A restaurant in the heart of New Orleans’ French Quarter has filed a lawsuit seeking a judicial declaration that its insurer will cover business interruption losses if coronavirus lockdowns force it to temporarily close.

people wearing face masks 375x210 Coronavirus shutdowns and business interruption insurance claimsOceana Grill filed the lawsuit against Lloyd’s of London Monday to get ahead of the insurer, which could seek to invalidate future claims by businesses hit by the COVID-19 pandemic and government-mandated shutdowns.

The Katrina precedent

Many insurance companies denied business-interruption claims in the wake of Hurricane Katrina, which barreled through the Gulf Coast in 2005, ravaging New Orleans and surrounding areas. Disputes arose about whether property damage in the storm was caused by wind or water. Private insurance policies covered property owners for wind damage, but not for flooding.

A lawyer representing Oceana Grill told Insurance Journal that insurance agents throughout the country have been telling business owners that their business-interruption policies won’t cover coronavirus shutdowns.

“I can’t imagine how defense counsel are going to walk into court and say that coronavirus does not cause damage to property, or contaminate property,” the lawyer told Insurance Journal.

The 500-seat Oceana Grill sits on Bourbon and Conti Streets and is almost always packed to capacity, no matter the time of day or week.

NOLA: Southern epicenter for Coronavirus

Louisiana is third in the U.S. for number of coronavirus cases per capita, behind New York and Washington state. New Orleans quickly emerged as the epicenter of the coronavirus outbreak in Louisiana after more than a million visitors from all over the world flocked to the city for more than a month to celebrate the Mardi Gras season. Most of the visitors arrived throughout the month of February.

As of Wednesday, Louisiana had 1,388 confirmed cases of coronavirus with at least 46 deaths. Nearly 560 of those cases and 20 of the deaths have been in New Orleans. Health experts say the virus is much more prevalent and widespread than these numbers indicate given the limited number of tests that have been done.

The rising numbers prompted Gov. John Bel Edwards to request a Major Disaster Declaration for the state on Tuesday.

Since COVID-19 started spreading in the city, crowds at Oceana Grill thinned as they did throughout the city. New Orleans depends on the hospitality industry for most of its income. Business fell even further as government orders closed bars and restricted restaurants to take-out service only.

COVID-19 contamination “a direct physical loss”

According to Insurance Journal, Oceana Grill’s lawyer argues that “coronavirus lives on surfaces for as long as 28 days, particularly in humid areas at temperatures below 84 degrees and thus contamination would be a direct physical loss.”

Many insurance policies also cover businesses for interruptions and losses caused by civil authority orders, such as government orders to shut down or scale back. Owners of restaurants and other businesses affected by the coronavirus pandemic should seek legal counsel if their business-interruption claim has been denied or if their insurer has pre-emptively stated they won’t cover such claims stemming from the coronavirus pandemic.

We are actively pursuing these cases already with our clients who received a denial communication from their insurance companies. Dee Miles, Head of our Consumer Fraud Section, Rachel Boyd and Paul Evans are spearheading this litigation for our firm. They would like to talk to you about any potential claims.

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