Court Opinion

ID: 6327798
Source: CourtListenerOpinion
Date Created: 2022-03-29 18:00:21.566848+00
Date Added: 2024-06-11T09:22:31.329412
License: Public Domain

Case: 21-30300     Document: 00516257930         Page: 1     Date Filed: 03/29/2022

              United States Court of Appeals
                   for the Fifth Circuit                                United States Court of Appeals
                                                                                 Fifth Circuit

                                                                               FILED
                                                                          March 29, 2022
                                  No. 21-30300                            Lyle W. Cayce
                                                                               Clerk

   Louisiana Bone & Joint Clinic, L.L.C.,

                                                           Plaintiff—Appellant,

                                       versus

   Transportation Insurance Company,

                                                           Defendant—Appellee.

                  Appeal from the United States District Court
                     for the Western District of Louisiana
                            USDC No. 6:21-CV-317

   Before King, Graves, and Ho, Circuit Judges.
   James E. Graves, Jr., Circuit Judge:*
          Plaintiff-Appellant Louisiana Bone & Joint Clinic, L.L.C. (LBJC)
   owns and operates a medical and surgical clinic for pain management in
   Lafayette. LBJC sued its insurer to recover economic losses stemming from
   the close of its business during the COVID-19 pandemic. The district court

          *
            Pursuant to 5th Circuit Rule 47.5, the court has determined that this
   opinion should not be published and is not precedent except under the limited
   circumstances set forth in 5th Circuit Rule 47.5.4.
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                                    No. 21-30300

   dismissed LBJC’s claims because its losses did not qualify as a “direct
   physical loss of or damage to property.” We AFFIRM.
                                         I.
           LBJC purchased a commercial property insurance policy from
   Defendant-Appellee Transportation Insurance Company. The policy
   insured LBJC’s premises at 1103 Kaliste Saloon Road in Lafayette, Louisiana.
   The policy was in effect from November 15, 2019 through November 15,
   2020.
           The policy contains the “Business Income and Extra Expense” form
   (BI/EE). Relevant here, that form states Transportation
           will pay for the actual loss of Business Income [LBJC]
           sustain[s] due to the necessary “suspension” of [LBJC’s]
           “operations” during the “period of restoration.” The
           “suspension” must be caused by direct physical loss of or
           damage to property at the described premises. The loss or
           damage must be caused by or result from a Covered Cause of
           Loss.
   “Period of restoration” means the period of time beginning with the date of
   the loss or damage and ending when the property at the described premises
   is repaired, rebuilt, or replaced, or when business resumes at a new location.
   “Covered Cause of Loss” means “risks of direct physical loss” unless it is
   excluded by the policy. One excluded Cause of Loss is “consequential
   losses” which means “delay, loss of use or loss of market.”
           The policy provides additional coverage in the Civil Authority form.
   That form states
           When the Declarations show that you have coverage for
           Business Income and Extra Expense, you may extend that

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                                    No. 21-30300

          insurance to apply to the actual loss of Business Income you
          sustain and reasonable and necessary Extra Expense you incur
          caused by action of civil authority that prohibits access to the
          described premises. The civil authority action must be due to
          direct physical loss of or damage to property at locations, other
          than described premises, caused by or resulting from a Covered
          Cause of Loss.
          In March 2020, the COVID-19 pandemic caused state and local
   authorities to issue orders to address the ongoing threat from the virus. In
   Louisiana, the Governor issued a state-wide order requiring nonessential
   businesses to close to the public and suspending nonessential medical
   procedures. In response to the Governor’s order, LBJC closed its clinic and
   suffered a loss of business income.
          LBJC submitted a claim to Transportation for BI/EE coverage.
   Transportation denied the claim. LBJC then sued Transportation in
   Louisiana state court for breach of contract and a declaratory judgment
   stating LBJC is entitled to coverage under the policy for the direct physical
   loss of or damage to property.
          Transportation removed the case to federal court in the Western
   District of Louisiana and moved to dismiss the complaint pursuant to Federal
   Rule of Civil Procedure 12(b)(6). The district court determined there was no
   coverage and granted Transportation’s motion. The district court concluded
   the policy language unambiguously requires some kind of “distinct,
   demonstrable, physical alteration of property.” And because the COVID-19
   pandemic and the Governor’s orders did not cause physical loss (or damage),
   there was no BI/EE coverage. The district court also determined the Civil
   Authority coverage did not apply because the Governor’s orders did not

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   prohibit access to LBJC and were not issued “due to” physical loss or
   damage. LBJC appeals.
                                          II.
          We review a dismissal for failure to state a claim de novo. Singleton v.
   Elephant Ins. Co., 953 F.3d 334, 337 (5th Cir. 2020). “Similarly, the
   interpretation of an insurance policy is a question of law that we
   review de novo.” Id. (citing Lubbock Cnty. Hosp. Dist. v. Nat’l Union Fire Ins.
   Co. of Pittsburgh, 143 F.3d 239, 241–42 (5th Cir. 1998)). Under Louisiana law,
   an insurance policy is a contract that must be construed using the general
   rules of contract interpretation set forth in the Civil Code.” Anco Insulations,
   Inc. v. Nat’l Union Fire Ins. Co. of Pittsburgh, 787 F.3d 276, 281 (5th Cir. 2015)
   (footnote omitted). If an insurance contract precludes recovery under our de
   novo review of its terms, dismissal is proper. IberiaBank Corp. v. Ill. Union
   Ins. Co., 953 F.3d 339, 345 (5th Cir. 2020).
          In Q Clothier New Orleans, L.L.C. v. Twin City Fire Insurance Co., we
   interpreted an identical policy with BI/EE coverage. We held that, under
   Louisiana law, a “direct physical loss of or damage to property” means a
   tangible alteration to, injury to, or deprivation of property. See No. 21-30278,
   slip op. at 11 (5th Cir. Mar. 22, 2022). We further concluded that business
   closures and suspensions during the COVID-19 pandemic do not trigger
   coverage under this meaning. Id. Pursuant to our reasoning in Q Clothier,
   LBJC’s losses in this case do not trigger coverage under the BI/EE provision.
          LBJC attempts to insert ambiguity into the coverage-triggering phrase
   by arguing it can reasonably be interpreted to cover “loss of use of property”
   or “loss of use of property for intended purposes.” A contract is ambiguous
   if after applying the rules of contract interpretation, it is susceptible to more
   than one reasonable interpretation. See Cadwallader v. Allstate Ins. Co., 848
   So. 2d 577, 580 (La. 2003). Once an ambiguity is identified, the rule of strict

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                                        No. 21-30300

   construction requires the court to adopt the interpretation in favor of the
   insured. See La. Civ. Code art. 2056; see also Cadwallader, 848 So. 2d at
   580. The determination of whether a contract is ambiguous is a question of
   law. See Cadwallader, 848 So. 2d at 580.
          The BI/EE provision is unambiguous as we discussed in Q Clothier. 1
   And here, we conclude LBJC’s proffered interpretation is unreasonable.
   Physical loss of or damage to property cannot reasonably be interpreted to
   include loss of use, because it would render the adjective “physical”
   meaningless. Because physical means “tangible,” the loss contemplated in
   the BI/EE provision is a tangible loss of or damage to property at the clinic.
   But the Governor’s orders did nothing tangible to LBJC’s property at the
   clinic. Nor did the orders do anything tangible to the clinic itself. The insured
   property has remained unchanged by the Governor’s orders.
          Interpreting the phrase to include “loss of use” is also at odds with
   the BI/EE’s coverage during a “period of restoration.” The BI/EE provision
   contemplates the loss or damage suffered to require a period of time for
   “rebuilding, repair, or replacement.” Because a “loss of use” in this case
   does not require rebuilding, repair, or replacement, interpreting the BI/EE
   provision to cover such a loss gives the period of restoration no meaning.
          And finally, we note that the policy explicitly uses the phrase “loss of
   use” elsewhere, suggesting a difference in the meanings of “loss of
   property” and “loss of use.” Although “loss” is not defined in the policy,
   the policy uses the phrase “loss of use” in its exclusion for consequential

          1
             We accordingly deny LBJC’s motion to certify the question to the Louisiana
   Supreme Court, its motion to stay this case pending an appeal in the Louisiana Fourth
   Circuit Court of Appeals in Cajun Conti LLC v. Certain Underwriters at Lloyd’s London,
   No. 2021-CA-0343, and its motion to permit supplemental briefing once the Fourth Circuit
   renders a decision.

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                                    No. 21-30300

   losses. In context, the exclusion states a loss of use may cause loss or damage
   (although it would not be covered). So we recognize that a “loss” can include
   loss of “use.” But when reading the BI/EE provision, “loss” is combined
   with the adjective “physical.” The loss contemplated in the provision
   therefore must be physical (or tangible) whereas a loss of use would not
   necessarily be characterized in the same way.
          Because “a direct physical loss of or damage to property” cannot be
   reasonably interpreted to include the “loss of use” of property, we conclude
   again, that the language in the BI/EE provision is unambiguous. And
   pursuant to that unambiguous language, the policy does not cover LBJC’s
   losses from the closure of its clinic during the pandemic.
          We also conclude LBJC’s losses are not covered by the Civil Authority
   provision. This provision is similar to the Civil Authority Extension we
   interpreted in Q Clothier, which we interpreted as requiring a nexus between
   the civil authority order and property damage or losses near the insured
   premises. See Q Clothier, slip op. at 12; see also Dickie Brennan & Co. v.
   Lexington Ins. Co., 636 F.3d 683, 686 (5th Cir. 2011). Because there is no
   meaningful distinction between the two provisions, and we have concluded
   the Governor’s orders were issued to mitigate the spread and impact of
   COVID-19 and not “due to” property damage or loss near the clinic,
   Q Clothier governs the outcome here. See Q Clothier, slip op. at 12; Terry
   Black’s Barbecue, L.L.C. v. State Auto. Mut. Ins. Co., 22 F.4th 450, 458–59
   (5th Cir. 2022). The Governor’s orders issued to contain and prevent the
   spread of COVID-19 do not trigger Civil Authority coverage in this policy.
                                        III.
          LBJC has not alleged a covered loss. The BI/EE provision requires “a
   direct physical loss of or damage to property” which means a tangible
   alteration to, injury to, or deprivation of insured property. LBJC’s alleged

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   losses from the close of its clinic during the COVID-19 pandemic therefore
   do not fall within BI/EE coverage. Its losses do not trigger Civil Authority
   coverage either because the Governor’s orders were not issued “due to” a
   physical loss of property near LBJC’s clinic. We accordingly AFFIRM the
   district court’s order granting Transportation’s motion to dismiss.

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