Advanced Property Restoration Services, LLC v. Continental Casualty Company

STATE OF LOUISIANA
COURT OF APPEAL, FIRST CIRCUIT

ADVANCED PROPERTY NO. 2025 CW 0088
RESTORATION SERVICES, LLC PAGE 1 OF 2
‘VERSUS

CONTINENTAL CASUALTY
COMPANY, SCOTTSDALE
INSURANCE COMPANY, GNO
PROPERTY MANAGEMENT, LLC AND

ROBERT KIRK PHILLIPS OCTOBER 27, 2025

In Re: The Burlington Insurance Company, applying for
supervisory writs, 19th Judicial District Court, Parish
of East Baton Rouge, No. 725334.

BEFORE: PENZATO, STROMBERG, AND FIELDS, JJ.

WRIT GRANTED. The trial court’s October 28, 2024 judgment,
which denied the motion for summary judgment filed by defendant,
The Burlington Insurance Company (“Burlington”), is reversed. An
insurance policy should not be given an interpretation which would
enlarge or restrict its provisions beyond what is reasonably
contemplated by its terms or which would lead to an absurd
conclusion. Coates v. Northlake Oil Company, Inc., 499 So.2d 252
(La. App. ist Cir. 1986), writ denied, 503 So.2d 476 (La. 1987).
The Burlington commercial general liability policy issued to its
insured, Metairie Towers Condominium Association (“MTCA”),
provides coverage for those sums the insured becomes legally
obligated to pay as damages because of property damage to which
this insurance applies. The policy defines “property damage” as
“[plhysical injury to tangible property, including all resulting
loss of use of that property” or “{[l]oss of use of tangible
property that is not physically injured.” Plaintiff, Advanced
Property Restoration Services, LLC (“APRS”), contracted with MTCA
to provide remediation services to Metairie Towers Condominiums
after Hurricane Ida. GNO Property Management, LLC (“GNO”) managed
the receipt of funds from the property insurer and operated under
the direction of MTCA to fulfill MTCA’s obligation to pay APRS.
APRS received two payments via wire transfer from GNO. However,
prior to the third payment, an unknown third party hacked into
APRS’ email server and sent an email to GNO with wire instructions
that resulted in the final payment being sent to the hacker. APRS
has asserted claims against Burlington’s insured, MTCA, in
contract and negligence, and alleged the negligence claims are
covered by Burlington’s policy.

The factual allegations and claimed damages in the underlying
litigation clearly and unambiguously relate to economic losses
caused by the hacking incident in which the unknown third party
hacked into APRS’ email server, provided fraudulent wire transfer
instructions, and obtained funds that were intended for APRS.
Applying Louisiana law to the same definition of “property damage”,
courts have found purely economic losses do not qualify as
“property damage” to trigger policy coverage. See CMP Coatings,

STATE OF LOUISIANA
COURT OF APPEAL, FIRST CIRCUIT

NO. 2025 CW 0088
PAGE 2 OF 2

Inc. v. Tokyo Marine & Nichido Fire Insurance Company, LTD, No.
10-4277, 2012 WL 3901625, *2 (E.D. La. 9/6/12). In doing so, the
court relied on Lamar Advertising Co. v. Continental Casualty
Company, 396 F.3d 654 (5th Cir. 2005), which held that economic
loss arising from an alleged breach of contract or lack of payment
under a contract is not covered as “property damage.” Contractual
rights are intangible in nature and thus any resulting economic
loss arising from the interference with such rights would not be
covered under the “property damage” coverage of the policy; the
money damages would arise from loss of use of intangible property,
and are, therefore not covered. CMP Coatings, Inc., 2012 WL 3901625
at *3. While APRS may have possessed, at the time, a right to the
funds pursuant to its contract, the funds at issue were never in
the possession of APRS, and accordingly, did not constitute its
tangible property. APRS failed to establish it sustained “property
damage” as defined in the policy.

Moreover, the Burlington policy at issue contained a
“Confidential, Personal, or Any Other Information or Data and
Computer System or Network Liability” exclusion (“Network
Liability Exclusion”), which excludes any damage caused by or
arising, directly or indirectly, in whole or in part out of “Ta] ny...
misappropriation, transmission, unauthorized use or access,
misuse.. diversion... corruption or impairment of... any other person's
or organization's .. [c]omputer system, including, but not limited
to, computers, computer hardware, software, operating systems,
[or] servers..; or [c]omputer network...” This exclusion further
bars coverage herein.

Accordingly, the motion for summary judgment is granted, and
the claims of plaintiff, Advanced Property Restoration services,
LLC, against defendant, The Burlington Insurance Company, are
dismissed with prejudice.

COURT OF APPEAL, FIRST CIRCUIT

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“ DEPUTY CLERK OF COURT
FOR THE COURT