Opinion · Court of Appeals for the Fifth Circuit
Q Clothier v. Twin City Fire Ins
Q Clothier v. Twin City Fire Ins, 29 F.4th 252 (5th Cir. 2022)
- Type
- Opinion
- Court
- Court of Appeals for the Fifth Circuit
- Jurisdiction
- Federal
- Date
- 2022-03-22
- Topic
- litigation
holding that losses incurred by men’s clothing store owners by closure orders related to the COVID-19 pandemic did not amount to “direct physical loss of or damage to property” | holding that the civil authority provision did not “provide coverage because the civil authority orders were issued to mitigate the spread of COVID- 19, not ‘as a direct result of’ a covered cause of loss to nearby property” | interpreting “physical loss of or damage to property” in an insurance policy to require “a tangible alteration to, injury to, or deprivation of property” | interpreting “physical loss of or damage to property” in an insurance policy to require “a tangible alteration to, injury to, or deprivation of property” | distinguishing insured’s reliance on drywall cases because property did not need to be removed or replaced and COVID-19 did not make the stores inherently dangerous or uninhabitable like the emission of sulfur gas from drywall | “The Governor's orders, for example, cited the need to mitigate the spread and impact of COVID-19 in the state.” | “[T]he Louisiana Supreme Court would interpret ‘direct physical loss of or damage to property’ to cover only tangible alterations of, injuries to, and deprivations of property.” | “[W]e conclude the plain and ordinary meaning of ‘physical loss of or damage to property’ is a tangible alteration to, injury to, or deprivation of property.” | Although the “Louisiana Supreme Court has not opined on this language,” the court concluded that “[it] would interpret ‘direct physical loss of or damage to property’ to cover only tangible alterations of, injuries to, and deprivations of property.” | “The Louisiana Supreme Court has not opined on [the meaning of “direct physical loss or damage to property”], but other courts have interpreted similar language. And we find these other courts’ analyses persuasive here.” | Although the “Louisiana Supreme Court has not opined on this language,” the court concluded that “[it] would interpret ‘direct physical loss of or damage to property’ to cover only tangible alterations of, injuries to, and deprivations of property.” | Although the “Louisiana Supreme Court has not opined on this language,” the court concluded that “[it] would interpret ‘direct physical loss of or damage to property’ to cover only tangible alterations of, injuries to, and deprivations of property.”
Citator
- Cited by
- 27 opinions
Case: 21-30278 Document: 00516248556 Page: 1 Date Filed: 03/22/2022
United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit
FILED
March 22, 2022
No. 21-30278 Lyle W. Cayce
Clerk
Q Clothier New Orleans, L.L.C.; Q Shirtmakers West
Village, L.L.C.; Q Custom Clothier Houston, L.L.C.;
Q Custom Clothier OKC, L.L.C.; Q Custom Clothier ATL,
L.L.C.; Q Clothier Tulsa, L.L.C.; Q Clothier Fort Worth,
L.L.C.; Q Fifty One Digital, L.L.C.; Q Fifty One, L.L.C.,
Plaintiffs—Appellants,
versus
Twin City Fire Insurance Company,
Defendant—Appellee.
Appeal from the United States District Court
for the Eastern District of Louisiana
USDC No. 2:20-CV-1470
Before King, Graves, and Ho, Circuit Judges.
James E. Graves, Jr., Circuit Judge:
In response to the onset of the COVID-19 pandemic, state and local
authorities across the country ordered nonessential businesses to close or
suspend operations. Louisiana and the City of New Orleans did the same.
Q Clothier complied with the orders and closed its men’s clothing stores.
After losing business income as a result, Q Clothier submitted claims to its
insurer under two types of provisions: one covering “direct physical loss of
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No. 21-30278
or damage to property” and the other covering the loss of business income
when access to the store is prohibited by a civil authority order “as a direct
result of” a covered loss of property. The insurer denied the claims.
Q Clothier sued the insurer and sought coverage for its business
income losses. The district court granted the insurer’s motion for judgment
on the pleadings after concluding the orders closing nonessential businesses
did not qualify as a direct physical loss of or damage to property and no other
coverage applied. We agree with these conclusions and AFFIRM.
I. BACKGROUND
Plaintiffs-Appellants Q Clothier own and operate nine high quality
men’s clothing stores in four states. 1 Q Clothier purchased an insurance
policy from Defendant-Appellee Twin City Fire Insurance Company to
cover each of the stores. The policy was in effect from June 19, 2019 through
June 19, 2020.
The policy provides coverage for Q Clothier’s business and business
property caused by covered causes of loss. For coverage, the policy states
Twin City “will pay for direct physical loss of or physical damage to Covered
Property at the premises described in the Declarations . . . caused by or
resulting from a Covered Cause of Loss.” “Covered Causes of Loss” are
defined as “risks of direct physical loss” unless excluded or limited by the
policy.
The policy has a couple of relevant coverage extensions. The Business
Income Extension states Twin City
1
Plaintiffs-Appellants are a collective of nine limited liability companies operating stores in
Louisiana, Texas, Oklahoma, and Georgia. We refer to them collectively as “Q Clothier.”
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will pay for the actual loss of Business Income [Q Clothier]
sustain[s] due to the necessary suspension of [Q Clothier’s]
‘operations’ during the ‘period of restoration.’ The
suspension must be caused by direct physical loss of or physical
damage to property at the ‘scheduled premises,’ . . . caused by
or resulting from a Covered Cause of Loss.
The Civil Authority Extension covers “the actual loss of Business Income
[Q Clothier] sustain[s] when access to [the] ‘scheduled premises’ is
specifically prohibited by order of a civil authority as the direct result of a
Covered Cause of Loss to property in the immediate area of [the] ‘scheduled
premises.’”
The policy also has a “Virus Exclusion.” It states Twin City “will not
pay for loss or damage caused directly or indirectly by” “[p]resence, growth,
proliferation, spread or any activity of ‘fungi,’ wet rot, dry rot, bacteria or
virus. Such loss or damage is excluded regardless of any other cause or event
that contributes concurrently or in any sequence to the loss.”
The Virus Exclusion has one relevant exception which states the
Exclusion does not apply when the “Additional Coverage – Limited
Coverage for ‘Fungi,’ Wet Rot, Dry Rot, Bacteria and Virus” provides
coverage. This “Limited Virus Coverage” “only applies when the . . . virus is
the result of one or more of the following causes that occurs during the policy
period and only if all reasonable means were used to save and preserve the
property from further damage at the time of and after that occurrence.”
(emphasis added). The causes listed are (1) a “specified cause of loss” other
than fire or lightning or (2) equipment breakdown or accident. A “specified
cause of loss” is defined in the policy as “fire; lightning; explosion,
windstorm or hail; smoke; aircraft or vehicles; riot or civil commotion;
vandalism; leakage from fire extinguishing equipment; sinkhole collapse;
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volcanic action; falling objects; weight of snow; ice or sleet; water damage.”
When Limited Virus Coverage applies, the policy states Twin City “will pay
for loss or damage by ‘fungi,’ wet rot, dry rot, bacteria and virus.” “[L]oss
or damage means [d]irect physical loss or direct physical damage . . . .”
The Limited Virus Coverage concludes with subsection (B)(1)(f),
which states:
The following applies only if a Time Element Coverage applies
to the “scheduled premises” and only if the suspension of
“operations” satisfies all the terms and conditions of the
applicable Time Element Coverage.
(1) If the loss which resulted in “fungi”, wet rot, dry rot,
bacteria or virus does not in itself necessitate a
suspension of ‘operations’, but such suspension is
necessary due to loss or damage to property caused by
“fungi”, wet rot, dry rot, bacteria or virus, then our
payment under the Time Element Coverage is limited
to the amount of loss and expense sustained in a period
of not more than 30 days unless other number of days is
indicated in the Declarations . . . .
In March 2020, the COVID-19 pandemic caused state and local
authorities to issue orders restricting personal and business activities to
prevent the spread of the virus. In Louisiana, the Governor issued a series of
proclamations directing certain nonessential businesses to close completely
or reduce operations. The Mayor of New Orleans also directed certain
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businesses to cease operations. Q Clothier complied with these orders, closed
its stores, and lost business income. 2
Q Clothier then filed a claim with Twin City to recover its losses under
the policy. Twin City denied coverage and stated “[e]ven if the virus did
cause damage, it is excluded from the policy, and the limited coverage
available for losses caused by virus does not apply to the facts of [Q
Clothier’s] loss.” Twin City also denied coverage under the Civil Authority
Extension because there was no indication that “a civil authority issued an
order as a direct result of a covered cause of loss to property in the immediate
area of [Q Clothier’s] scheduled premises.”
Q Clothier sued Twin City in federal court in the Eastern District of
Louisiana seeking coverage for its losses under the policy. Twin City moved
for judgment on the pleadings. The district court granted Twin City’s
motion. The district court applied Louisiana law and concluded
(1) Q Clothier did not allege it was entitled to coverage because it failed to
allege a direct physical loss of or damage to property, (2) the Virus Exclusion
applied, (3) the Limited Virus Coverage did not apply, (4) the Civil Authority
Extension did not apply, and (5) the “Time Element Coverage” in
subsection (B)(1)(f) was not an independent basis of coverage. Q Clothier
timely appeals.
II. APPLICABLE LAW
The court reviews de novo a district court’s ruling on a Rule 12(c)
motion for judgment on the pleadings. See In re Katrina Canal Breaches Litig.,
495 F.3d 191, 205
(5th Cir. 2007). The standard for deciding a Rule 12(c)
motion is the same standard used for deciding motions to dismiss pursuant
2
Although Q Clothier has stores in many states, it only alleges it closed its stores
in response to the orders from the Governor of Louisiana and Mayor of New Orleans.
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to Rule 12(b)(6). See id.
The court must accept the well-pleaded facts as true and view them in the light most favorable to the plaintiff. See Guidry v. Am. Pub. Life Ins. Co.,512 F.3d 177, 180
(5th Cir. 2007).
The parties do not dispute that Louisiana law governs the policy. “An
insurance policy is a conventional obligation that constitutes the law between
the insured and the insurer, and the agreement governs the nature of their
relationship.” Supreme Servs. & Spec. Co. v. Sonny Greer, Inc., 958 So. 2d 634, 638
(La. 2007) (citing La. Civ. Code Ann. art. 1983). Insurance policies are therefore interpreted by the same principles as contract interpretation. See id.; Sims v. Mulhearn Funeral Home, Inc.,956 So. 2d 583
, 588–89
(La. 2007).
Courts must first consider the parties’ intent by examining the words
of the policy. See Sims, 956 So. 2d at 589
; La. Civ. Code Ann. art. 2045–46. In so doing, “words and phrases in an insurance policy are to be construed using their plain, ordinary and generally prevailing meaning, unless the words have acquired a technical meaning, in which case the words must be ascribed their technical meaning.” Sims,956 So. 2d at 589
(citing La. Civ. Code Ann. art. 2047). “When the words of an insurance contract are clear and unambiguous and lead to no absurd consequences, courts must enforce the contract as written and may make no further interpretation in search of the parties’ intent.” Gorman v. City of Opelousas,148 So. 3d 888, 892
(La. 2014) (citation omitted); La. Civ. Code Ann.
art. 2046.
An insurance policy must be construed as a whole and each provision
must be interpreted to give meaning to each provision. See Peterson v.
Schimek, 729 So. 2d 1024, 1029
(La. 1999). “One portion of the policy should not be construed separately at the expense of disregarding other provisions.”Id.
(citing La. Civ. Code Ann. art. 2050).
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After applying these general rules of interpretation, if a true ambiguity
exists in the policy language, the court must construe the policy in favor of
the insured. See Bonin v. Westport Ins. Corp., 930 So. 2d 906, 911
(La. 2006). A policy provision is ambiguous if it “is susceptible to two or more reasonable interpretations.”Id.
(citing Cadwallader v. Allstate Ins. Co.,848 So. 2d 577, 580
(La. 2003)).
The policy language at issue in this case has not yet been interpreted
by the Louisiana Supreme Court. See Gulf & Miss. River Transp. Co. v. BP Oil
Pipeline Co., 730 F.3d 484, 488
(5th Cir. 2013) (“To determine Louisiana law . . . , this Court should first look to final decisions of the Louisiana Supreme Court.” (internal quotation marks and citation omitted)). Pursuant to Erie, the court must make an “Erie guess” as to how the Louisiana Supreme Court would decide the issue. See Erie R.R. v. Tompkins,304 U.S. 64
(1938); see also Carrizales v. State Farm Lloyds,518 F.3d 343
, 345–46 (5th Cir. 2008).
III. DISCUSSION
Q Clothier’s claimed losses are not covered by the policy. Each of the
policy’s coverages for “direct physical loss of or damage to property” does
not cover business income losses caused by civil authority orders closing
nonessential businesses in response to the COVID-19 pandemic. The Civil
Authority Extension doesn’t provide coverage because the civil authority
orders were issued to mitigate the spread of COVID-19, not “as a direct
result of” a covered cause of loss to nearby property. And finally, the Limited
Virus and Time Element Coverages unambiguously do not apply. We
therefore affirm the district court’s judgment in all respects.
A. Direct Physical Loss of or Damage to Property
We conclude the Louisiana Supreme Court would interpret “direct
physical loss of or damage to property” to cover only tangible alterations of,
injuries to, and deprivations of property. Because the mandated closure of
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Q Clothier’s stores is none of these, Q Clothier has failed to allege facts to
trigger coverage under the policy.
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.
In Mangerchine v. Reaves, a Louisiana appellate court interpreting a
homeowners insurance policy stated the ordinary and generally-accepted
meaning of “loss” is “destruction, ruin, or deprivation.” 63 So. 3d 1049, 1056
(La. Ct. App. 2011) (internal quotation marks and citation omitted). In Widder v. Louisiana Citizens Property Insurance Corp., a Louisiana appellate court determined lead contamination constituted a “direct physical loss” because the contamination rendered the insured property uninhabitable until it was gutted and remediated. See82 So. 3d 294, 296
(La. Ct. App. 2011), writ denied,76 So. 3d 1179
(La. 2011). Although there was no physical damage, the property was unusable or uninhabitable and therefore qualified as a direct physical loss. See id. And because the property was required to be removed and replaced, that fact suggested the insured had suffered a direct physical loss. See id.; see also Ross v. C. Adams Const. & Design, L.L.C.,70 So. 3d 949, 952
(La. Ct. App. 2011) (concluding insured suffered direct physical loss even
though drywall was intact and functional because the qualities of the drywall
required it to be removed and replaced).
In Trinity Industries, Inc. v. Insurance Company of North America, this
court applied Louisiana law and stated “[t]he language ‘physical loss or
damage’ strongly implies that there was an initial satisfactory state that was
changed by some external event into an unsatisfactory state—for example,
the car was undamaged before the collision dented the bumper.” 916 F.2d 8
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267, 270–71 (5th Cir. 1990). We interpreted the language pursuant to
Louisiana law, and that definition has been followed in Texas, as well. See N.
Am. Shipbuilding, Inc. v. S. Marine & Aviation Underwriting, Inc., 930 S.W.2d 829, 834
(Tex. App. 1996) (“The Trinity standards are also followed in Texas.”); Great Am. Ins. Co. of N.Y. v. Compass Well Servs., LLC, No. 02-19- 00373,2020 WL 7393321
, at *14 (Tex. App. Dec. 17, 2020).
In Terry Black’s Barbecue, L.L.C. v. State Automobile Mutual Insurance
Co., we applied Texas law to a similar insurance policy and interpreted
“physical loss of property” to mean a tangible alteration or deprivation of
property. 22 F.4th 450
, 458 (5th Cir. 2022). We accordingly held that losses caused by civil authority orders closing nonessential businesses in response to the COVID-19 pandemic were not covered by commercial property policies. See id.; see also Aggie Investments, L.L.C. v. Cont’l Cas. Co.,2022 WL 257439
, at *2 (5th Cir. Jan. 26, 2022) (applying Terry Black’s and concluding intangible losses from pandemic closures did not qualify as “direct physical loss of property”). Although we applied Texas law in Terry Black’s, we are persuaded Texas and Louisiana courts would reach the same conclusion regarding the interpretation of the language in these policies. See, e.g., Aggreko, L.L.C. v. Chartis Spec. Ins. Co.,942 F.3d 682, 688
(5th Cir.
2019) (“[W]e note that . . . we are unaware of[] any pertinent difference
between Texas law and Louisiana law with respect to interpreting insurance
policies.”).
Considering this case law and the unambiguous 3 meaning of “direct
physical loss of or damage to property,” we conclude Q Clothier’s losses are
not covered by the policy’s general coverage, Business Income Extension, or
3
We accordingly deny Q Clothier’s motion to certify the question to the Louisiana
Supreme Court. Q Clothier’s motion for leave to file a supplemental motion to certify the
question is denied as moot.
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Limited Virus Coverage. 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. Q Clothier’s property has been unchanged by the
orders or the close of its stores. Although we recognize the government
orders placed limitations on the operations of businesses, those limitations
did not tangibly alter Q Clothier’s property or deprive Q Clothier of its
property.
As we said in Terry Black’s, this conclusion is consistent with every
other circuit court to interpret this language in the context of losses caused
by civil authority orders closing nonessential businesses during the
COVID-19 pandemic. See 22 F.4th at 456–57 (citing cases); see also Uncork &
Create LLC v. Cincinnati Ins. Co., -- F.4th --, No. 21-1311, 2022 WL 662986
, at *6 (4th Cir. Mar. 7, 2022) (concluding government-mandated business closures were not covered because they did not cause “present or impending material destruction or material harm that physically altered the covered property requiring repairs or replacement so that they could be used as intended”); Brown Jug, Inc. v. Cincinnati Ins. Co., -- F.4th --, No. 21-2644,2022 WL 538221
, at *3 (6th Cir. Feb. 23, 2022) (“[A] sufficient complaint
alleging that the COVID-19 virus itself damaged an insured property would
likely, at a minimum: (1) include allegations that COVID-19 was present at
the covered property; (2) include allegations that COVID-19 materially
altered all or part of the property; and (3) seek specific damages ‘for replacing
that property and only for the time that property was damaged or lost.’”
(citation omitted)). Although these cases are nonbinding and applied
different states’ laws, we find no reason to conclude the Louisiana Supreme
Court would interpret the policy differently.
Despite this unambiguous meaning, Q Clothier equates its losses to
those in the Chinese drywall cases in which some Louisiana courts
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determined the loss was a covered “physical loss” even in the absence of
“physical damage.” See, e.g., In re Chinese Man. Drywall Prods. Liab. Litig.,
759 F. Supp. 2d 822
, 831–32 (E.D. La. 2010). In those cases, courts determined the drywall was a “physical loss” even though it was intact and undamaged. See, e.g., Ross,70 So. 3d at 952
. Importantly, the drywall still had to be removed and replaced in the property. Seeid.
The courts also noted the drywall made the property unusable or uninhabitable due to the emission of sulfur gases. See In re Chinese Man. Drywall Prods. Liab. Litig.,759 F. Supp. 2d at 832
. One court determined the drywall, although not damaged, constituted a “distinct, demonstrable, physical alteration” of the insureds’ property. Seeid. at 831
.
The losses in those cases are distinguishable from Q Clothier’s
claimed losses here. Unlike the drywall cases, Q Clothier has not alleged that
any property needs to be removed or replaced due to COVID-19’s presence
in its stores. Nor has it alleged that its property was unusable or uninhabitable
because of COVID-19. Rather, the pandemic caused civil authorities to
proclaim it unsafe for people to gather indoors including in stores like
Q Clothier’s. But COVID-19 itself did not make Q Clothier’s stores
inherently dangerous or uninhabitable like the drywall. Q Clothier’s reliance
on the drywall cases is therefore misplaced.
Because we conclude the plain and ordinary meaning of “physical loss
of or damage to property” is a tangible alteration to, injury to, or deprivation
of property, Q Clothier’s claimed losses do not qualify for coverage under the
policy’s general coverage, Business Income Extension, or Limited Virus
Coverage.
B. Civil Authority Extension
The Civil Authority Extension does not cover Q Clothier’s losses
either. Although the civil authority orders directed Q Clothier to close its
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stores, Q Clothier has not plausibly alleged they were issued as a “direct
result of” a covered cause of loss to property in the immediate area of its
stores.
The Civil Authority Extension applies “to the actual loss of Business
Income [Q Clothier] sustain[s] when access to [the] ‘scheduled premises’ is
specifically prohibited by order of a civil authority as the direct result of a
Covered Cause of Loss to property in the immediate area of [the] ‘scheduled
premises.’” (emphasis added). In interpreting a similar civil authority
provision, we concluded the provision requires a nexus between the civil
authority order and property damage or losses near the insured premises. See
Dickie Brennan & Co. v. Lexington Ins. Co., 636 F.3d 683, 686
(5th Cir. 2011)
(interpreting provision using “due to” as requiring a nexus under Louisiana
law). So too here, the phrase “direct result of” requires Q Clothier to
plausibly allege some causal relationship between the “order of a civil
authority,” i.e., the Governor and Mayor’s orders, and damage or loss to
property near Q Clothier’s stores.
Although Q Clothier alleges the civil authority orders were issued
because of damage or covered losses to property near Q Clothier’s stores,
that allegation is implausible. The Governor’s orders, for example, cited the
need to mitigate the spread and impact of COVID-19 in the state. Insofar as
there was a possibility of physical contamination of properties in the state,
the orders called for preventative measures to avoid damage and
contamination from COVID-19. The civil authority orders were a “direct
result of” “the global pandemic and the need to take measures to contain and
prevent the spread of COVID-19.” Terry Black’s, 22 F.4th at 458–59. There
is no plausible nexus between the orders and any loss to property nearby
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Q Clothier’s stores. 4 Cf. Dickie Brennan & Co., 636 F.3d at 686
(noting that a closure that occurs before damage occurs, based on fear of damage and not prior damage, does not establish the necessary causal link for civil authority coverage); S. Tex. Med. Clinics, P.A. v. CNA Fin. Corp., No. 06-4041,2008 WL 450012
, at *10 (S.D. Tex. Feb. 15, 2008) (concluding there was no civil
authority coverage when order was issued based on an “anticipated threat of
damage” not actual damage to nearby property).
The coverage in the Civil Authority Extension requires a causal
connection between loss or damage to property near Q Clothier’s stores and
the civil authority orders prohibiting access to its stores. Q Clothier has failed
to plausibly allege that causal connection.
C. Limited Virus and Time Element Coverage
Q Clothier’s final argument is that its losses fall within subsection
(B)(1)(f), the Time Element Coverage within the Limited Virus Coverage. 5
As an initial matter, the Limited Virus Coverage does not cover Q Clothier’s
4
Q Clothier only cites to the orders from the Governor of Louisiana and the Mayor
of New Orleans. Those orders only discuss measures to be taken in the state and city. They
make no mention of any location outside of the state. Most of Q Clothier’s insured stores,
however, are located outside of the state of Louisiana. To the extent Q Clothier argues the
orders were issued as a result of damage to nearby property of the stores located in other
states, we conclude that allegation is implausible simply because the stores are located
outside of Louisiana.
5
The Limited Virus Coverage is an exception to the Virus Exclusion which
explicitly excludes from coverage losses that are caused by a virus. Q Clothier does not
attempt to avoid the applicability of the Virus Exclusion. Nor could it in light of its
unambiguous exclusion of the losses claimed here. See Mudpie, Inc. v. Travelers Cas. Ins. Co.
of Am., 15 F.4th 885
, 893–94 (9th Cir. 2021) (holding, under California law, the virus
exclusion applied because COVID-19 was the “efficient cause” of its losses even though
government orders directed business closures). But Q Clothier argues that its losses fall
into the exception to the Exclusion. So, although we conclude the Virus Exclusion
unambiguously applies, we must nonetheless address the exception here.
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losses because it requires physical loss or damage to property. But even if
Q Clothier did allege physical loss or damage, the Limited Virus Coverage
“only applies” when the virus is the result of a (1) specified cause of loss, or
(2) equipment breakdown. Q Clothier has not alleged one of the enumerated
specified causes of loss listed in the policy, nor has it alleged an equipment
breakdown. The Limited Virus Coverage therefore does not apply at all.
Q Clothier nevertheless argues subsection (B)(1)(f) creates an
independent basis for coverage. That subsection, located in Limited Virus
Coverage, states:
The following applies only if a Time Element Coverage applies
to the “scheduled premises” and only if the suspension of
“operations” satisfies all the terms and conditions of the
applicable Time Element Coverage.
(1) If the loss which resulted in . . . virus does not in itself
necessitate a suspension of ‘operations,’ but such
suspension is necessary due to loss or damage to
property caused by . . . virus, then our payment under
the Time Element Coverage is limited to the amount of
loss and expense sustained in a period of not more than
30 days unless another number of days is indicated in
the Declarations.
(emphasis added). Focusing only on the second clause of subsection (1),
Q Clothier argues it is covered because it suspended its operations due to a
loss caused by the COVID-19 virus. Despite Q Clothier’s novel argument,
we discern no such reading of this subsection to provide coverage here.
The subsection does offer some limited coverage. In order to get it, a
couple of things must happen. First, a loss causes a virus. That first loss does
not require a suspension of operations. Second, the virus (that was caused by
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the first loss) causes a different loss. That second loss does require a
suspension of operations. Third, and finally, the payment for the suspension
of operations caused by the loss from the virus, will be limited to 30 days.
Q Clothier does not allege that it suffered a loss that caused a virus,
and that the virus in turn caused a loss which then led to the suspension of its
operations. In fact, Q Clothier makes clear that its loss is the suspension of its
operations. Regardless, a suspension of its operations first requires a physical
loss of or damage to property. And as we have already concluded, that is
absent here.
Q Clothier’s argument also fails to recognize that subsection (B)(1)(f)
is triggered by the first statement in the subsection: “[t]he following applies
only if a Time Element Coverage applies.” (emphasis added). This sentence
requires the insured to show first that a “Time Element Coverage” applies.
Although the policy does not define “Time Element Coverage,” Q Clothier
acknowledges that it is a term of art for coverages in which the measurement
of loss is tied to a period of time, i.e., business interruption coverage.
Q Clothier does not allege that a “Time Element Coverage” applies
at all. It only argues that its insurance has a time element in the general policy
provisions and stretch coverage. In this policy, the applicable Time Element
Coverage is the Business Income Extension. And because the Business
Income Extension does not provide coverage here, subsection (B)(1)(f) is not
triggered either.
IV. CONCLUSION
Consistent with our decision in Terry Black’s, and the decisions of the
unanimous circuit courts, we conclude, pursuant to Louisiana law, that losses
caused by civil authority orders closing nonessential businesses in response
to the COVID-19 pandemic do not fall within the meaning of “direct physical
loss of or damage to property.” And because Q Clothier has not plausibly
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Case: 21-30278 Document: 00516248556 Page: 16 Date Filed: 03/22/2022
No. 21-30278
alleged that any other policy provision applies, its losses from the close of its
stores are not covered by the policy. We accordingly AFFIRM.
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