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Law360 (April 26, 2021, 8:13 PM EDT) -- Owners of stores in a national clothing chain can't tap into coverage with Twin City Fire Insurance Co., a Louisiana federal judge has ruled, saying losses from coronavirus lockdowns were economic and not caused by any physical loss or damage to their men's clothing boutiques.
U.S. District Judge Ivan L.R. Lemelle granted Twin City's bid for judgment on the pleadings Friday, finding the virus exclusion barred coverage even if there was physical alteration to Q Clothier stores in Louisiana, Texas, Georgia, Oklahoma and Arkansas that would have triggered coverage.
Judge Lemelle's ruling was the fourth Louisiana federal coronavirus decision on the merits and the second win for insurers. Two other rulings denied summary judgment motions brought by policyholders, according to data from the University of Pennsylvania's COVID Coverage Litigation Tracker.
"Louisiana jurisprudence indicates that lost profits from government-mandated business closures are not covered without evidence of physical property damage," Judge Lemelle said.
The owners of the stores filed suit in May, claiming mandatory closures by governments in response to the pandemic caused their losses, triggering coverage from Twin City. The owners sought coverage under business income, extra expense, civil authority and limited virus provisions.
However, Judge Lemelle declined to interpret "direct physical loss or physical damage" broadly. The threat of the coronavirus temporarily closing the clothing stores can't be "likened to toxic contamination rendering a home inhabitable," the judge said.
Judge Lemelle also said there isn't much relative case authority on Louisiana law and virus exclusions in coronavirus-related coverage disputes. But the judge found district courts across the country have held that virus exclusions in Twin City policies do preclude coverage for pandemic losses.
The judge also held that the clothing store owners aren't independently covered under the time element provision that are otherwise barred by the policy, including the virus exclusion. The Q Clothier owners don't say that the coronavirus was at their stores or caused equipment breakdowns, the judge said.
Finally, there isn't any civil authority coverage, the judge said, as there is no connection between damage to any nearby property and the stay-at-home orders. Q Clothier owners' allegation that the orders caused their properties to be unusable isn't enough to trigger coverage, according to the judge.
"Although Q Clothier was unable to use the property for normal profit-bearing operations, access to the property was not restricted for purposes of other necessary administrative tasks," the judge said.
Representatives for the parties didn't respond to requests for comment Monday.
The clothing stores are represented by David J. Schexnaydre of Schexnaydre Law Firm.
Twin City is represented by Seth A. Schmeeckle and Nicole M. Babb of Lugenbuhl Wheaton Peck Rankin & Hubbard and Sarah D. Gordon, Frank Winston Jr. and Alexandra R. Galdos of Steptoe & Johnson LLP.
The case is Q Clothier New Orleans LLC et al. v. Twin City Fire Insurance Co. et al., case number 2:20-cv-1470, in the U.S. District Court for the Eastern District of Louisiana.
--Editing by Neil Cohen.
For a reprint of this article, please contact reprints@law360.com.
