Opinion ID: 6325653
Heading Depth: 2
Heading Rank: 3

Heading: Limited Virus and Time Element Coverage

Text: 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. 13 Case: 21-30278 Document: 00516248556 Page: 14 Date Filed: 03/22/2022 No. 21-30278 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 14 Case: 21-30278 Document: 00516248556 Page: 15 Date Filed: 03/22/2022 No. 21-30278 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.