5th Circuit rules again for insurer in COVID BI case

The U.S. Court of Appeals in New Orleans issued its third pro-insurer ruling in a COVID-19 related business interruption case on Tuesday, holding that a men’s clothing store chain was not entitled to litigation in a lawsuit filed against a Hartford Financial Services Group Inc. unit.

The lawsuit was filed by Q Clothier New Orleans LLC, which operates nine stores in Georgia, Oklahoma and Texas in addition to Louisiana, against Hartford unit Twin City Fire Insurance Co., according to the ruling in Q Clothier New Orleans LLC et. al v. Twin City Fire Insurance Co.

A three-judge appeals court panel affirmed a decision ruling by the U.S. District Court in New Orleans and said, “The policy’s general coverage, Business Income extension, and Limited Virus Coverage are each triggered by ‘direct physical loss of or damage to property.”

“The Louisiana Supreme Court has not opined on this language, but other courts have interpreted similar language. And we find these other courts’ analyses persuasive here,” the ruling said.

The panel referred to the 5th Circuit’s ruling in the insurer’s favor in January, in Terry Black’s Barbecue L.L.C. v. State Automobile Mutual Insurance Co., which was based on Texas law.

“Considering this case law and the unambiguous meaning of ‘direct physical loss or damage to property’” we conclude Q Clothier’s losses are not covered by the policy, it said.

“Q Clothier has only alleged a loss of business income due to its compliance with the civil authority orders directing the close of its stores. But that loss is not tangible. Nor is it an alteration, injury or deprivation of property,” it said.

Attorneys in the case did not respond to requests for comment.

The appeals court also ruled in favor of the insurer in its January ruling in Aggie Investments, LLC v. Continental Casualty Company.

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