Court Opinion

ID: 9352774
Source: CourtListenerOpinion
Date Created: 2023-01-09 19:02:34.076112+00
Date Added: 2024-06-11T16:59:49.886830
License: Public Domain

Case: 21-30544     Document: 00516602507          Page: 1    Date Filed: 01/09/2023

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

                                                                             FILED
                                                                       January 9, 2023
                                   No. 21-30544
                                                                        Lyle W. Cayce
                                                                             Clerk
   New Orleans Equity L.L.C., doing business as
   Galatoire’s Restaurant, doing business as
   Galatoire’s 33 Bar & Steak,

                                                            Plaintiff—Appellant,

                                       versus

   U.S. Specialty Insurance Company,

                                                            Defendant—Appellee.

                  Appeal from the United States District Court
                     for the Eastern District of Louisiana
                           USDC No. 2:20-CV-1935

   Before Higginbotham, Jones, and Oldham, Circuit Judges.
   Per Curiam:*
          Appellant, owner of Galatoire’s in New Orleans, sued its insurance
   provider for refusing to cover its revenue losses suffered during the opening

          *
            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   opinion should not be published and is not precedent except under the limited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.
Case: 21-30544        Document: 00516602507             Page: 2      Date Filed: 01/09/2023

                                        No. 21-30544

   months of the Covid-19 pandemic. The district court granted summary
   judgment in favor of the insurance provider. We affirm.
                                   I. Background
           New Orleans Equity L.L.C. owns and operates Galatoire’s Restaurant
   and Galatoire’s 33 Bar & Steak on Bourbon Street. One of the most popular
   members of Galatoire’s wait staff worked the weekend of March 13 to 15,
   2020. Little did he or his employer know that he would test positive for
   Covid-19 on March 17. The day before, on March 16, the Governor of
   Louisiana announced that, effective March 17, “all restaurants . . . shall cease
   allowing for any on premises consumption of food or beverages.” The City
   of New Orleans issued a similar order, announced on March 16 and effective
   March 17. The evening of March 16, Galatoire’s management decided to fire
   all 148 non-management employees.               By April 20, Appellant lost over
   $1,000,000 in gross revenue, which rose to $3,445,000 by September 23,
   2020.
           In March 2020, Appellant had an insurance policy with U.S. Specialty
   Insurance Company (USSIC) that covered business interruption losses
   “directly and solely caused” by an “accidental contamination” of an
   “insured product.”        The policy did not contain a Covid-19, virus, or
   pandemic exclusion.        Appellant notified USSIC of a claim that it had
   sustained a loss due to accidental contamination of an insured product by the
   sick waiter.     USSIC conducted an investigation and denied coverage.
   Appellant sued USSIC for breach of contract in federal court. 1
           Following discovery, both parties moved for summary judgment. The
   district court granted summary judgment for USSIC. This appeal followed.

           1
            Diversity jurisdiction exists under 28 U.S.C. § 1332. Appellant is a resident of
   Louisiana, USSIC is a resident of Texas, and the amount in controversy exceeds $75,000.
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                                   II. Discussion
          “This court reviews the district court’s grant of summary judgment
   de novo, applying the same legal standards as the district court.” DePree v.
   Saunders, 588 F.3d 282, 286 (5th Cir. 2009). A party is entitled to summary
   judgment “if the movant shows that there is no genuine dispute as to any
   material fact and the movant is entitled to judgment as a matter of law.”
   Fed. R. Civ. P. 56; see also Celotex Corp. v. Catrett, 477 U.S. 317, 322,
   106 S. Ct. 2548, 2552 (1986). The interpretation of an insurance policy is a
   question of law reviewed de novo. EMJ Corp. v. Hudson Specialty Ins. Co.,
   833 F.3d 544, 547 (5th Cir. 2016).
          To meet its burden of proving coverage under the policy, Appellant
   must show that (1) an insured event occurred (here, that insured products
   were accidentally contaminated), (2) the event was reported to USSIC, and
   (3) the insured event directly and solely caused a loss. Appellant fails to
   submit summary judgment evidence that it has satisfied the first and third
   requirements.
                                   1. Insured Product
          The parties agree that the policy covers business interruption losses if
   caused by an “accidental contamination” of an “insured product.” The
   parties disagree over the proper interpretation of the term “Insured
   Products.” 2 As defined by the policy, “Insured Products” means:
          all ingestible products for human consumption, or any of their
          ingredients or components, that have been reported to the

          2
             Louisiana law governs the interpretation of this policy. Under Louisiana law,
   courts must interpret insurance policy terms according to “their plain, ordinary and
   generally prevailing meaning, unless the words have acquired a technical meaning.”
   Cadwallader v. Allstate Ins. Co., 848 So. 2d 577, 580 (La. 2003) (citing La. Civ. Code.
   art. 2047).
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          Insurer on the application on file with the Insurer for the
          effective dates of this Policy or by addendum to such
          application and that are:
             a. in production; or
             b. have been manufactured, handled or distributed by the
             Insured; or
             c. manufactured by any contract manufacturer for the
             Insured; or
             d. being prepared for or are available for sale; or
             e. all ingestible products for human consumption served at
             any restaurant location operating under the same trade
             name as the Insured.
   Appellant contends that Galatoire’s itself is an insured product because it
   was “reported to the Insurer on the application.” Under this reading,
   everything constituting the restaurant, such as the “plates, flatware, salt and
   pepper dispensers, etc.,” is an “insured product.” The district court rightly
   dismissed this argument as ignoring the clause’s limiting term of “ingestible
   products for human consumption.” Thus, Appellant’s summary judgment
   evidence must show that food products, including “ingredients or
   components,” were accidentally contaminated, and that contaminated food
   “directly and solely caused” its business interruption losses.
                                2. Contamination
          The district court held, and USSIC argues, that Appellant must
   submit evidence of actual contamination of food products to meet its burden.
   Appellant essentially makes two arguments in response: (1) that it provided
   evidence of contamination via expert testimony; and (2) that a requirement
   of scientific testing or proof of sickness would render the contract illusory.
   The first is wrong, and the second misunderstands Appellant’s burden under
   the policy.

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          First, Appellant emphasizes as evidence of contamination the report
   of its expert, Dr. Cameron, which concluded that the infected employee
   “likely unknowingly expelled infectious virus in tiny aerosolized droplets
   each time he spoke to patrons.” (emphasis added). The report stated further
   that it “is therefore likely that [the waiter’s] virus was distributed across all
   aspects of table service, contaminating food and beverages, utensils, and table
   linens.” (emphasis added).
          According to the plain meaning of its text, the policy mandates the
   insured to submit proof of actual contamination, not of likely contamination.
   The clause pertaining to “Notice of an Incident” requires the insured to
   “make every reasonable effort to . . . determine whether an Insured Event
   has actually occurred,” and when submitting a “Notice of a Claim,” the
   insured must determine “that an Insured Event has actually occurred.”
   (emphasis added). Further, a comparison of the definitions of coverage for
   “Accidental Contamination” and “Malicious Tampering” supports this
   interpretation. The former has no qualifying language before “accidental or
   unintentional contamination, impairment or mislabeling of an Insured
   Product,” while the latter begins, “Any actual, alleged or threatened
   intentional, malicious, and wrongful alteration or contamination of the
   Insured’s Products . . . .” (emphasis added). Thus, if the “alleged wrongful
   contamination of an Insured Product” is covered under Malicious
   Tampering, then the Accidental Contamination clause should be read to
   cover only actual contamination of an insured product. It is undisputed that
   Appellant has neither provided evidence of actual contamination of food nor
   submitted a claim for malicious tampering.
          Second, Appellant argues that if proof of actual contamination is
   required, then contamination of this kind will never qualify as an insured
   event. Appellant misunderstands the district court’s opinion and USSIC’s
   argument to be that actual contamination can only be proven by scientific
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   testing or by evidence of sick customers. To be sure, both of those types of
   evidence might suffice to show actual contamination, but neither is required
   by the policy. It is not USSIC’s burden to show Appellant how to submit
   evidence of actual contamination. Appellant’s frustration over its inability to
   proffer evidence of actual contamination suggests not that the policy is
   illusory, but that the contamination alleged here is not an insured event.
                                   3. Causation
          The biggest problem with Appellant’s case is that Appellant cannot
   prove that the sick waiter’s alleged contamination of food was the “sole and
   direct cause” of Appellant’s business interruption losses. The district court
   heard argument on this issue but granted summary judgment to USSIC on
   the ground that Appellant had not shown that an insured event occurred.
   Nevertheless, this court may affirm the grant of summary judgment for any
   reason “supported by the record and argued in the court below,” even if not
   relied upon by the district court. Maria S. ex rel. E.H.F. v. Garza, 912 F.3d
   778, 783 (5th Cir. 2019); see also LLEH, Inc. v. Wichita Cnty., 289 F.3d 358,
   364 (5th Cir. 2002).
          The policy defines “Loss” as including only the “reasonable and
   necessary expenses or costs incurred by the Insured directly and solely as the
   result of a covered Insured Event.” (emphasis added). The undisputed facts
   show that the insured event, if it occurred, was neither the direct nor the sole
   cause of Appellant’s business interruption losses. The facts are these: On
   March 16, upon learning of the Governor’s and Mayor’s announcements that
   would shut down in-person dining at Galatoire’s, Appellant decided to fire
   all 148 non-management employees. Appellant admitted that it complied
   with the Governor’s and Mayor’s orders, that business slowed during the
   pandemic, and that Appellant reopened its restaurants when permitted.
   Appellant’s representative testified during his deposition that he attributed

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   all of the company’s financial losses to the pandemic. This evidence does not
   forbid the finding that food contamination was a cause of Appellant’s losses.
   But it does mean that food contamination was not “the sole and direct
   cause.”
          Accordingly, Appellant has failed to submit summary judgment
   evidence that it proved coverage under the policy.
          For the foregoing reasons, the district court’s judgment is
   AFFIRMED.

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