My Barton law partner, Ken Rashbaum, recently wrote an excellent article discussing the June 15, 2022 Louisiana decision by the 4th Circuit Court of Appeals in New Orleans which held that there was coverage for Covid-19 business interruption losses in Cajun Conti LLC, et. al. v. Certain Underwriters at Lloyd’s, London, docket number 2021-CA-0343.
As Ken discussed, the Louisiana court held in that case that the policy language was clear that it insured “all risks” but was ambiguous as to what was excluded; therefore, the court held that it had to construe the policy in favor of coverage for business interruption due to Covid-19. The decision is extraordinarily significant and will almost certainly be vigorously contested through the Louisiana Supreme Court. In light of the significance of the Cajun Conti ruling, we believe additional discussion should follow.
In Cajun Conti, the appellate court held in a very close 3 to 2 decision that coverage existed for business interruption claims made by the policyholder:
Upon review, we conclude that the insurance policy is ambiguous and capable of more than one reasonable interpretation in regards to the coverage of lost business income. Due to the existing ambiguity in the relevant policy language, the contract should be interpreted in favor of the appellants. Therefore, we reverse the trial court’s judgment.
The majority held that:
Ambiguity in an insurance policy must be resolved by construing the policy as a whole; one policy provision is not to be construed separately at the expense of disregarding other policy provisions.” La. Ins. Guar. Ass’n v. Interstate Fire & Cas. Co., 93-0911, (La. 1/01/94), 630 So. 2d 759, 763-64. The policy under review in this case is an “all-risk” policy, “where all risks are covered unless clearly and specifically excluded.” Widder, 11-0196, p. 4, 82 So. 3d at 296 (citing Morgan v. Auto Club Family Ins. Co., 04-1562, p. 4 (La. App. 3 Cir. 4/6/05), 899 So. 2d 135, 137; Dawson Farms, L.L.C. v. Millers Mut. Fire Ins. Co., 34,801, p. 3 (La. App. 2 Cir. 8/1/01), 794 So. 2d 949, 950). Additional context is provided in the policy’s definition of “suspension”, which includes both a “slowdown” and a “cessation” of business activities.” The words of the policy foresee a situation in which business losses can be covered by less than the complete destruction of the property or less than the complete loss of the property’s utility. Construing the policy as a whole does not resolve the ambiguity inherent in “loss” for viral contagions, as the dual definition of suspension allows for both reasonable interpretations of loss.
If the appellate court ruling stands, Cajun Conti will become persuasive authority for courts around the country. As our good friend, and outstanding insurance coverage Louisiana attorney, Sid Degan of Degan, Blanchard and Nash, says: “Cajun Conti is one of the most significant insurance coverage determinations pending in any court in the country due to its potential for nationwide precedential impact. Its resolution will either further stabilize the overwhelming trend of existing Covid-19 business interruption decisions or potentially unleash a volume of new claims in federal and state courts across the country. A favorable policyholder ruling will undoubtedly result in insurance carriers being forced to spend literally millions of dollars litigating coverage positions defining the scope of coverage allowed on the physical damage policy issue and, in the event of a finding of coverage, pay full policy limits in many cases. A favorable insured policy limits decision will result in yet another important question, if the appellate decision in Cajun Conti is sustained: What does that do for policyholder claims that were already decided to the contrary on motions at trial courts around the country and not appealed? In many jurisdictions, the failure to timely appeal due to the prevailing unfavorable law could likely result in the policyholder’s inability to recover for its Covid-19 loss.”
As background, Cajun Conti was one of the first Covid business interruption cases in the United States, filed in New Orleans in March 2020. The ruling is now the first by an appellate court holding that there is insurance coverage arising from Covid-19 business interruption. It is unquestionable that there will be much interest, focus, and involvement now from competing interests around the country in further appeal of the dispute due to the potential significance of the Cajun Conti ruling.
Obviously, the risk for the policyholder going forward in Cajun Conti is that the Louisiana Supreme Court may reverse the appellate court decision, accepting the trial court denial of coverage instead. For that reason, the policyholder may prefer to settle. For the insurer, a risk is that a writ of certiorari to the Louisiana Supreme Court may not be accepted, leaving the appellate decision intact and available for use in litigations around the country.
An even more significant risk to the insurer, and to the insurance industry, is that the Louisiana Supreme Court might leave the appellate decision intact, finding Covid-related business interruption losses were covered under the policy of insurance. Ordinarily, a confidential settlement would be a viable option; however, that may not occur in this instance since a settlement leaves the Louisiana appellate court decision intact, with potential precedential impact in other courts around the country.
With respect to the Cajun Conti decision, the dissent by Judge Roland L. Belsome is of particular note. Judge Belsome stated that even though the contractual language of the policy is not defined within the Policy, “it has been interpreted by numerous courts applying Louisiana law, in the context of business interruption coverage due to Covid-19, without a finding of ambiguity.” Judge Belsome also stated that the court had, in the past, rejected the argument that the term “physical loss of or damage to” was ambiguous when determining coverage in a business interruption dispute and that other language in the policy further supported interpreting the term as unambiguous.
Judge Belsome also wrote that there had been no finding by the appellate court of manifest error in the trial court’s determination that there was no direct physical loss of or damage to the policyholder’s property due to Covid-19, from which a finding of coverage would follow, as required under Louisiana law for a reversal by an appellate court. A very interesting note about his dissent, though, is that the case relied upon by the majority in Cajun Conti in its finding that coverage existed (Widder v. Louisiana Citizens Prop. Ins. Corp.) was authored by Judge Belsome himself, who stated in his dissent that the majority’s reliance upon his case “was misplaced” and that Widder was not controlling to the court’s determination.
The significance that the Louisiana appellate court decision has for Covid insurance coverage litigation is highlighted in Ken’s article by his discussion that coincident to the Cajun Conti decision in favor of coverage, the New Jersey Court of Appeals court came to the opposing conclusion five days later on June 20, 2022. In MAC Property Group LLC & The Cake Boutique LLC v Selective Fire and Casualty Insurance Company, the New Jersey court held that there was no coverage for such Covid losses. The New Jersey decision is consistent with the majority of the decisions that have been made around the country. Until the Cajun Conti decision, what had been a difficult path to recovery is reflected in Covid-19 litigation data tracked and contained in a website created by the University of Pennsylvania Casey Law School: Covid Coverage Litigation Tracker – An insurance law analytics tool (upenn.edu).
As is apparent from the data on this website, the Cajun Conti court is the first, and only, appellate court that has found coverage for Covid-19 business interruption claims. Iowa has found that Covid-19 losses can potentially satisfy physical loss or damage proof; however, the requirements were not met in those cases. In contrast, forty-six states have no published appellate opinions as to whether Covid-19 losses can satisfy physical loss or damage proof requirements. Further confusing the determination for policyholders and insurers is that both New Jersey and California courts have rendered inconsistent opinions within their own jurisdictions regarding whether Covid-19 business interruption losses are potentially covered by insurance.
The question is: Where are we with respect to coverage for business interruption claims arising from Covid-19? For insurance carriers, the Cajun Conti decision will have to be appealed or it will be used in cases throughout the country as authority supporting coverage. It is likely that an appeal to the Louisiana Supreme Court, assuming certiorari is granted, will take at least another year during which time many claims that are now viable may expire. For policyholders who incurred business interruption during Covid-19, and for whom the time for making such claim with their insurer has not already expired, claim should be made now with the insurer so as to preserve the claim.
In his article discussing the Louisiana Cajun Conti decision, Ken quoted Jack Kerouac: “One day I will find the right words, and they will be simple.” Another apt Kerouac quote may be: “It’s all too much and not enough at the same time.”
Addendum: Since writing the article above, an application to rehear argument has been filed with the Louisiana 4th Circuit Court of Appeals by the insurance carriers.