Advanced Property Restoration Services, LLC v. Continental Casualty Company

STATE OF LOUISIANA
COURT OF APPEAL, FIRST CIRCUIT

ADVANCED PROPERTY NO. 2025 CW 0205
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 Scottsdale 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,
Scottsdale Insurance Company (“Scottsdale”), 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. lst Cir. 1986), writ denied, 503 So.2d 476 (La. 1987).
The Scottsdale commercial general liability policy issued to its
insured, GNO Property Management, LLC (“GNO”), 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 “[p]hysical injury to
tangible property, including all resulting loss of use of that
property” or “{l]loss of use of tangible property that is not
physically injured.” Plaintiff, Advanced Property Restoration
Services, LLC (“APRS”), contracted with Metairie Towers
Condominium Association (“MTCA”) to provide remediation services
to Metairie Towers Condominiums after Hurricane Ida. 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 Scottsdale’s insured, GNO, in contract
and negligence, and alleged the negligence claims are covered by
Scottsdale’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,
Inc. v. Tokyo Marine & Nichido Fire Insurance Company, LTD, No.

STATE OF LOUISIANA
COURT OF APPEAL, FIRST CIRCUIT

NO. 2025 CW 0205
PAGE 2 OF 2

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

COURT OF APPEAL, FIRST CIRCUIT

~ Ry.

DRPUTY CLERK OF COURT
(|) FOR THE COURT