Courts of Appeal regarding this issue.

The Amedee plaintiff filed a personal injury suit against multiple defendants including the City of New Orleans and Premium Parking of South Texas, LLC. After discovery, the City of New Orleans filed a Motion for Summary Judgment seeking dismissal from the suit. The plaintiff did not oppose the city’s motion. Premium Parking was the only party to file an opposition. The trial court granted the city’s motion and dismissed it from the suit. Premium Parking appealed the court’s judgment.

The Fourth Circuit did not address the merits of Premium Parking’s appeal. Instead, the court dismissed the appeal because it found Premium Parking did not have a legal right to appeal the city’s dismissal when the plaintiff did not appeal the judgment.

The Supreme Court disagreed and reversed the appellate court’s ruling. The Court noted that “to prohibit appellate review of a summary judgment by a co-defendant, even where a plaintiff did not appeal, diminishes the search for truth—the object of a lawsuit—and denies a defendant the ability to fully defend itself.” To reach this conclusion, the Court first asked, who may appeal a judgment?

To answer this question, the Court looked to La. C.C.P. art. 2082 and observed the article makes no restriction regarding what party may appeal a final judgment. Further, the Court noted that the right to an appeal is even extended third parties, not involved in the suit, when that third party is allegedly aggrieved by the judgment. See La. C.C.P. art. 2086.

The Court also considered a defendant’s right to appeal in the context of Louisiana’s pure comparative fault system and summary judgments. Under La. C.C. art. 2323, Louisiana’s comparative fault statute, the fault of all parties is to be quantified. La. C.C.P. art. 966(G), provides that when summary judgment is granted in favor of a party or non-party to a suit, the fault of the dismissed party may not be considered in any subsequent allocation of fault in the matter.

The Court noted that while art. 966(G) precludes an allocation of the fault of a party dismissed under the statute, it does not limit the right of a defendant to appeal the dismissal of a co-defendant. No statute limited a defendant’s right to appeal a summary judgment only to those situations where a plaintiff also filed an appeal. Therefore, a defendant who hopes to keep a co-defendant in the case so that fault still may be allocated to the dismissed party at trial now may appeal the co-defendant’s dismissal, even when the plaintiff fails to do so.

Case Reference: Amedee v. Aimbridge Hosp. LLC, 2021-01906 (La. 10/1/22), --- So.3d ---, 2022 WL 12338929.

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