Cajun Conti LLC, Cajun Cuisine 1 LLC, and Cajun Cuisine LLC D/B/A Oceana Grill v. Certain Underwriters at Lloyd's, London and Governor John B. Edwards in His Official Capacity as Governor of the State of Louisiana, and the State of Louisiana

CAJUN CONTI LLC, CAJUN * NO. 2021-CA-0343
CUISINE 1 LLC, AND CAJUN
CUISINE LLC D/B/A OCEANA *
GRILL COURT OF APPEAL
*
VERSUS FOURTH CIRCUIT
*
CERTAIN UNDERWRITERS STATE OF LOUISIANA
AT LLOYD'S, LONDON AND *******
GOVERNOR JOHN B.
EDWARDS IN HIS OFFICIAL
CAPACITY AS GOVERNOR
OF THE STATE OF
LOUISIANA, AND THE STATE
OF LOUISIANA

APPEAL FROM
CIVIL DISTRICT COURT, ORLEANS PARISH
NO. 2020-02558, DIVISION “M”
Honorable Paulette R. Irons, Judge
******
Chief Judge Terri F. Love
******
(Court composed of Chief Judge Terri F. Love, Judge Roland L. Belsome, Judge
Joy Cossich Lobrano, Judge Sandra Cabrina Jenkins, Judge Pro Tempore Lynn M.
Luker)

BELSOME, J., DISSENTS WITH REASONS
LOBRANO, J., CONCURS AND ASSIGNS REASONS
LUKER, J., PRO TEMPORE, DISSENTS FOR THE REASONS ASSIGNED
BY J., BELSOME

John W. Houghtaling, II
GAUTHIER, HOUGHTALING & WILLIAMS, L.L.C.
3500 North Hullen Street
Metairie, LA 70002

Jennifer Perez
GAUTHIER MURPHY & HOUGHTALING, L.L.C.
3500 N. Hullen St
Metairie, LA 70002

Daniel Ernest Davillier
DAVILLIER LAW GROUP
1010 Common Street, Suite 2510
New Orleans, LA 70112

Roderick Rico Alvendia
ALVENDIA KELLY & DEMAREST, L.L.C.
909 Poydras Street, Suite 1625
New Orleans, LA 70112-4500

Jennifer L. Kuechmann
ALVENDIA, KELLY & DEMAREST, L.L.C.
909 Poydras Street, Suite 1625
New Orleans, LA 70112

James M. Williams
CHEHARDY SHERMAN WILLIAMS MURRAY RECILE STAKELUM &
HAYES, LLP
One Galleria Boulevard, Suite 1100
Metairie, LA 70001

Phillip J. Laborde
CHEHARDY SHERMAN WILLIAMS MURRAY RECILE STAKELUM &
HAYES, LLP
One Galleria Boulevard, Suite 1100
Metairie, LA 70001

Matthew A. Sherman
CHEHARDY SHERMAN WILLIAMS MURRAY RECILE STAKELUM &
HAYES, LLP
One Galleria Boulevard, Suite 1100
Metairie, LA 70001

Bernard Louis Charbonnet, Jr.
LAW OFFICES OF BERNARD L. CHARBONNET, JR.
365 Canal Street
One Canal Place, Suite 1155
New Orleans, LA 70130

Desiree Mary Charbonnet
Law Office Desiree M. Charbonnet LLC
365 Canal Street
Suite 1100
New Orleans, LA 70130

Anthony David Irpino
IRPINO LAW FIRM
2216 Magazine Street
New Orleans, LA 70130

Richard P. Lewis
REED SMITH, LLP
Three Logan Square

1717 Arch Street Suite 3100
Philadelphia, PA 19103

John N. Ellison
REED SMITH, LLP
599 Lexington Avenue
22nd Floor
New York, NY 10022

COUNSEL FOR PLAINTIFF/APPELLANT

Kyle D. Schonekas
SCHONEKAS EVANS McGOEY & McEACHIN, L.L.C.
909 Poydras Street, Suite 1600
New Orleans, LA 70112

Joelle Flannigan Evans
SCHONEKAS EVANS McGOEY & McEACHIN, L.L.C.
909 Poydras Street, Suite 1600
New Orleans, LA 70112

Heather S. Duplantis
PHELPS DUNBAR LLP
400 Convention Street, Suite 1100, II City Plaza
P. O. Box 4412
Baton Rouge, LA 70821-4412

Thomas H. Peyton
PHELPS DUNBAR, LLP
365 Canal Street, Suite 2000
New Orleans, LA 70130

Allen C. Miller, Sr.
PHELPS DUNBAR LLP
365 Canal Street, Suite 2000
New Orleans, LA 70130-6534

Virginia Y. Dodd
PHELPS DUNBAR LLP
400 Convention Street, Suite 1100
Baton Rouge, LA 70802

Kevin W. Welsh
PHELPS DUNBAR LLP
400 Convention Street, Suite 1100
Baton Rouge, LA 70802

Martin A. Stern
ADAMS AND REESE LLP
701 Poydras Street, Suite 4500
New Orleans, LA 70139

Leigh Ann Schell
ADAMS AND REESE LLP
4500 One Shell Square
New Orleans, LA 70193

Sara C. Valentine
ADAMS AND REESE LLP
701 Poydras Street, Suite 4500
New Orleans, LA 70139

Alexandra Roselli Lamb
ADAMS AND REESE, LLP
701 Poydras Street, Suite 4500
New Orleans, LA 70139

COUNSEL FOR DEFENDANT/APPELLEE

REVERSED
JUNE 15, 2022

TFL
Cajun Conti LLC, Cajun Cuisine I LLC, and Cajun Cuisine LLC d/b/a
SCJ
Oceana Grill (hereinafter collectively “Oceana”) filed a petition for declaratory

judgment regarding an all-risks insurance policy they purchased from Certain

Underwriters at Lloyd’s, London (Lloyd’s). In their petition, the appellants sought

a declaration that the insurance policy provided coverage for any loss or damage

caused by direct physical loss of or damage to their insured premises as a result of

continuous contamination by COVID-19. Lloyd’s argued that contamination due

to COVID-19 did not constitute “direct physical loss or damage” and filed a

motion for summary judgment, which the trial court denied. After a bench trial,

the trial court denied Oceana’s petition for declaratory judgment. Oceana

subsequently appealed this judgment.

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

1

language, the contract should be interpreted in favor of the appellants. Therefore,

we reverse the trial court’s judgment.

FACTUAL BACKGROUND AND PROCEDURAL HISTORY

Oceana is the owner and operator of Oceana Grill in the French Quarter of

New Orleans. Prior to the onset of the COVID-19 pandemic, Oceana Grill

employed 200 staff members and could accommodate up to 500 guests at a time.

After the emergence of the COVID-19 pandemic, on March 16, 2020, the mayor of

New Orleans prohibited non-emergency public and private social gatherings and

limited restaurant operations to take-out and delivery services via an emergency

proclamation. As time passed, the mayor issued other proclamations facilitating

the return of in-person dining at different occupancy levels. Additionally, the

Centers for Disease Control (“CDC”) issued guidelines and procedures for

restaurants and bars to abate the spread of the contagious virus on their properties.

Oceana closed the Oceana Grill dining rooms on March 16, 2020, in

compliance with the mayor’s proclamation, and reopened on May 16, 2020, in

keeping with updated mayoral guidelines. The guidelines envisioned a phased

reopening plan based on the prevalence of COVID-19 in the city. The May re-

opening of Oceana Grill was undertaken with a 75% diminishment of the

property’s normal capacity. Capacity increased on June 13, 2020 and on October

3, 2020, but the property still operated at 40%-45% under capacity due to the

spread of COVID-19 in the city. To mitigate the spread of COVID-19 particles

within its property, Oceana modified seating arrangements, decreased the number

2

of tables and floor area available for patrons, and implemented measures to sanitize

surfaces.

On March 16, 2020, Oceana filed a petition for declaratory judgment

seeking a declaration from the district court that a policy issued to it by Lloyd’s

covered certain losses related to the pandemic. The policy in question is an all-

risks commercial insurance policy with a $91,000 premium. The policy covers

losses due to “direct physical loss of or damage to” the insured property. Lost

business income and extra expenses are covered for losses sustained due to

necessary suspensions of the property’s operations during the “period of

restoration.” The “period of restoration” is defined as commencing seventy-two

hours after the physical loss or damage occurs and continuing until the date when

the property is “repaired, rebuilt, or replaced with reasonable speed and similar

quality” or when business is “resumed at a new permanent location.”

Oceana’s initial petition sought a declaration that the policy contained

coverage “for any future civil authority shutdowns of restaurants in the New

Orleans area due to physical loss from Coronavirus contamination and that the

policy provides business income coverage in the event that the coronavirus has

contaminated the insured premises.” In subsequent amendments, Oceana sought a

declaration that the policy provided coverage for any loss or damage caused by

“direct physical loss of or damage to” their insured premises as a result of

continuous contamination by COVID-19.

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In response, Lloyd’s filed a motion for summary judgment arguing that the

claims are not covered because contamination due to coronavirus did not constitute

“direct physical loss of or damage to” property. Lloyd’s contended that the

petition lacked any genuine issues of material fact and that it was entitled to

summary judgment as matter of law. The trial court denied Lloyd’s motion for

summary judgment and held a bench trial. Following the trial, the trial court

rendered judgment denying Oceana’s petition for declaratory judgment. Oceana

filed the present appeal.

DISCUSSION

Standard of Review

Trial courts possess great discretion in considering petitions for declaratory

relief. Deep South Center for Envtl. Justice v. Council of City of New Orleans, 19-

0774, p. 17 (La. App. 4 Cir. 2/12/20), 292 So. 3d 973, 984 (citing Delta Admin.

Servs., L.L.C. v. Limousine Livery, Ltd., 15-0110, p. 6 (La. App. 4 Cir. 6/17/15),

216 So. 3d 906, 910). Appellate courts review these decisions under an abuse of

discretion standard. Id. The Louisiana Code of Civil Procedure Article 1872

authorizes the use of declaratory judgment proceedings in construing contracts.

Legal questions of contractual interpretation are subject to de novo review

by appellate courts. Armstrong Airport Concessions v. K-Squared Restaurant,

LLC, 15-0375, p. 9 (La. App. 4 Cir. 10/28/15), 178 So. 3d 1094, 1101 (citing

Subervielle v. State Farm Mut. Auto. Ins. Co., 08-0491, p. 2 (La. App. 4 Cir.

1/7/09), 32 So. 3d 811, 812). “Appellate courts apply the ‘manifest error’ or

4

‘clearly wrong’ standard when reviewing a trial court’s findings of fact.”

Greenblatt v. Sewerage & Water Board of New Orleans, 19-0694, p. 3, (La. App. 4

Cir. 12/20/19), 287 So. 3d 763, 766 (citing Rosell v. ESCO, 549 So. 2d 840, 844

(La. 1989) (citations omitted)).

“Thus, applying these precepts to the case sub judice, this Court must

determine whether the district court abused its discretion in granting the

declaratory judgment and whether the district court’s review and analysis of the

contract was legally correct.” Brady v. Pirner, 18-0556, p. 11 (La. App. 4 Cir.

12/5/18), 261 So. 3d 867, 874-75.

Insurance policies should be interpreted under ordinary rules of contract

interpretation. Sumner v. Mathes, 10-0438, p. 5 (La. App. 4 Cir. 11/24/10), 52 So.

3d 931, 934 (citing Peterson v. Schimek, 98-1712, pp. 4-5 (La. 3/2/99), 729 So. 2d

1024, 1028-29). The rules of contractual interpretation are laid out in the

Louisiana Civil Code. Pursuant to La. C.C. art 2047, the “words of a contract are

given their generally prevailing meaning”, while “[w]ords of art and technical

terms must be given their technical meaning when the contract involves a technical

matter.” The words used in insurance policies are to be interpreted “in their plain,

ordinary and popular sense.” Central Louisiana Elec. Co., Inc. v. Westinghouse

Elec. Corp., 579 So. 2d 981, 986 (La. 1991) (citing Muse v. Metropolitan Life Ins.

Co., 193 La. 605, 192 So. 72 (La. 1939)).

“Words susceptible of different meanings must be interpreted as having the

meaning that best conforms to the object of the contract.” La. C.C. art 2048. “A

5

doubtful provision must be interpreted in light of the nature of the contract, equity,

usages, the conduct of the parties before and after the formation of the contract,

and of other contracts of a like nature between the same parties.” La. C.C. art.

2053.

If a contractual provision is susceptible of different meanings, it “must be

interpreted with a meaning that renders it effective and not with one that renders it

ineffective.” La. C.C. art 2049. In other words, “[i]nsurance policies should be

construed to effect, rather than to deny coverage.” Davis v. Nola Home

Construction, L.L.C., 16-1274, p. 14 (La. App. 4 Cir. 6/14/17), 222 So. 3d 833, 844

(citing Supreme Services and Specialty Co., Inc. v. Sonny Greer, Inc., 06-1827, p.

6 (La. 5/22/07), 958 So. 2d 634, 638). However, efforts to interpret insurance

contracts must not be undertaken in “an unreasonable or strained manner” so as to

“enlarge or to restrict its provisions beyond what is reasonably contemplated by

unambiguous terms.” Sumner, 10-0438, p. 5, 52 So. 3d at 934 (citing Rolston v.

United Services Automobile Ass’n, 06-0978, p. 4 (La. App. 4 Cir. 12/13/06), 948

So. 2d 1113, 1117).

A contractual term is “not automatically considered ambiguous merely

because it is not defined in the contract.” Sumner, 10-0438, p. 6, 52 So. 3d at 935.

“However, if the insurance policy is susceptible to two or more reasonable

interpretations, then it is considered ambiguous and must be liberally interpreted in

favor of coverage.” Supreme Services, 06-1827, p. 6, 958 So. 2d at 638 (citing

Reynolds v. Select Properties, Ltd., 93-1480 (La. 4/11/94), 634 So. 2d 1180, 1183;

6

Newby v. Jefferson Parish Sch. Bd., 99-0098 (La. App. 5 Cir. 6/1/99), 738 So. 2d

93).

Additionally, when a contractual term is adjudged to be ambiguous, parole

evidence becomes admissible “to clarify the ambiguity and to show the intention of

the parties. Dixie Campers, Inc. v. Vesely Co., 398 So. 2d 1087, 1089 (La. 1981)

(citing White v. Rimmer & Garrett, Inc., 340 So. 2d 283 (La. 1976); Gulf States

Finance Corp. v. Airline Auto Sales, Inc., 248 La. 591, 181 So. 2d 36 (1965);

Moreau v. Otis Elevator Co., 531 F. 2d 311 (5th Cir. 1976)).

“It is well settled that a court of appeal may not set aside a trial court’s or a

jury’s finding of fact in the absence of ‘manifest error’ or unless it is ‘clearly

wrong.’” Snider v. Louisiana Medical Mut. Ins. Co., 14-1964, p. 5 (La. 5/5/15),

169 So. 3d 319, 323 (citing Rosell v. ESCO, 549 So. 2d 840, a844 (La. 1989)).

The appellate court must review the entirety of the record to evaluate “whether the

fact-finder's conclusion was a reasonable one.” Id. (citing Clay v. Our Lady of

Lourdes Regional Medical Center, 11-1797 (La. 5/8/12), 93 So. 3d 536, 543).

Assignments of Error

In their first assignment of error, the appellants claim that the district court

erred in concluding that their premises did not sustain a direct physical loss or

damage under the terms of the contract as a result of continuous contamination by

the COVID-19 coronavirus. In their second assignment of error, the appellants

argue, in the alternative, that the district court erred in concluding that the

commercial property policy that the appellee drafted and sold to Oceana was not

7

ambiguous. The appellants further argue that this ambiguity requires the court to

liberally construe the policy in favor of coverage.

The question posed by the appellants in their first assignment of error is a

factual one, subject to the manifest error/clearly wrong standard of review.

Gordon v. Gordon, 16-0008, p. 2 (La. App. 4 Cir. 6/8/16), 195 So.3d 687, 688-89

(citing Hall v. Folger Coffee Co., 03-1734, p. 9 (La. 4/14/04), 874 So. 2d 90, 98).

However, the question of whether ambiguity exists in the policy terms is a legal

question requiring an examination of the contractual language and subject to de

novo review. Armstrong Airport Concessions, 15-0375, p. 9, 178 So. 3d at 1101

(citation omitted). These two assignments of error were propounded in the

alternative. We focus on the question of ambiguity, as we believe it resolves the

matter at hand.

The policy at issue is an “all-risk” commercial insurance policy that covered

the appellants’ loss of business income sustained due to necessary “suspension” of

operations during the “period of restoration.” The “suspension” must be caused by

“direct physical loss of or damage to the property.” “All-risk” insurance policies

cover all risks “unless clearly and specifically excluded.” Widder v. Louisiana

Citizens Prop. Ins. Corp., 11-0196, p. 4 (La. App. 4 Cir. 8/10/11), 82 So. 3d 294,

296, writ denied, 11-2336 (La. 12/02/11), 76 So. 3d 1179. The policy does not

define “direct physical loss” or “damage.”

The Supreme Court of Louisiana has previously defined the meaning of

“direct,” in relation to “loss or damage” in an insurance contract, as signifying

8

“immediate or proximate as distinguished from remote.” Central Louisiana Elec.

Co., Inc., 579 So. 2d at 985 n. 8 (citing Lorio v. Aetna Ins. Co., 255 La. 721, 232

So. 2d 490 (1970)). The appellants discussed this Court’s examination of what

constitutes “direct physical loss of or damage to the property” in Widder v.

Louisiana Citizens Prop. Ins. Corp., a residential lead contamination case.

Widder held that physical damage was not necessary to trigger coverage in a

homeowner policy because the insured property was “rendered unusable or

uninhabitable.” Widder, 11-0196, p. 4, 82 So. 3d at 296 (citing In re Chinese

Manufactured Drywall Products Liability Litigation, 759 F. Supp. 2d 822 (E.D.

La. 2010); Ross v. C. Adams Construction & Design, 10-852 (La. App. 5 Cir.

6/14/11), 70 So. 3d 949). Widder’s holding relies on a line of defective drywall

cases wherein drywall installed on insured property was physically intact, but its

inherent defects required that it be replaced in order for the property to be usable.

The appellee asserts that Widder and associated drywall cases do not apply to the

facts herein because the appellants continued operations with employees and some

patrons, and the property was not uninhabitable or useless as it was in Widder and

the drywall cases.

However, the policy covers the loss of business income due to necessary

“suspension” of operations caused by “direct physical loss of or damage to the

property.” “Suspension” is defined in the policy as the “slowdown or cessation of

your business activities.” Therefore, under the terms of the contract, the complete

cessation of operations and an uninhabitable property are not prerequisites to

9

payment for business losses suffered due to the suspension of operations caused by

“direct physical loss of or damage to the property.” Suspension includes the

slowdown of business activities, which occurred here, as well as the complete

cessation of business operations which occurs when a property is entirely

uninhabitable.

The appellee also argues that Widder’s holding is inapposite because this

matter deals with a business property policy, not a homeowner policy, and a viral

contagion, not defective drywall. However, it is possible to review conceptual

commonalities between different types of insurance policies without

inappropriately extending a court’s holding. The central inquiry remains focused

upon “the words of the contract” itself. See La. C.C. art 2047. “Most importantly,

a contract ‘must be interpreted in a common-sense fashion, according to the words

of the contract their common and usual significance.’” Prejean v. Guillory, 10-

0740, p. 7 (La. 7/2/10), 38 So.3d 274, 279 (quoting Lambert v. Maryland Cas. Co.,

418 So. 2d 553, 559 (La. 1982)).

The appellee notes that the insurance policies in the drywall cases “all define

‘property damage’ to include loss of use of tangible property.” In re Chinese

Manufactured Drywall Prods. Liab. Litig., 759 F. Supp. 2d 822, 832 (E.D. La.

2010). The appellee argues that this language is distinct from the present case,

where the loss itself must be “physical.” The appellee points to recent cases in

other jurisdictions that have interpreted “physical” in relation to coronavirus claims

10

as requiring a tangible or corporeal loss of property or damage. The cases

referenced by the appellee are not binding upon this Court.

Moreover, many cases in other jurisdictions have reached a contrary

conclusion and extended coverage to losses arising from disease-causing agents

with a tangible physical form but which are, nevertheless, not discernible with the

naked human eye. See Port Authority of N.Y. and N.J. v. Affiliated FM Ins. Co.,

311 F.3d 226, 235-36 (3d Cir. 2002) (holding that “physical loss or damage” exists

if asbestos fibers contaminate the insured property such that it is uninhabitable, or

if there is an imminent threat of the release of a quantity of asbestos fibers that

would cause a loss of utility”); See Farmers Ins. Co. of Or. v. Trutanich, 123 Or.

App. 6, 858 P.2d 1332, 1335 (1993) (finding that odor is a “physical” trait because

it damaged the insured property and concluding that the “cost of removing the odor

is a direct physical loss”); See Matzner v. Seaco Ins. Co., No. CIV. 96-0498-B,

1998 WL 566658, at *4 (Mass. Super. 1998) (ruling that “carbon-monoxide

contamination constitutes ‘direct physical loss of or damage to’ property”). This

Court, in Widder, joined this line of cases extending coverage for a broader array

of losses caused by disease-causing agents with a tangible, but microscopic,

physical form.

The appellee further contends that this Court has previously rejected the

argument that “physical loss of or damage to” was ambiguous in a business

interruption suit. Yount v. Lafayette Ins. Co., 08-0380 (La. App. 4 Cir. 1/28/09), 4

So. 3d 162. In Yount, a doctor sued for property damage and economic losses

11

suffered after her medical office was damaged in Hurricane Katrina. Id., 08-0380,

p. 3, 4 So. 3d at 165. The policy provided coverage for lost business income due to

suspension of business activities “caused by direct physical loss of or damage to

property.” Id., 08-0380, p. 4, 4 So. 3d at 166. The doctor argued that the policy

language was ambiguous because it could be “interpreted to mean the plaintiff

need only suffer damage to the insured property, not necessarily direct or

physical.” Id., 08-0380, p. 9, 4 So. 3d at 168. The doctor took the position that in

the policy provision requiring “physical loss of or damage to the property,” the

words “direct physical” only modified “loss,” and not “damage.” Id.

This Court held that “the policy provision at issue to be clear and

unambiguous as applied under the facts of this case.” Id., 08-0380, p. 10, 4 So. 3d

at 169 (emphasis added). Consequently, Yount does not stand for the proposition

that the terms “physical loss of or damage to” are not ambiguous. Rather, the

Court held that, under the facts of that case, and in the context of the specific

ambiguity argument proffered by the policyholder in Yount, the terms were not

ambiguous. Id.

Under the facts of this viral contagion case, an equal level of clarity is

absent. One reasonable interpretation of the provision is that suspension of

business operations due to “direct physical loss of or damage to the property”

means the loss of the property’s full use, as the appellants argue. In this case, the

appellants were unable to fully utilize the insured property due to the viral particles

inside the property. The physical presence of these viral particles necessitated

12

diminished capacity, constant decontamination efforts, and caused a slowdown of

their business.

The appellants closed their dining rooms on March 16, 2020, and reopened

on May 16, 2020. They reopened with a 75% diminishment of the restaurant’s

capacity due to the prevalence of COVID-19, in compliance with government

mandates. Capacity increased on June 13, 2020 and on October 3, 2020, but the

property still operated at 40%-45% under capacity due to the ongoing

omnipresence of the coronavirus.

The appellants presented the testimony of Doctor Lemuel Moye, accepted as

an expert in general medicine, biostatistics, epidemiology, and virology. Dr. Moye

found that there was an “overwhelming probability” that there were people in the

restaurant infected with COVID-19 at all times relevant to this suit. Dr. Moye

further testified that viral particles can remain in the air for over an hour and can

contaminate surfaces.

Although the appellee’s expert witness testified that there have been no

known infections caused by interactions between humans and an inanimate

surface, the appellants demonstrated that contagion-causing viral particles persisted

in the air of the premises. The physical presence of COVID-19 substantially

diminished the usable space of the property, as tables needed to be pushed farther

apart, and resulted in economic losses due to the slowdown of the appellants’

business. Stated differently, the physical presence of infectious viral particles

13

decreased the habitable portion of the insured property and caused a slowdown of

business activities.

Another reasonable interpretation of the provision is that the suspension of

business operations due to “direct physical loss of or damage to the property”

requires the full loss of the property’s use, a situation distinct from the loss of the

property’s full use. Under this scenario, the appellants would have had to shut

down their restaurant completely for some period of time in order to qualify for

coverage.

“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

14

contagions, as the dual definition of suspension allows for both reasonable

interpretations of loss.

Reference to external definitions of “loss” accentuate the ambiguity. Loss is

defined in one dictionary as “the fact that you no longer have something or have

less of something.”1 Another dictionary provides that loss is the “destruction,

ruin,” “the act or fact of being unable to keep or maintain something or someone,”

and “the partial or complete deterioration or absence of a physical capability or

function.”2

The presence of this ambiguity and the existence of two equally reasonable

interpretations as to what constitutes a “direct physical loss of or damage to” the

insured property requires the Court to liberally construe the provision in favor of

coverage for the appellants and against the appellee, who drafted the vague

provision. La. C.C. art 2056; Edwards v. Daugherty, 03-2103, p. 22 (La. 10/1/04),

883 So. 2d 932, 947 (finding ambiguity in a provision regarding the burden of

defense costs and expenses and barring the insurer from deducting defense costs);

Osbon v. Nat'l Union Fire Ins. Co., 93-1975, p. 2 (La. 2/28/94), 632 So. 2d 1158,

1159-60 (finding ambiguity in the phrase “the insured” because it could refer to the

named insured, any insured as defined in the policy, or the particular insured

seeking coverage); Garcia v. St. Bernard Parish School Bd., 576 So. 2d 975, 976

(La. 1991) (concluding that an exclusionary provision for sports contests was

1 Loss Definition, MERRIAM-WEBSTER, https://www.merriam-webster.com/dictionary/loss

(last visited June 9, 2022).
2 Loss Definition, CAMBRIDGE DICTIONARY,

https://dictionary.cambridge.org/us/dictionary/english/loss (last visited June 9, 2022).

15

ambiguous because it could reasonably be interpreted as not clearly excluding

injuries sustained while cheerleading at a football game).

Even if coverage is found to exist, the appellee argued that the only

compensable lost income under the policy is that which falls within the “period of

restoration.” The appellee contends that the appellants did not experience a

“period of restoration” and, as a result, are unable to recover any alleged lost

income. The “period of restoration” is defined as the period of time beginning

seventy-two hours after the time of the loss or damage and ending the earlier of

either (1) when the property is repaired, rebuilt or replaced with reasonable speed

and similar quality, or (2) the date when business is resumed at a new, permanent

location.

It is unclear what would constitute “repair” in light of a viral outbreak.

Repair is defined as “to restore by replacing a part or putting together what is torn

or broken” and “to restore to a sound or healthy state.”3 It could be that the “period

of restoration” provision requires the wholesale and permanent repair of physical

objects within the property. However, under the plain meaning of “repair”, it is

equally plausible that some portion of the cycle of cleaning and decontamination

fulfills the definition of restoring the property to a healthy state.

Given the existence of multiple plausible interpretations of these two

provisions, the policy is ambiguous as to what constitutes a covered “direct

3 Repair Definition, MERRIAM-WEBSTER, https://www.merriam-

webster.com/dictionary/repair (last visited March 24, 2022).

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physical loss of or . . . to the property” and coverage should, therefore, be

construed in favor of the appellants.

Furthermore, the ambiguity of the provision now renders parole evidence

admissible to clarify the ambiguity or show the parties’ intent. Succession of

Barreca v. Weiser, 10-0574, p. 16 (La. App. 4 Cir. 11/3/10), 53 So. 3d 481, 491.

“Ambiguity will also be resolved by ascertaining how a reasonable insurance

policy purchaser would construe the clause at the time the insurance contract was

entered.” Breland v. Schilling, 550 So. 2d 609, 610-11 (La. 1989). Examining the

evidence introduced by the appellants,4 it is apparent that at the time that the policy

was issued, viral exclusions which eliminated the insurer’s liability for loss or

damage caused by a virus were available on the market. However, the appellee did

not include a viral exclusion in the policy it drafted and sold to the appellants.

Additionally, the appellants’ general manager testified that he would not have

bought a policy that excluded coverage for viruses or bacteria because the business

sold raw oysters to customers. His testimony provides insight regarding how the

appellants reasonably construed the policy at the time of its purchase. This

evidence strengthens the equity of construing coverage in favor of the appellants,

pursuant to La. C.C. art. 2053.

Application of the ordinary rules of contract interpretation reveals the

ambiguities present in the insurance policy that the appellee drafted and sold to the

4 Although the trial court did not issue reasons for its judgment, the fact that it allowed this

otherwise impermissible evidence to be introduced over the objections of the appellee suggests
that it also found the provision to be ambiguous, and ultimately admitted it as parole evidence.

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appellants. The ambiguities are amplified by the presence of two equally

reasonable interpretations as to what constitutes a “direct physical loss of or

damage to” the insured property and the subsequent “repair” of the insured

property. Thus, this Court is compelled to liberally construe the provision in favor

of coverage for the appellants and against the appellee, who drafted the vague

provision. Accordingly, we conclude that the trial court committed legal error in

finding that the insurance policy was not ambiguous and hold that the trial court

abused its discretion in denying the declaratory judgment.

CONCLUSION

For the foregoing reasons, we reverse the judgment of the trial court and

hold that coverage exists for loss or damage caused by “direct physical loss of or

damage to” the appellants’ insured premises as a result of contamination by

COVID-19.

REVERSED

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