Restaurant business

Pandemic-related losses covered by restaurant business interruption insurance, court rules

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A Louisiana court has ruled that a New Orleans restaurant is entitled to payment from its business interruption insurer for losses suffered during the pandemic, a rare victory after a series of failed attempts by restaurants to recover their fonts.

A panel of judges ruled that Lloyd’s was obligated to compensate the owner-operator of Oceana Grill because the restaurant’s alleged coronavirus contamination could be construed as physical damage to the establishment. The judges noted that the emergency measures imposed by local authorities required physical adjustments such as the removal and repositioning of tables.

The court also rejected the argument that business was not actually on hold when indoor dining was halted in New Orleans because Oceana continued to offer takeout and delivery. The judges interpreted the “suspension” to mean a significant decrease in operations, noting that the restaurant operated for some time at 25% capacity.

The 22-page decision notes that the judges assessed the situation in accordance with Louisiana regulations and precedents, and were therefore not bound by decisions made in similar cases by federal courts or courts in other states. For the same reason, the result of the Louisiana Court of Appeals for the Fourth Circuit may not apply to other cases.

Restaurants have had a decidedly losing record in these other cases. Courts have consistently agreed with insurers that business interruption insurance is meant to cover losses incurred while a facility is repairing physical damage severe enough to warrant closure. Restaurants have been closed nearly across the country due to an airborne pathogen, not the physical damage that follows generally applicable events like hurricanes or floods.

Indeed, a trial court had agreed with Lloyd’s that the insurer was not obligated to pay Oceana. The Fourth Circuit’s five-judge panel was hearing an appeal of that decision. The appeal committee sided with Oceana in a 3-2 vote.

The Louisiana decision noted that Oceana paid $91,000 for its business interruption policy.

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