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Another appeals court rules for insurer in COVID BI case


The 5th U.S. Circuit Court of Appeals in New Orleans became the eighth federal appeals court Wednesday to rule that a policyholder was not entitled to COVID-19 business interruption coverage, in a lawsuit filed by two barbeque restaurants.

As with decisions filed by its sister appeals courts, the New Orleans-based 5th Circuit ruled that Terry Black’s Barbeque LLC and Terry Black’s Barbecue Dallas LLC, which own and operate two barbecue dine-in restaurants in Austin and Dallas, failed to establish the virus had caused physical damage in the restaurants, according to the ruling in Terry Black’s Barbecue LLC; Terry Black’s Barbecue Dallas, LLC. v. State Automobile Mutual Insurance, which affirmed a decision by the U.S. District Court in Austin.

The restaurants had argued they were entitled to coverage under their business income and extra expense coverage and their extension coverage, which covered the suspension of operations due to a civil authority order.

The restaurants’ business income/extra expense coverage requires TBB “to allege it suffered a direct physical loss of property at its restaurants. These words, however, are not defined in the policy,” the ruling said.

“TBB has failed to allege any tangible alternation or deprivation of its property,” it said. “Nothing physical or tangible happened to TBB’s restaurants at all.

“In fact, TBB had ownership of, access to, and ability to use all physical parts of its restaurants at all times. And importantly, the prohibition on dine-in services did nothing to physically deprive TBB of any property at its restaurants,” the opinion said, in affirming the lower court ruling.

The three-judge panel says also, “Because civil authority orders did not ‘result from’ TBB’s exposure to COVID-19,” the restaurant extension provision does not provide coverage as well.

Kenneth B. Chaiken, of Chaiken & Chaiken, P.C. in Plano, Texas, who represented the restaurants, said in a statement, “We are in the process of evaluating this obviously disappointing decision and do not expect to complete that evaluation in the immediate future.”

Adam H. Fleischer, a partner with BatesCarey LLP in Chicago, who represented Rome, Georgia-based State Automobile Mutual, said in a statement, “We are very pleased with the court’s thorough and thoughtful analysis of the issues, and for astutely finding the exact intersection where the case law is consistent with the context of the policy language.”

He said, “This opinion demonstrates that the plain meaning of ‘direct physical loss’ in fact does not change when the policy crosses a state border.

“The decision will help both insurers and policyholders achieve common policy expectations and interpretations in Texas, Louisiana, Mississippi and beyond.”

Other courts that have ruled in insurers’ favor on the issue, include the 2nd U.S. Circuit Court of Appeals in New York, which ruled last week. Similar rulings have been issued by the 10th Circuit in Denver, the 6th in Cincinnati, the 7th in Chicago, the 8th in St. Louis, the 9th in San Francisco and the 11th in Atlanta.

On Tuesday, the Indiana Court of Appeals affirmed a lower court ruling that the Indiana Repertory Theatre is not entitled to COVID-19-related business interruption coverage from a unit of the Cincinnati Insurance Co.







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