Ochsner Clinic Foundation v. Lexington Insurance Company et al

Filing 163

ORDER DENYING 63 Motion for Summary Judgment on All or Certain Portions of Plaintiff's Claim for Business Interruption Damages. Signed by Judge Nannette Jolivette Brown on 1/3/2017. (mmv)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
OCHSNER CLINIC FOUNDATION

CIVIL ACTION

VERSUS

NO. 15-2313

LEXINGTON INSURANCE COMPANY

SECTION: “G”(2)

ORDER
In this litigation, Plaintiff Ochsner Clinic Foundation (“Ochsner”) alleges that Defendant
Lexington Insurance Company (“Lexington”) breached its insurance policy by failing to pay
additional amounts owed to Ochsner, and that Lexington acted in bad faith during the adjustment
process.1 Pending before the Court is Lexington’s “Motion for Summary Judgment on All or
Certain Portions of Plaintiff’s Claim for Business Interruption Damages.”2 Having reviewed the
motion, the memoranda in support, the memorandum in opposition, the record, and the applicable
law, the Court will deny the motion.
I. Background
A.

Factual Background
In this case, Ochsner alleges that Lexington sold a Certificate of Property Facultative

Reinsurance (“certificate”) to Ochsner for the term of May 31, 2011, through May 31, 2012.3 The
certificate made Lexington the reinsurer of Ochsner System Protection Company’s (“OSPC”) allrisks Commercial Property Policy (“insurance policy”).4 The insurance policy covered a former

1

See Rec. Doc. 1-1; Rec. Doc. 11 at 2–3.

2

Rec. Doc. 63.

3

Rec. Doc. 1-1 at 2.

4

Id.; Rec. Doc. 68-2 at 3.

1

warehouse located at 1401 Jefferson Highway that Ochsner was repurposing to serve as an
expanded internal medicine practice.5 On June 10, 2011, construction on the building began and
was scheduled to be completed by June 2012.6 On August 24, 2011, a portion of the building’s
roof collapsed during the renovation, causing property damage and delaying the clinic’s opening.7
Afterwards, Ochsner made a claim under the insurance policy for indemnification of the
losses it alleges to have suffered as a result of the roof collapse. 8 According to Ochsner, on
September 23, 2011, Lexington informed Ochsner that it was taking “full control of the
investigation, defense, adjustment, and settlement of any claim.”9 Ochsner states that by doing so,
OSPC did not have any role in handling Ochsner’s insurance claim, and that Lexington became,
“for all practical and legal purposes, the direct insurer of Ochsner.”10
Ochsner argues that Lexington’s subsequent tactics, disputes, and arguments regarding the
insurance policy coverage unnecessarily delayed work on the collapsed building, increased the
cost of the repurposing project, and caused Ochsner to suffer further business interruption losses.11
In particular, Ochsner seeks more than $29.5 million in business interruption losses it allegedly
suffered as a result of the 17-month delay caused by the collapse, and contends that Lexington has

5

Rec. Doc. 1-1 at 2; Rec. Doc. 68-2 at 4.

6

Rec. Doc. 60-1 at 4.

7

Rec. Doc. 1-1 at 2.

8

Id.; Rec. Doc. 68-2 at 4; Rec. Doc. 60-1 at 5.

9

Rec. Doc. 1-1 at 2.

10

Id. at 3.

11

Rec. Doc. 1-1 at 4.

2

only paid approximately $1 million on Ochsner’s business interruption claim.12 Ochsner alleges
that Lexington has still not paid the full amount of Ochsner’s property damage claim or business
interruption losses claim. 13 Accordingly, Ochsner argues that Lexington has breached its
obligations under the insurance policy.14 Moreover, Ochsner asserts that Lexington’s actions, such
as allegedly prolonging the investigation, adjustment, and payment process, amount to bad-faith
conduct in violation of La. Rev. Stat. § 22:1892 and La. Rev. Stat. § 22:1973.15 Lexington, by
contrast, asserts that it timely investigated, adjusted, and paid undisputed amounts of losses in
Ochsner’s claim as soon as Lexington learned of the claim. 16 Lexington contends that it
consistently worked with Ochsner to resolve any disputes over the scope of coverage while
continuing to make payments throughout the adjustment process.17
B.

Procedural Background
On June 26, 2014, Ochsner filed a Petition for Damages in the 24th Judicial District Court

for the Parish of Jefferson, State of Louisiana.18 On June 25, 2015, Lexington removed the case
to this Court after Ochsner voluntarily dismissed the only non-diverse defendant, OSPC, and the
parties stipulated that Lexington is the proper defendant in this matter.19 On August 30, 2016,

12

Rec. Doc. 63-1 at 22.

13

Rec. Doc. 1 at 4–5.

14

Id. at 5.

15

Id.

16

See Rec. Doc. 60-1 at 5–7.

17

Id. at 7–8.

18

Id.

19

Rec. Doc. 1 at 1–2.

3

Lexington filed the instant motion.20 On September 6, 2016, Ochsner filed its opposition.21 On
September 27, 2016, Lexington filed a reply. 22 On October 26, 2016, the Court held oral
arguments on all of the parties’ motions for partial summary judgment.23
II. Parties’ Arguments
A.

Lexington’s Arguments in Support of the Motion
In this motion, Lexington contends that Ochsner seeks more than $29.5 million in business

interruption losses it alleged suffered as a result of delays caused by the collapse of the building
by using “incurably flawed” methodology. 24 Lexington asserts that it has already paid
approximately $1 million on Ochsner’s business interruption claim, and seeks summary judgment
on the remaining amount.25 Lexington states that the insurance policy covers business interruption
losses, defined as “the actual loss sustained” by Ochsner during the “period of interruption”
between the original anticipated date of substantial completion had no loss occurred and the actual
date of completion.26 However, Lexington argues that Ochsner’s business interruption loss claim
seeks to recover far more than what Ochsner is entitled to under the insurance policy.27

20

Rec. Doc. 63.

21

Rec. Doc. 83.

22

Rec. Docs. 130.

23

Rec. Docs. 149, 150.

24

Rec. Doc. 63-1 at 2.

25

Id.

26

Id. at 4.

27

Id. at 2–3.

4

1.

Ochsner’s “Downstream Revenue” Theory

First, Lexington asserts that 95% of Ochsner’s business interruption losses were calculated
using an allegedly flawed “downstream revenue” theory.28 According to Lexington, Ochsner avers
that primary care physicians act as business generators for the entire Ochsner system by seeing
patients for routine exams or minor medical issues and referring them to specialists elsewhere in
the Ochsner system on referral (e.g., oncologists, cardiologists, etc.).29 Lexington states that it is
Ochsner’s position that this specialist-generated “downstream revenue” should be attributed to the
primary care physicians at the new clinic. 30 However, Lexington argues that Ochsner’s
downstream theory is too speculative, and that the policy itself allows for only actual losses and
excludes “[i]ndirect, remote, or consequential loss or damage.”31 Therefore, Lexington states that
summary judgment is appropriate on 95% of Ochsner’s business interruption claim.32
Lexington argues that Ochsner has no evidence that its patients would not have visited an
Ochsner specialist but for an earlier visit to an Ochsner primary care physician.33 Lexington avers
that Ochsner’s methodology rests on the presumption that every time a patient sees an Ochsner
specialist after visiting a primary care physician, that specialist-revenue should be attributed to the

28

Id. at 8 (quoting Hall v. Arkansas-Louisiana Gas Co., 368 So. 2d 984, 991 (La. 1979) (“Actual damages
arising from a breach of contract must be proven; they cannot be merely speculative or conjectural.”); Nick Farone
Music Ministry v. City of Bastrop, 179 So. 3d 629, 631 (La. App. 2015) (“Loss of business income or profits is a
type of special damages that must be proved with reasonable certainty . . . It must be shown that the loss of income
was, more probably than not, tributable to the defendants conduct or fault.”).
29

Id.

30

Id. at 8–9.

31

Id. at 13.

32

Id. at 12.

33

Id. at 2.

5

primary care physician.34 Lexington contends that this conflates correlation with causation, and is
too speculative and flawed to submit to a jury.35 Without more evidence establishing the causation
link, Lexington argues that Ochsner cannot claim the revenues for “downstream” specialist visits.36
For example, Lexington states that a patient may be referred to a specialist by a friend or family
member, another specialist, or through an insurer’s preferred provider director. 37 There is no
evidence, Lexington avers, that Ochsner’s specialists are “entirely dependent on Ochsner [primary
care physicians] for the patients they see, if a [primary care physician] sees the patient first.”38
According to Lexington, it is “[m]ere common sense” that Ochsner’s specialists would still see
many patients if the expanded clinic was never built, and Lexington points out that Michael
Hulefeld of Ochsner admitted that patients pick specialists “through many gateways.”39 Moreover,
Lexington contends that Ochsner’s methodology allows it to count revenues from specialist visits
up to three years after the visit to the primary care physician, and to attribute visits to heart
specialists out of a standard flu shot; but, Lexington argues, to say that a June 2015 specialist visit
was “caused by” a September 2012 primary care physician visit or that unrelated prior primary
care visits created specialist revenue is “completely speculative.”40 Thus, Lexington alleges that
Ochsner has not demonstrated that there was any “actual loss sustained” as required by the

34

Id. at 9.

35

Id.

36

Id.

37

Id. at 15.

38

Id.

39

Id.

40

Id.

6

insurance policy.41
2.

Ochsner’s “Period of Interruption” Time Frame Comparison

Second, Lexington asserts that Ochsner came up with its business interruption claim by
comparing the period of interruption time frame of when the clinic would have been opened if not
for the roof collapse (Timeframe 1: September 2012–February 2014) to the first 17 months after
the new clinic opened (Timeframe 2: February 2014–June 2015).42 However, Lexington states
that Ochsner has not shown how these two periods and their market conditions are comparable,
and does not account for other explanations for why net revenue might have increased after the
clinic opened.43 For example, Lexington avers that other external factors in Timeframe 2, such as
the implementation of the Affordable Care Act in 2014, changes in the reimbursement rates,
differences in healthcare services demands, and growth in patient care, make a comparison of two
17 month periods at a hospital system “speculative at best.”44 Moreover, Lexington contends that
Ochsner is excluding the “large volume of patients” who saw a primary care physician before the
collapse and was seen by a specialist during Timeframe 1.45 In particular, Lexington states that
Ochsner’s Timeframe 2 counts all specialist visits if a primary care physician had seen the patient
first at any point in Timeframe 1 or 2, a 34 month period; however, Lexington points out that for
Timeframe 1, Ochsner only counts specialist visits if a primary care physician had seen the patient
only in Timeframe 1, only a 17 month period rather than a 34 month period like Ochsner used for

41

Id. at 13.

42

Id. at 2.

43

Id. at 2–3, 10.

44

Id. at 10, 19.

45

Id. at 9–10.

7

Timeframe 2.46 The result, Lexington avers, is that Ochsner artificially deflates its Timeframe 1
revenue by failing to count “hundreds, if not thousands, more specialist visits” in Timeframe 1,
which Lexington contends creates the appearance of greater losses than Ochsner actually
suffered.47 Thus, Lexington argues that Ochsner’s business interruption claim is too speculative
to survive summary judgment.48
3.

Ochsner’s Claim for “Ramp Up” Costs

Third, Lexington argues that Ochsner is not entitled to the $7.5 million it claims are revenue
losses during the post-opening “ramp up” period.49 According to Lexington, the insurance policy
only permits recovery of post-opening losses up to three months when necessary to “restore”
Ochsner’s business to “the condition that would have existed had no loss occurred.” 50 Here,
Lexington contends that Ochsner was expanding its business that did not exist as of September
2012, and thus was not covered by the insurance policy.51 Lexington contends that if the clinic
had opened as scheduled in September 2012, the clinic’s business would have started at zero
regardless and expanded naturally over the following three months.52 According to Lexington, this
did not change when the new clinic opened in September 2014, and, thus, there was nothing to
“restore” that would be covered by the policy’s three month extended period of indemnity after

46

Id. at 16–17.

47

Id. at 17.

48

Id. at 20.

49

Id. at 3.

50

Id.

51

Id.

52

Id. at 10.

8

losses.53
4.

Ochsner’s Decision to Hire Doctors from Residency Programs

Fourth, Lexington avers that Ochsner cannot claim approximately $3.8 million as an
adjustment to its actual post-opening experience because the new primary care doctors Ochsner
hired after the delayed opening could not begin working until several months later when their
residency programs ended.54 Lexington states this claim is “inconsistent” with the plain language
of the insurance policy, which requires “due consideration” of Ochsner’s “actual experience,” and
that the further delay was caused by Ochsner’s own business decision to hire doctors from
residency programs rather than ones who could start immediately in February 2014.55 According
to Lexington, hiring new doctors out of residency programs was a business choice not caused by
the partial collapse, and, absent direct causation, is precluded from recoverable lost net revenues.56
Lexington alleges that Ochsner has offered no evidence that it could not hire non-resident primary
care physicians to start in February 2014.57
5.

Ochsner’s Plan to Hire Additional Primary Care Physicians

Fifth, Lexington argues that Ochsner is not entitled to recover any amount of business
losses for the first year (September 2012–September 2013), because, after the collapse, Ochsner

53
Id. at 10–11 (citing Safeguard Storage Props., LLC v. Donahue Favret Contractors, Inc., 60 So. 3d 110,
122 (La. App. 2011) (“[t]he extended period begins when the damaged properties are actually repaired … and ends
when the business returns to pre-loss conditions” (emphasis added)); cf. Home Indem. Co. v. Hyplains Beef, L.C.,
893 F. Supp. 987, 993 (D. Kan. 1995) (requirement that insured “resume” operations suggests that “there must have
necessarily been a stoppage of operations from which it was necessary to begin anew”)_.
54

Id. at 3, 23–24.

55

Id.

56

Id. at 11, 24.

57

Id. at 25.

9

proceeded with its plans to hire three new primary care physicians for 2012 and instead housed
them at the main facility.58 Lexington points to an internal email exchange of Janie Gilberti, Vice
President of Primary Care and Hospital Medicine, who said that Ochsner “did not delay any new
hires because we had signed contracts” and that she did not think “we lost revenue because we
were able to find a space to move the physicians.”59 Thus, according to Lexington, Ochsner could
not have lost any revenue in the first year, because it fully expanded its primary care practice as
originally planned, despite the partial collapse of the new building. 60 Lexington asserts that
Ochsner’s claim that it delayed hiring “less than two full time equivalent physicians as a result of
the collapse” is “a false claim directly contradicted by” Gilberti’s email exchange, and states that
Ochsner was not in a position to hire any more physicians until after the period of interruption for
reasons unrelated to the collapse.61
B.

Ochsner’s Opposition to the Motion
Ochsner opposes Lexington’s motion for summary judgment on Ochsner’s claim for

business interruption damages.62 Ochsner states that its business interruption claim is proper under
its insurance policy, as it is based on the loss of revenue it did not receive during the 17-month
period of interruption from September 1, 2012 to January 1, 2014. 63 Additionally, Ochsner
contends its coverage included an “Extended Period of Indemnity” provision that provides

58

Id.

59

Id. at 6.

60

Id. at 3.

61

Id. at 6, 25–26.

62

Rec. Doc. 83.

63

Id. at 2–3.

10

coverage needed to put a business back in the position it would have been in but for the loss.64
1.

Ochsner’s “Downstream Revenue” Theory

First, Ochsner argues that downstream revenue is an accepted measurement of business
losses in the healthcare industry.65 Ochsner avers that the internal medicine clinic is part of its
insured business, and thus revenue it loses as a result of the collapse forms a valid part of its
business interruption claim. 66 Ochsner contends that it provided Lexington with “voluminous
data” supporting its claim, with the original estimates based on projections derived from prior
business performance and later estimates based on the actual revenue data from the period after
the clinic opened.67 According to Ochsner, in Louisiana, claimants under a business interruption
insurance policy have “broad latitude” in proving their business interruption loss, and
mathematical certainty is not required; rather, they only need to offer proof “as precise as the
particular circumstances allow.” 68 Ochsner states that a projection of earnings is an accepted
method of calculating business interruption loss, as well as using data trends, historical
performance, and pre-loss projections and budgets.69
Additionally, Ochsner asserts that its downstream losses calculations are neither remote
nor speculative.70 It includes patients who saw an internal medicine doctor and later received

64

Id. at 3.

65

Id. at 8.

66

Id.

67

Id.

68

Id. (citing Citadel Broadcasting Corp. v. Axis Insurance Co., 162 So. 3d 470, 475 (La. App. 4 Cir. 2015)
(internal citations omitted)).
69

Id. at 8–9.

70

Id. at 9.

11

additional care from Ochsner, such as specialists, lab services, radiology, and more.71 Ochsner
argues that the causal connection is clearly supported from numerous witnesses and depositions
“based upon the experience of Ochsner as well as accepted industry assumptions that expanded
primary care results in expanded downstream care.”72 Ochsner contends that Lexington’s own
healthcare expert, Larry Hancock, used a study confirming that internal medicine doctors generate
downstream revenue.73 Ochsner represents that the study relied on by Hancock stated that the
“historical rule of thumb” is that a primary care physician generates approximately $1 million in
downstream revenue, while a primary care physician with 2,000 patients can provide $12 to $14
million.74
Moreover, Ochsner argues that Lexington accepted Ochsner’s theory when it calculated its
partial payment in June 2016, which used Ochsner’s data on downstream revenue.75 Ochsner also
avers that the insurance policy lists types of remote and consequential damages which are not
covered, and downstream revenue is not listed.76 Ochsner represents that in Safeguard Storage
Properties, L.L.C. v. Donahue Favret Contractors, Inc., the Louisiana Fourth Circuit rejected a
similar summary judgment argument by Lexington in a similar insurance case. 77 Ochsner
represents that, in that case, a business sued Lexington for damages under a business interruption

71

Id.

72

Id. at 9–10.

73

Id. at 10.

74

Id.

75

Id. at 16.

76

Id. at 11.

77

Id. (citing 60 So. 3d 110 (La. App. 4 Cir. 2011)).

12

policy after Hurricane Katrina prevented a planned expansion, and the Louisiana Fourth Circuit
rejected Lexington’s similar argument that the plaintiff’s claim was “too speculative.” 78
According to Ochsner, the court found that expert testimony supported the plaintiff’s loss of
business opportunity claim, and that attacking the credibility of those experts was more suitable
for a trial on the merits.79
Ochsner further contends that Louisiana law “expressly rejects the customer-by-customer
standard of proof that Lexington seeks to impose on Ochsner” by arguing that Ochsner has not
provided evidence of specific patients who only visited a specialist because of a visit to a primary
care physician.80 According to Ochsner, “[c]ourts around the country,” such as the Third Circuit,
have also rejected Lexington’s argument. 81 Moreover, Ochsner asserts that Lexington’s own
expert, Larry Hancock, testified that the “perfect system, tracking patient by patient, does not
exist.”82 Ochsner argues that to allow Lexington to deny business losses coverage in the $550
million all risk insurance policy by demanding “an impossible level of proof” would render the
policy illusory in contradiction to Fifth Circuit case law. 83 Moreover, Ochsner contends that
Lexington accepted the “basic premise” of Ochsner’s claim when Lexington made a partial

78

Id.

79

Id. at 11–12.

80

Id. at 13.

81
Id. (citing Am. Med. Imaging Corp. v. St. Paul Fire & Marine Ins. Co., 949 F.2d 690, 694 (3d Cir.
1991); Archer Daniels Midland Co. v. Aon Risk Servs., Inc., No. 97-2185, 2002 WL 31185884, at * 3 (D. Minn.
Sept. 27, 2002)).
82

Id. at 13–14.

83

Id. at 15–16 (citing Boston Old Colony Ins. Co. v. Tiner Assocs., Inc., 288 F.3d 222, 227 (5th Cir. 2002);
Ranger Insurance Company v. Culberson, 454 F.2d 857, 864-65 (5th Cir. 1971); Aladdin Oil Company v. Rayburn
Well Service, Inc., 202 So. 2d 477, 489 (La. App. 4 Cir. 1967); Mayer v. Laniri, 97-2535 (La. App. 4 Cir. 3/11/98),
712 So. 2d 533, 535).

13

payment in June of 2016 by using “much of Ochsner’s information and methodology.”84
2.

Ochsner’s “Period of Interruption” Time Frame Comparison

Second, Ochsner avers that the two timeframes it used are comparable and appropriate to
consider, as the insurance policy requires Lexington to give “due consideration” to “the actual
experience of the business after substantial completion and startup.”85 Ochsner asserts that the
timeframes span two periods of identical length, and Ochsner’s witnesses testified that the New
Orleans market for primary care was static or shrinking during that time, the ratio of insured versus
uninsured patients was steady, and there were no significant changes in payment rates.86 Ochsner
states that Lexington only offers a “laundry list of possible reasons” why Timeframe 1 and
Timeframe 2 may not be comparable, but does not identify any evidence that proves its point or
shows the data from Timeframe 2 is actually not comparable.87
3.

Ochsner’s Claim for “Ramp Up” Losses

Third, Ochsner contends that the “ramp up” coverage of the extended period of indemnity
provision is applicable here.88 Ochsner avers that the extended period of indemnity provision
provides coverage “for such additional length of time as is required to restore the Insured’s
business to the condition that would have existed had no loss occurred . . . .”89 Ochsner states that
extended period of indemnity coverage recognizes that a business does not immediately return to

84

Id. at 16.

85

Id. at 18.

86

Id. at 19.

87

Id. at 19–20 (emphasis in original).

88

Id. at 20.

89

Id. (emphasis in original).

14

previous profit levels after the damage is repaired.90 Here, if no loss had occurred, Ochsner states
that it would have opened on time in September 2012, and had a fully functioning business in
February 2014 and each month after.91 Instead, Ochsner argues it had “another ramp-up period”
in the months after opening in February 2014, an additional loss to the business due to the delay.92
Moreover, Ochsner asserts that its internal medicine practice was not “new,” but rather a 70-yearold functioning practice covered by the insurance policy.93 Thus, Ochsner avers that to put the
business in the condition “had no loss occurred,” Lexington must compensate Ochsner for the
additional losses it suffered in the months after opening in February 2014.94 Ochsner contends that
Lexington misreads the insurance policy language by arguing that the extended period of
indemnity coverage should be limited to coverage needed to get the business back to its prior level
of production.95
4.

Ochsner’s Decision to Hire Doctors from Residency Programs

Fourth, Ochsner further argues that the original opening date for the clinic, September
2012, was purposefully selected to coincide with the date that new doctors would finish their
residency.96 According to Ochsner, when the start date was pushed back to February 2014 by the

90

Id.

91

Id. at 20–21.

92

Id.

93

Id. at 22.

94

Id.

95

Id. at 21.

96

Id. at 22–23.

15

collapse, it was forced to wait before the new residents were ready to start seeing patients.97
Ochsner contends that the all risks insurance policy requires “due consideration” of the actual
experience before and after the loss, which includes the “longstanding practice of hiring a majority
of new internal medicine physicians out of residency.”98 Ochsner asserts that several witnesses
also testified that there was a shortage of available primary care doctors, which is one of the main
reasons doctors are hired fresh out of residency. 99 Accordingly, Ochsner argues the delay in
opening the building during an “off hiring cycle” time in February instead of September
“prevented Ochsner from conducting its business as it would in the absence of the loss.”100
5.

Ochsner’s Plan to Hire Additional Primary Care Physicians

Fifth, Ochsner asserts it had to “stall” recruiting due to the collapse because there was no
space for additional providers, and Ochsner was able to hire additional providers once it had the
additional space in the expanded clinic.101 According to Ochsner, Janie Gilberti was not asked in
her deposition about her email exchange regarding finding space for three physicians in the
existing location, but that she did testify that she stalled hiring after the collapse. 102 Another
witness also testified that there was a “revenue delay” and “loss” due to the lack of space to hire
new physicians.103

97

Id. at 23.

98

Id.

99

Id.

100

Id. at 23–24.

101

Id. at 24.

102

Id.

103

Id.

16

C.

Lexington’s Reply to Ochsner’s Opposition
Lexington states that Ochsner has failed to create any genuine issue of material fact on

Lexington’s motion for partial summary judgment on Ochsner’s claim for business interruption
damages.104 First, Lexington re-asserts that Ochsner’s downstream revenue calculation is flawed
because it rests on a comparison of margins earned in two separate timeframes using different
methodologies.105 For example, Lexington argues that in Timeframe 1, Ochsner fails to include
patients who visited a primary care physician in the 17 months prior to Timeframe 1, but includes
in its Timeframe 2 calculation the downstream revenue associated with patients who visited a PCP
doctor in the 17 months prior to Timeframe 2.106 According to Lexington, this artificial deflation
and inflation of the timeframes “renders meaningless any comparison” between the two. 107
Lexington states that Ochsner ignored this fatal calculation error in its opposition brief other than
to say it involves factual disputes precluding summary judgment.108
Lexington further argues that it is not asking Ochsner to prove every single hypothetical
transaction that did not occur because of the roof collapse to support its $28 million downstream
revenue theory, but rather it must provide some information that would establish a direct causal
connection between primary care physicians and downstream specialists.109 Lexington asserts that

104

Rec. Doc. 130.

105

Id. at 3.

106

Id. at 4.

107

Id.

108

Id.

109

Id. at 5.

17

no reasonable juror could determine if there was any actual downstream revenue loss without
information showing actual referrals from primary care physicians to downstream specialists.110
According to Lexington, Ochsner has only asserted that downstream revenue could, in theory,
result from primary care physicians; Lexington argues that Ochsner has not provided evidence,
however, proving the loss. 111 Lexington points to the testimony of Ochsner’s witnesses, who
conceded that a patient could choose his or her own specialist without a referral and that such
patients were included in Ochsner’s calculations.112 Lexington contends that its own expert, Larry
Hancock, is critical of Ochsner attributing 100% of all revenue to its primary care physicians,
stating that patients see specialists for other reasons besides primary care physician referrals and
that specialists generate their own downstream revenue.113 Lexington avers that other industry
literature cautions against and contradicts Ochsner’s downstream revenue model.114 Lexington
asserts that Louisiana law requires losses to be established “with reasonable certainty” and
demonstrate a direct causal connection between the covered loss and the insured’s damages, and
Lexington alleges that Ochsner has not done so here.115
Lexington also argues that Ochsner’s position that it is owed $7.5 million in additional
damages for its “ramp up” period ignores the word “restore” in the insurance provision.116 That

110

Id.

111

Id.

112

Id. at 6.

113

Id. at 6–7.

114

Id. at 7.

115

Id. at 7–8.

116

Id. at 9.

18

is, Lexington asserts that the “Extended Period of Interruption” coverage is not based on gross
earnings, but on the amount needed for “restoration of any level of prior business once the business
reopens.” 117 Lexington avers that Ochsner’s business interruption claim is premised on the
inability to hire new primary care physicians for its new clinic, but points out that these “new
physicians, by definition, did not have any prior revenue that needed to be ‘restored.’”118
Lexington further contends that Ochsner admits its business model was to hire both new
doctors “as well as more experienced doctors,” and that hiring new residents was Ochsner’s
choice. 119 According to Lexington, this decision triggers the insurance policy’s mitigation
provision, which requires Ochsner to take reasonable and necessary steps to mitigate losses from
a covered peril.120 Lexington states that Ochsner could have hired physicians who were able to
start work in February 2014, but “offers no explanation for why it did not do so.”121 Finally,
Lexington argues that the “undisputed facts” undermine Ochsner’s claim that it stalled
recruiting.122 Lexington points again again to an email from Ochsner’s executive, Janie Gilberti,
stating that Ochsner did not delay any new hires, and her testimony that she had no additional
applicants to consider. 123 Lexington states that it did not ask Gilberti about the email in her

117

Id. (emphasis in original).

118

Id. at 10.

119

Id. at 11 (quoting Rec. Doc. 83 at 20).

120

Id.

121

Id.

122

Id.

123

Id.

19

deposition because it did not receive the evidence until after her deposition.124
III. Law and Analysis
A.

Legal Standard for Summary Judgment
Summary judgment is appropriate when the pleadings, the discovery, and any affidavits

show that “there is no genuine dispute as to any material fact and the movant is entitled to judgment
as a matter of law.”125 When assessing whether a dispute as to any material fact exists, the court
considers “all of the evidence in the record but refrains from making credibility determinations or
weighing the evidence.”126 All reasonable inferences are drawn in favor of the nonmoving party,
but “unsupported allegations or affidavits setting forth ‘ultimate or conclusory facts and
conclusions of law’ are insufficient to either support or defeat a motion for summary judgment.”127
If the record, as a whole, “could not lead a rational trier of fact to find for the non-moving party,”
then no genuine issue of fact exists and the moving party is entitled to judgment as a matter of
law.128 The nonmoving party may not rest upon the pleadings, but must identify specific facts in
the record and articulate the precise manner in which that evidence establishes a genuine issue for
trial.129
The party seeking summary judgment always bears the initial responsibility of informing

124

Id.

125

Fed. R. Civ. P. 56(a); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322–23 (1986); Little v. Liquid
Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994).
126

Delta & Pine Land Co. v. Nationwide Agribusiness Ins. Co., 530 F.3d 395, 398–99 (5th Cir. 2008).

127

Galindo v. Precision Am. Corp., 754 F.2d 1212, 1216 (5th Cir. 1985); Little, 37 F.3d at 1075.

128

Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 586 (1986).

129

See Celotex, 477 U.S. at 325; Ragas v. Tenn. Gas Pipeline Co., 136 F.3d 455, 458 (5th Cir. 1998).

20

the Court of the basis for its motion and identifying those portions of the record that it believes
demonstrate the absence of a genuine issue of material fact.130 Thereafter, the nonmoving party
should “identify specific evidence in the record, and articulate” precisely how that evidence
supports his claims.131 To withstand a motion for summary judgment, the nonmoving party must
show that there is a genuine issue for trial by presenting evidence of specific facts. 132 The
nonmovant’s burden of demonstrating a genuine issue of material fact is not satisfied merely by
creating “some metaphysical doubt as to the material facts,” “by conclusory allegations,” by
“unsubstantiated assertions,” or “by only a scintilla of evidence.” 133 Rather, a factual dispute
precludes a grant of summary judgment only if the evidence is sufficient to permit a reasonable
trier of fact to find for the nonmoving party. Hearsay evidence and unsworn documents that cannot
be presented in a form that would be admissible in evidence at trial do not qualify as competent
opposing evidence.134
B.

Legal Standard for Interpreting Insurance Contracts under Louisiana Law
Under Louisiana law, “an insurance policy is a contract between the parties and should be

construed by using the general rules of interpretation of contracts set forth in the Louisiana Civil
Code.”135 “The Louisiana Civil Code provides that ‘[t]he judiciary's role in interpreting insurance

130

Celotex, 477 U.S. at 323.

131

Forsyth v. Barr, 19 F.3d 1527, 1537 (5th Cir. 1994), cert. denied, 513 U.S. 871 (1994).

132

Bellard v. Gautreaux, 675 F.3d 454, 460 (5th Cir. 2012) (citing Anderson v. Liberty, 477 U.S. 242, 248–

49 (1996)).
133

Little, 37 F.3d at 1075.

134

Martin v. John W. Stone Oil Distrib., Inc., 819 F.2d 547, 549 (5th Cir. 1987); Fed. R .Civ. P. 56(c)(2).

135
In re Katrina Canal Breaches Litig., 495 F.3d 191, 206 (5th Cir. 2007) (quoting Cadwallader v. Allstate
Ins. Co., 848 So.2d 577, 580 (La. 2003)); Mark v. Sunshine Plaza, Inc., No. 16-455, 2016 WL 6876645, at *2 (E.D.
La. Nov. 22, 2016) (Morgan, J.) (quoting Wisznia Co. v. Gen. Star Indem. Co., 759 F.3d 446, 448 (5th Cir. 2014)
(quoting Mayo v. State farm Mut. Auto. Ins. Co., 2003-1801, at 3 (La. 2/25/04); 869 So.2d 96, 99)) (quotation marks

21

contracts is to ascertain the common intent of the parties to the contract’ by construing words and
phrases ‘using their plain, ordinary and generally prevailing meaning.’”136 “Interpretation of an
insurance contract generally involves a question of law.”137
If the contract is clear and unambiguous and does not have absurd consequences, the court
applies the ordinary meaning of the contractual language. 138 If the insurance policy contains
ambiguous provisions, the “[a]mbiguity . . . must be resolved by construing the policy as a whole;
one policy provision is not to be construed separately at the expense of disregarding other policy
provisions.”139 “An insurance contract, however, should not be interpreted in an unreasonable or
strained manner under the guise of contractual interpretation to enlarge or restrict its provisions
beyond what is reasonably contemplated by unambiguous terms or achieve an absurd
conclusion.”140 “Courts lack the authority to alter the terms of insurance contracts under the guise
of contractual interpretation when the policy's provisions are couched in unambiguous terms.”141
C.

Analysis
Lexington argues that it is entitled to partial summary judgment on all or certain portions

of Ochsner’s claim for business interruption damages. 142 The Court will address each of

omitted) (alterations omitted).
136

Wisznia Co., 759 F.3d at 448–49 (quoting Mayo, 2003–1801, at 3 (La.2/25/04); 869 So.2d at 99 (citing
La. Civ. Code arts. 2045, 2047)).
137

In re Katrina Canal Breaches Litig., 495 F.3d at 206 (citing Bonin v. Westport Ins. Corp., 930 So.2d
906, 910 (La. 2006)).
138

Prejean v. Guillory, 2010-0740, at 6 (La. 7/2/10); 38 So. 3d 274, 279; see also Sapp v. Wood Grp. PSN,
Inc., No. 15-3, 2016 WL 6995897, at *4 (E.D. La. Nov. 30, 2016) (Brown, J.)).
139
In re Katrina Canal Breaches Litig., 495 F.3d at 207 (quoting La. Ins. Guar. Assoc. v. Interstate Fire &
Cas. Co., 630 So.2d 759, 763 (La. 1994)).
140

Id. at 208 (quoting Cadwallader v. Allstate Ins. Co., 848 So.2d 577, 580 (La. 2003)).

141

Id.

142

Rec. Doc. 63-1 at 2–3.

22

Lexington’s arguments in turn.
1.

Ochsner’s “Downstream Revenue” Theory

First, Lexington argues that Ochsner’s “downstream revenue” damages claim is too
speculative and relies on flawed methodology, and thus summary judgment on it is proper.143
Lexington avers that Ochsner has not presented sufficient causation evidence to establish that
every time a patient sees a specialist after seeing a primary care physician, the specialist visit
revenue should be attributed to the primary care physician.144 Lexington argues that Ochsner has
offered no evidence that any particular patient would not have seen an Ochsner specialist but for
an earlier visit to an Ochsner primary care physician.145 Lexington also points out that Ochsner
still attributes a specialist visit to a primary care physician visit even if significant amount of time
passed between the two visits or if the medical treatments received at each visit are entirely
unrelated.146
Lexington further asserts that Ochsner uses different groups of patients for calculating
revenue in Timeframe 1 (the 17 month period after the roof collapse that is covered by the
insurance policy) and Timeframe 2 (the first 17 months after opening the clinic).147 In particular,
Lexington alleges that Ochsner counts the “downstream revenue” of specialist visits in Timeframe
2 if the prior primary care physician visit occurred in either Timeframe 1 or 2, while Ochsner only
counts the “downstream revenue” of specialist visits in Timeframe 1 if the primary care physician
visit occurred in Timeframe 1; Lexington contends that Ochsner should have included all primary
care physician visits in Timeframe 1 and 17 months prior to Timeframe 1 in its calculation as it
143

Id. at 2, 8–9.

144

Id. at 9.

145

Id. at 2, 9, 15.

146

Id. at 15–16.

147

Id. at 16.

23

did with Timeframe 2.148 Lexington alleges that if Ochsner had used the same methodology of a
34-month window for both timeframes, Ochsner would have included hundreds or thousands more
specialist visits for Timeframe 1 that would have reduced or eliminated the alleged “downstream
revenue” loss.149
In response, Ochsner points out that “downstream revenue” is an accepted measurement of
business losses in the healthcare industry, and argues that it provided Lexington with “voluminous
data” supporting its claim.150 According to Ochsner, this included estimates based on projections
from prior business performance and estimates based on the actual revenue data from the period
after the clinic opened.151 Ochsner points out that several of its witnesses testified in support of
the acceptability of its “downstream revenue” damages claim.152 For example, Ochsner avers that
its healthcare expert, Charlotte Kohler, testified that the “primary care doctor coordinates and
directs the care of the downstream providers.”153 According to Ochsner, Lexington asserted a
similar argument in an unrelated case, Safeguard Storage Properties, L.L.C. v. Donahue Favret
Contractors, Inc., where a company sued under a business interruption policy after Hurricane
Katrina prevented a planned business expansion.154 Ochsner represents that the Louisiana Fourth
Circuit rejected Lexington’s argument that the business interruption damages claims for future
locations were too speculative, and held that Lexington’s attacks on the plaintiff’s expert report

148

Id. at 17.

149

Id.

150

Rec. Doc. 83 at 8.

151

Id.

152

Id. at 10.

153

Id. (citing Rec. Doc. 83-13 at 5–9).

154

Id. at 11–12 (citing 60 So. 3d 110 (La. App. 4 Cir. 2011)).

24

involved an “intensely factual determination” and was an issue to be decided at trial.155
Under Louisiana law, damages for loss of profits may not be based on speculation and
conjecture.156 However, as Louisiana courts have held, “such damages need be proven only within
reasonable certainty . . . [b]road latitude is given in proving lost profits because this element of
damages is often difficult to prove and mathematical certainty or precision is not required.”157
“Accordingly, where it is not possible to state or prove a perfect measure of lost earnings, ‘courts
have reasonable discretion to assess damages based upon all the facts and circumstances of the
case.’”158 “Proof of such losses need only be as precise as circumstances in a particular situation
allow.”159
Here, the insurance policy’s business interruption provision provides that Lexington must
cover the “actual loss sustained by the insured during the Period of Interruption directly resulting
from a Covered Cause of Loss to Insured Property.”160 In order to determine the amount of loss
payable under this provision, the insurance policy states that “due consideration shall be given to
the experience of the business before the Period of Interruption and the probable experience
thereafter had no loss occurred.”161 Section V(B)(3) of the insurance policy notes that for property

155

Id. (quoting Safeguard Storage Properties, L.L.C., 60 So. 3d at 121).

156

La Louisiane Bakery Co. v. Lafayette Ins. Co., 09-825 (La. App. 5 Cir. 2/8/11), 61 So. 3d 17, 34.

157

Id. (emphasis added) (citing Cox Commc’ns v. Tommy Bowman Roofing, LLC, 04–1666, at 8 (La. App.
4 Cir. 3/15/06), 929 So.2d 161, 166–67; Louisiana Farms v. Louisiana Depart’t of Wildlife and Fisheries, 95–845,
at 36 (La. App. 3 Cir. 10/9/96), 685 So.2d 1086, 1105; Lavigne v. J. Hofert Co., 431 So.2d 74, 77 (La. App. 1 Cir.
1983)).
158

Cotton Bros. Baking Co. v. Indus. Risk Insurers, 774 F. Supp. 1009, 1028 (W.D. La. 1989) (quoting
Tide Craft, Inc. v. Red Ball Oxygen Co., 514 So.2d 664 (La. App. 2 Cir. 1987)), aff'd as modified, 941 F.2d 380 (5th
Cir. 1991), as amended on denial of reh'g (Oct. 10, 1991), opinion corrected on reh'g sub nom. Cotton Bros. Baking
Co. v. Indus. Risk Insurers, 951 F.2d 54 (5th Cir. 1992).
159

Citadel Broad. Corp. v. Axis U.S. Ins. Co., 2014-0326 (La. App. 4 Cir. 2/11/15), 162 So. 3d 470, 475.

160

Rec. Doc. 63-2 at 87.

161

Id. at 88.

25

under construction, “due consideration will be given to the actual experience of the business
compiled after substantial completion and start-up.”162
Ochsner contends that it has produced sufficient evidence of its actual losses sustained for
its business interruption loss claim to survive summary judgment.163 Ochsner argues that it has
supported its “downstream revenue” damages claim with sufficient “industry-standard evidence,”
including: (1) projections based on past experience;164 (2) industry publications and studies;165 (3)
the actual experience of the business after the clinic was eventually opened;166 and (4) back-up
data, which was provided to Lexington to use for its own calculations.167 Ochsner also points to
the supporting testimony of its experts and its executives who Ochsner contends have significant
healthcare experience. 168 For example, Ochsner points to the deposition of Michael Hulefeld,
Ochsner’s Chief Operating Officer, who testified that he is “completely” confident that primary
care physician visits result in downstream revenue for Ochsner, and that he “can’t think of an

162

Id. at 89.

163

Rec. Doc. 83 at 3.

164

See id. at 5 (stating that Ochsner provided Lexington and HSNO with its own projections on how much
revenue it would have made but for the loss); Rec. Doc. 83-7 at 27 (Ochsner’s expert Frank Bocklud testifying in his
deposition that Ochsner provided Lexington with the contribution margin based on 2012 data); Rec. Doc. 83-8 at 5
(Ochsner executive Bobby Brannon stating in his deposition that Ochsner offered Lexington information on its
business losses as early as October of 2013).
165
See Rec. Doc. 83-5 at 3–4 (HSNO employee Peter Fogarty discussing in his deposition that the Merritt
Hawkins survey reflected that primary care physicians tend to generate more revenue, including downstream
revenue); Rec. Doc. 83-14 at 9 (study stating that the “historical rule of thumb is that each primary care physician
provides approximately $1 million of downstream referral revenue for hospitals” and up to $12 million to $14
million if they manage 2,000 patients).
166
See Rec. Doc. 83 at 5 (Ochsner asserting that it provided Lexington with the “actual data to support the
claim rather than the projections discussed in the early days”); id. at 6 (Ochsner alleging that it provided Lexington
with the actual patient revenue by January 2016); Rec. Doc. 83-3 at 2 (Ochsner’s accounting expert, George
Panzeca, stating that he provided Lexington with an expert report considering and measuring the revenues produced
in the two timeframes).
167

Id. at 1.

168

Id. at 2, 17–18. See Rec. Doc. 83-3 at 2 (Ochsner’s accounting expert, George Panzeca, testifying that
he compared the two timeframes).

26

instance where it hasn’t.”169 Likewise, Ochsner’s healthcare expert, Charlotte Kohler, testified in
her deposition that primary care physicians directs a patient’s care and are involved with the
services provided by downstream providers.170
The Court finds that Ochsner has submitted sufficient evidence in support of its
“downstream revenue” claim to preclude summary judgment on this issue. While Lexington points
to several alleged flaws in Ochsner’s methodology and calculations, these factual disputes are
suitable issues for trial and more properly addressed through cross examination.171 For example,
Lexington argues that Ochsner improperly attributes every specialist visit that occurred after a
primary care physician visit as “downstream revenue,” and raises several scenarios where the two
visits would be unrelated or are too attenuated and thus should not be included in a “downstream
revenue” calculation.172 Likewise, Lexington alleges that Ochsner used different patient groups
when calculating revenue in Timeframe 1 and Timeframe 2, such that Ochsner would have found
a greater number of specialist visits in Timeframe 1 if it had used the same calculation as it did in
Timeframe 2.173 However, even if the Court accepts Lexington’s allegations as true, Lexington
has provided no evidence as to how over-inclusive Ochsner’s calculation may be, and thus
provides no basis for the Court to find that Ochsner’s “downstream revenue” claim is too
speculative and fails as a matter of law.

169

Rec. Doc. 83-10 at 15.

170

Rec. Doc. 83-13 at 9.

171
See Safeguard Storage Properties, L.L.C. v. Donahue Favret Contractors, Inc., 2010-0673 (La. App. 4
Cir. 3/31/11), 60 So. 3d 110, 121 (“However, attacking the credibility of Safeguard's expert reports regarding the
loss of business opportunities and determining the monetary amount of lost business opportunities, which is an
intensely factual determination, are suitable issues for a trial on the merits.”); see also Ross v. Travelers Indem. Co.,
325 A.2d 768, 771–72 (Me. 1974) (stating that arguments that an insured’s estimate of damages failed to include all
relevant costs and figures were more appropriate for cross-examination).
172

Rec. Doc. 63-1 at 14–16.

173

Id. at 16–17.

27

In Blis Day Spa, L.L.C. v. Hartford Insurance Group, a court in the Western District of
North Carolina rejected a similar argument by an insurance company that the insured party
overestimated the revenue generated before, during, and after the period of interruption, and found
that it could not conclude as a matter of law that the plaintiff’s estimate was unduly speculative.174
Similarly, in Citadel Broadcast Corporation v. Axis U.S. Insurance Company, the Louisiana
Fourth Circuit rejected an insurer’s argument that an insured must prove its business interruption
loss on a customer-by-customer basis, and found that such a standard would be “overly
burdensome” and more than the “due consideration” requirement to prove actual loss sustained
under the plaintiff’s insurance policy.175
As stated supra, “mathematical certainty or precision is not required” to assess business
interruption loss damages, and Ochsner has pointed to sufficient evidence, including expert
testimony, projections, industry surveys, and actual financial data, to establish “with reasonable
certainty” its “downstream revenue” damages claim.176 Both parties have presented conflicting
expert testimony and evidence, and thus a genuine dispute of material fact exists precluding
summary judgment.177 The Court cannot conclude as a matter of law that Ochsner’s claim is
unduly speculative or that Ochsner has not established its “downstream revenue” damages with
reasonable certainty. Therefore, the Court denies Lexington’s instant motion for partial summary
judgment on the “downstream revenue” portion of Ochsner’s business interruption loss damages

174

427 F. Supp. 2d 621, 630 (W.D. N.C. 2006).

175

2014-0326 (La. App. 4 Cir. 2/11/15), 162 So. 3d 470, 475.

176

See La Louisiana Bakery Co. v. Lafayette Ins. Co., 09-825 (La. App. 5 Cir. 2/8/11), 61 So. 3d 17, 34
(citing Cox Communic’ns v. Tommy Bowman Roofing, LLC, 04–1666, at 8 (La. App. 4 Cir. 3/15/06), 929 So.2d 161,
166–67; Louisiana Farms v. Louisiana Dep’t of Wildlife and Fisheries, 95–845, at 36 (La. App. 3 Cir. 10/9/96), 685
So.2d 1086, 1105; Lavigne v. J. Hofert Co., 431 So.2d 74, 77 (La. App. 1 Cir. 1983)).
177

See Boudreaux v. Swift Transp. Co., 402 F.3d 536, 540 (5th Cir. 2005) (“When considering summary
judgment evidence, we must . . . ‘not weigh the evidence or evaluate the credibility of witnesses.’”) (citations
omitted); La Louisiane Bakery Co., 09-825 (La. App. 5 Cir. 2/8/11), 61 So. 3d at 35 ([C]redibility determinations,
including evaluating expert witness testimony, are for the trier of fact.”).

28

claim.
2.

Ochsner’s “Period of Interruption” Time Frame Comparison

Second, Lexington argues that Ochsner’s comparison of Timeframe 1 and Timeframe 2
“is legally and factually insupportable,” and thus summary judgment on it is proper. 178 In
particular, Lexington alleges that Ochsner has not shown that the two time periods are actually
comparable, as many external factors, such as the Affordable Care Act implementation and
changes in healthcare services, patient demand, and reimbursement rates, make such a comparison
“speculative at best.”179 Lexington asserts that Ochsner has not offered any evidence that the two
timeframes are comparable.180 Lexington contends that, “[i]n short, there are simply too many
variables influencing the overall profitability of a healthcare enterprise to allow a simple
comparison of a practice’s revenues from two timeframes.”181
In response, Ochsner asserts that the timeframes are comparable and summary judgment
on this issue should be denied, as: (1) both timeframes span periods of identical length with similar
months and holiday seasons; 182 (2) Frank Bocklud, one of Ochsner’s experts, testified in his
deposition that New Orleans had “a static or shrinking [primary care] market” and was “not
growing like a Houston, where they are getting a lot of new people in and new patients;”183 (3)
Michael Hulefeld, an Ochsner executive, stated in his deposition that the ratio of insured to
uninsured patients was “steady” between the two timeframes; 184 and (4) Charlotte Kohler,

178

Rec. Doc. 63-1 at 18.

179

Id. at 10.

180

Id. at 18–19.

181

Id. at 19.

182

Rec. Doc. 83 at 19.

183

See Rec. Doc. 83-7 at 17; Rec. Doc. 83 at 19.

184

Rec. Doc. 83-10 at 7; Rec. doc. 83 at 19–20.

29

Ochsner’s healthcare expert, testified that there were no significant changes in payment rates
either. 185 Ochsner argues that Lexington only offers a “laundry list of possible reasons” why
Timeframe 1 and Timeframe 2 may not be comparable, but does not identify any evidence that
proves its point or shows the data from Timeframe 2 is actually not comparable.186
The Court finds that Ochsner has submitted sufficient evidence in support of its claim that
it is entitled to business interruption loss damages to preclude summary judgment on this issue as
well. As stated supra, Louisiana law does not require Ochsner to prove its business loss damages
to an absolute certainty.187 Likewise, the insurance policy requires that “due consideration . . . be
given to the actual experience of the business compiled after substantial completion and startup.”188 Ochsner has pointed to sufficient evidence, including expert and lay witness testimony, to
create a genuine dispute of material fact precluding summary judgment on its damages claim based
on a comparison of Timeframe 1 and Timeframe 2.189 The Court cannot conclude as a matter of
law that Ochsner’s comparison of the two timeframes is so speculative as to warrant summary
judgment. Therefore, the Court denies Lexington’s instant motion for partial summary judgment
to the extent that it seeks to dismiss Ochsner’s business interruption claim for damages due to its
use of a comparison between Timeframe 1 and Timeframe 2.
3.

Ochsner’s Claim for “Ramp Up” Losses

Third, Lexington argues that summary judgment is proper on Ochsner’s $7.5 million

185

Rec. Doc. 83-13 at 11; Rec. Doc. 83 at 20.

186

Id. at 19–20 (emphasis in original).

187

La Louisiane Bakery Co. v. Lafayette Ins. Co., 09-825 (La. App. 5 Cir. 2/8/11), 61 So. 3d 17, 34.

188

Rec. Doc. 63-2 at 89.

189

See Boudreaux v. Swift Transp. Co., 402 F.3d 536, 540 (5th Cir. 2005) (“When considering summary
judgment evidence, we must . . . ‘not weigh the evidence or evaluate the credibility of witnesses.’”) (citations
omitted); La Louisiane Bakery Co. v. Lafayette Ins. Co., 09-825 (La. App. 5 Cir. 2/8/11), 61 So. 3d 17, 35
(“[C]redibility determinations, including evaluating expert witness testimony, are for the trier of fact.”).

30

damages claim for revenue losses during the post-opening “ramp up” period.190 According to
Lexington, the insurance policy only permits recovery of post-opening losses up to three months
when necessary to “restore” Ochsner’s business to “the condition that would have existed had no
loss occurred.”191 Lexington argues that the term “restore” is defined as putting something back
into existence or returning something “to an earlier or original condition by repairing it, cleaning
it, etc.”192 Here, Lexington contends that Ochsner was expanding its business that did not exist as
of September 2012, and thus was not covered by the insurance policy because there was nothing
to “restore.” 193 Lexington avers that the collapse did not prevent any existing primary care
physicians from operating at the same level as they had been prior to the collapse, and that Ochsner
admits that there is no evidence that the collapse caused Ochsner to lose any patients either.194
Lexington alleges that Ochsner’s “ramp up” damages claim would constitute a windfall, which is
contrary to the purpose of business interruption insurance coverage to bring a business to the same
financial condition as existed before the loss.195
In response, Ochsner argues that if the roof collapse had not occurred, its new clinic would
have opened on time in September 2012 and would have been a fully functioning business in
February 2014 and each month after. 196 Instead, Ochsner avers that it had “another ramp-up
period” in the months after opening in February 2014 in addition to the ramp up period Lexington

190

Rec. Doc. 63-1 at 3, 10, 21–23.

191

Id.

192

Id. at 21 (emphasis in original).

193

Id.

194

Id. at 22.

195

Id. at 23 (citing United Land Invs., Inc. v. N. Ins. Co. of Am., 476 So. 2d 432, 436 (La. App. 1985);
Dictiomatic, Inc. v. U.S. Fid. & Guar. Co., 958 F. Supp. 594, 604–05 (S.D. Fla. 1997).
196

Rec. Doc. 83 at 20–21.

31

must compensate for that would have occurred in September 2012, which constitutes an additional
business loss.197 Moreover, Ochsner asserts that its internal medicine practice was not “new,” but
rather a 70 year old functioning practice covered by the insurance policy issued to its existing
business, “Ochsner Clinic Foundation.”198 Thus, Ochsner avers that to put the business in the
condition “had no loss occurred,” Lexington must compensate Ochsner for the additional losses it
suffered in the months after opening in February 2014. 199 Ochsner contends that Lexington
misreads the insurance policy language by arguing that the extended period of indemnity coverage
should be limited to coverage needed to get the business back to its prior level of production.200
As stated supra, “[t]he Louisiana Civil Code provides that ‘[t]he judiciary's role in
interpreting insurance contracts is to ascertain the common intent of the parties to the contract’ by
construing words and phrases ‘using their plain, ordinary and generally prevailing meaning.’”201
If the contract is clear and unambiguous and does not have absurd consequences, the court applies
the ordinary meaning of the contractual language.202 “Courts lack the authority to alter the terms
of insurance contracts under the guise of contractual interpretation when the policy's provisions
are couched in unambiguous terms.”203 The insurance policy at issue in this case is an “all risk”
policy, which creates “a special type of coverage that extends to risks not usually covered under

197

Id.

198

Id. at 22.

199

Id.

200

Id. at 21.

201

Wisznia Co., 759 F.3d at 448–49 (quoting Mayo v. State Farm Mut. Auto. Ins. Co., 2003–1801, at 3
(La.2/25/04); 869 So.2d 96, 99 (citing La. Civ. Code arts. 2045, 2047)).
202
Prejean v. Guillory, 2010-0740, at 6 (La. 7/2/10); 38 So. 3d 274, 279; see also Sapp v. Wood Grp. PSN,
Inc., No. 15-3, 2016 WL 6995897, at *4 (E.D. La. Nov. 30, 2016) (Brown, J.)).
203

In re Katrina Canal Breaches Litig., 495 F.3d at 208 (quoting Cadwallader v. Allstate Ins. Co., 848
So.2d 577, 580 (La. 2003)).

32

other insurance.” 204 Insurers are permitted to limit their liability under all-risk policies, but
“[e]xclusionary provisions in insurance contracts are strictly construed against the insurer, and any
ambiguity is construed in favor of the insured.”205
Pursuant to Section V(C)(8) of Ochsner’s insurance policy, the “Extended Period of
Indemnity” provision at issue here, Lexington is obligated to provide coverage “for such additional
length of time as is required to restore the insured’s business to the condition that would have
existed had no loss occurred . . . .”206 The insurance policy clarifies that the extended period of
indemnity lasts for 90 days, 207 and both parties appear to agree that the extended indemnity
provision was triggered on the day Ochsner’s clinic opened following the roof collapse.208 The
insurance policy also excludes from all coverage any “[i]ndirect, remote, or consequential loss or
damage.”209
While the parties dispute whether or not the extended period of indemnity applies in this
instance to Ochsner’s new clinic, the Court finds that the provision is not ambiguous, and thus will
apply the ordinary meaning of the contractual language.210 Lexington primarily focuses on the
term “restore,” and argues that “restore” is defined as putting something back into existence or
returning something “to an earlier or original condition by repairing it, cleaning it, etc.” 211
204

Id.

205

Id. (quoting Ledbetter v. Concord Gen. Corp., 665 So.2d 1166, 1169 (La. 2006) (citing Garcia v. St.
Bernard Parish Sch. Bd., 576 So.2d 975, 976 (La. 1991))).
206

Rec. Doc. 83-1 at 19 (emphasis added).

207

Id. at 7.

208

Rec. Doc. 83 at 21 (Ochsner stating that the extended period of indemnity coverage applied on February
2014, the month that Ochsner’s internal medicine clinic opened); Rec. Doc. 63-1 at 21 (Lexington stating that the
extended period of indemnity coverage begins “once a damaged property reopens and normal business resumes.”)
209

Rec. Doc. 83-1 at 10; Rec. Doc. 63-1 at 5.

210

Prejean, 2010-0740, at 6; 38 So. 3d at 279; Wisznia Co., 759 F.3d at 448–49.

211

Rec. Doc. 63-1 at 21 (emphasis in original).

33

However, such an interpretation ignores the rest of the clause. The “Extended Period of Indemnity”
provision explicitly covers losses needed to “restore” a business “to the condition that would have
existed had no loss occurred,” and not, as Lexington suggests, to “restore” a business back to its
pre-loss condition or to allow a business “to get back to its prior level of production.” 212
Lexington’s interpretation misconstrues the unambiguous contractual language and interprets part
of the extended period of indemnity clause in a way that would disregard the rest of the
provision.213
Ochsner’s interpretation, by contrast, properly comports with the language of the provision.
Ochsner’s “ramp up” cost damages claim seeks to put Ochsner in the position that would have
existed had no loss occurred, i.e. opening the clinic in September 2012 and being fully operational
by February 2014. In addition, the Court notes that Ochsner’s interpretation is consistent with the
plain meaning of “restore,” which the Supreme Court has recognized means to “give back (as
something lost or taken away)” and “bring back into existence or use; reestablish.”214 Thus, the
contractual provision requires Lexington to restore to Ochsner what was lost by the roof collapse,
i.e. Ochsner’s condition that would have existed had the roof not collapsed, rather than restore its
business to its pre-loss condition as Lexington avers.
Neither case cited by Lexington supports its argument or changes the plain language of the
contract.215 For example, Lexington cites Safeguard Storage Properties, L.L.C v. Donahue Favret
Contractors, Inc., where the Louisiana Fourth Circuit held that “[t]he extended period begins when

212

Rec. Doc. 83-1 at 19, 21.

213

In re Katrina Canal Breaches Litig., 495 F.3d at 207; La. Civ. Code art. 2050 (1987) (“Each provision
in a contract must be interpreted in light of the other provisions so that each is given the meaning suggested by the
contract as a whole.”).
214

Logan v. United States, 552 U.S. 23, 31 n.3 (2007) (quoting Webster's Third New International
Dictionary 1936 (1993); American Heritage Dictionary 1486 (4th ed. 2000)).
215

Rec. Doc. 63-1 at 22.

34

the damaged properties are actually repaired . . . and ends when the business returns to pre-loss
conditions.”216 However, in that case the parties were disputing the length of time that was covered
by the extended period of indemnity in that specific contract, and not whether an extended
indemnity provision would apply to a new expansion of an existing business.217 Moreover, despite
the fact that the plaintiff was seeking coverage for lost business development opportunities for
future stores, the Louisiana Fourth Circuit found that the issue of when the extended period of
recovery began was a question of fact to be determined at trial, and not, as Lexington would have
this Court find, that such recovery is precluded because no business existed pre-loss. 218
Additionally, Lexington points to Home Indemnity Company v. Hyplains Beef, L.C., where a
federal court in the District of Kansas interpreted a mitigation provision of an insurance contract.219
However, in that case, the contract specified that a business must “resume” operations as quickly
as possible to mitigate its damages, which the court interpreted to only apply to complete stoppages
of operations and not slowdowns.220 Here, however, Ochsner’s contract specifies that additional
coverage would be provided to “restore” Ochsner to the condition that “would have existed had
no loss occurred.”
The parties also dispute whether Ochsner’s clinic should be considered an expansion of a
business, as Lexington avers,221 or if Ochsner’s claim involves Ochsner’s 70-year-old internal
medicine business and “Ochsner Clinic Foundation,” the insured business.222 However, even if

216

Id. (quoting 2010-0673 (La. App. 4 Cir. 3/31/11), 60 So. 3d 110, 122) (emphasis in original).

217

Safeguard Storage Props., 2010-0673, at *18–19, 60 So. 3d at 122–23.

218

Id.

219

Rec. Doc. 63-1 at 22 (citing 893 F. Supp. 987, 993 (D. Kan. 1995), aff'd, 89 F.3d 850 (10th Cir. 1996)).

220

Home Indem. Co., 893 F. Supp. at 993.

221

Rec. Doc. 63-1 at 22.

222

Rec. Doc. 83 at 22.

35

Lexington’s characterization of Ochsner’s clinic is correct, the Court notes that the insurance
contract does not contain any provision limiting its “Extended Period of Indemnity” clause to
interruptions of existing businesses only, as opposed to new expansions. 223 As stated supra,
“[e]xclusionary provisions in insurance contracts are strictly construed against the insurer,” and
Lexington does not present sufficient evidence that Ochsner’s damages claim for “ramp up” costs
falls under any exclusionary clause in the insurance contract.224 The terms of the contract clearly
contemplate that Ochsner can seek an additional coverage of 90 days after the clinic opened to
reach the condition that would have existed had no loss occurred, and Lexington has not presented
any evidence to demonstrate that Ochsner’s “ramp up” cost damages would constitute a windfall
beyond that condition or otherwise violate the insurance contract.
Thus, the Court finds that Ochsner has submitted sufficient evidence in support of its
claim that it is entitled to “ramp up” costs under the insurance contract to preclude summary
judgment on this issue. Lexington has failed to point to any evidence or provision of the contract
that excludes expansion of businesses from coverage under the “Extended Period of Indemnity”
clause. Therefore, the Court denies Lexington’s instant motion for partial summary judgment to
the extent that it seeks to dismiss Ochsner’s damages claim for “ramp up” costs.
4.

Ochsner’s Decision to Hire Doctors from Residency Programs

Fourth, Lexington avers that Ochsner seeks $3.8 million because the two new primary care
physicians it hired could not begin working until several months after the clinic opened when their
residency programs were finished, and Lexington asserts that summary judgment on this claim is
proper.225 According to Lexington, Ochsner had planned on opening the clinic in September 2012,

223

Rec. Doc. 83-1 at 10

224

Id. (quoting Ledbetter v. Concord Gen. Corp., 665 So.2d 1166, 1169 (La. 2006) (citing Garcia v. St.
Bernard Parish Sch. Bd., 576 So.2d 975, 976 (La. 1991))).
225

Rec. Doc. 63-1 at 3, 23–24.

36

which coincides with the normal completion of doctors’ summer residency programs, but failed to
hire doctors who could immediately start for the February 2014 opening of the clinic.226 Lexington
argues that this further delay was caused by Ochsner’s own business decision to hire doctors from
residency programs rather than ones who could start immediately in February 2014, and was not
caused by the roof collapse.227 Lexington points to Frank Bocklud’s deposition testimony, who
conceded that hiring physicians out of a residency program was “a choice [Ochsner] made,” and
to Gilberti’s deposition testimony, who stated that Ochsner had previously hired three physicians
outside residency programs.228 Lexington argues that Ochsner breached its duty to mitigate its
losses from the roof collapse when it “needlessly waited seven months to hire two [primary care
physicians] off the residency cycle,” causing its own delay.229 Lexington further contends that this
is only a hypothetical projection of what Ochsner says “would have happened,” whereas the
insurance policy only requires “due consideration” of Ochsner’s “actual experience” postopening.230
In response, Ochsner contends that its business model uses both new doctors outside
residency as well as more experienced doctors. 231 Ochsner cites to the deposition of Frank
Bocklud, who stated that out of the four physicians it hired, only two from the residency programs
were significantly delayed and thus included in its business loss calculation.232 Ochsner further
argues that the original opening date for the clinic, September 2012, was purposefully selected to

226

Id. at 23–24.

227

Id.

228

Id. at 24 (citing Rec. Doc. 63-4 at 36).

229

Id. at 25.

230

Id.

231

Rec. Doc. 83 at 22.

232

Id. at 21–22 & n.88 (citing Rec. Doc. 83-7 at 12).

37

coincide with the date that new doctors would finish their residency.233 Ochsner contends that the
all risks insurance policy requires “due consideration” of the actual experience before and after the
loss, which includes the “longstanding practice of hiring a majority of new internal medicine
physicians out of residency.”234 Ochsner points out that Michael Hulefeld testified that “there is a
national shortage of primary care doctors;”235 likewise, Charlotte Kohler, Ochsner’s healthcare
expert, testified that once a physician has been hired by a hospital, the hospital “[is] going to try
to keep that doctor, because they are hard in the marketplace. The marketplace—everybody wants
primary care [physicians] because of their revenue generating potential.”236 Additionally, Janie
Gilberti testified in her deposition that “existing doctors are harder to come by” and that existing
primary care physicians “are not looking to leave and abandon [their] patients.”237 Ochsner avers
that this difficulty in hiring experienced doctors is “one of the main reasons that doctors are hired
fresh out of residency.”238 Thus, Ochsner argues that delay caused the clinic to open during an
“off hiring cycle” time in February instead of September “prevented Ochsner from conducting its
business as it would in the absence of the loss.”239
Pursuant to Section V(A)(2) of the insurance policy, Ochsner may recover the “actual loss”
it suffered if it was “unable . . . [t]o continue business operations or services . . . obtainable from
other sources.”240 Lexington argues that this imposed on Ochsner a duty to mitigate its losses from

233

Id. at 22–23.

234

Id.

235

Id. at 23 (citing Rec. Doc. 83-10 at 9).

236

Id. (citing Rec. Doc. 83-13 at 3–4).

237

Rec. Doc. 83-12 at 9.

238

Rec. Doc. 83 at 23.

239

Id.

240

Rec. Doc. 83-1 at 16.

38

the roof collapse.241 Considering the foregoing evidence, the Court finds that both parties have
presented conflicting testimony regarding whether primary care physicians could have been
obtained from “other sources” besides residency programs. Ochsner presents expert and lay
testimony that hiring physicians from residency programs was part of its business model, that
hiring experienced physicians outside of residency programs was more difficult, and that there was
a national shortage of experienced doctors who could begin immediately. While Lexington argues
that Ochsner’s decision to hire physicians from residency programs was a business choice,
Lexington does not point to evidence that there were, in fact, other physicians that Ochsner could
have hired to start in February 2014 such that Ochsner could have mitigated its damages.
Thus, the Court finds that genuine disputes of material fact exist regarding whether
Ochsner is entitled to the additional business interruption loss damages for the delayed start of the
physicians hired from residency programs caused by the roof collapse. Lexington has not
demonstrated that there are no genuine disputes of material facts here and that Lexington is entitled
to summary judgment as a matter of law on this portion of Ochsner’s claim for business
interruption loss damages. Therefore, the Court denies Lexington’s instant motion for partial
summary judgment on part of Ochsner’s business interruption loss claim for the damages caused
by hiring physicians out of residency.242
5.

Ochsner’s Plan to Hire Additional Primary Care Physicians

Finally, Lexington argues that Ochsner is not entitled to recover any amount of business
losses for the first year of interruption from September 2012 to September 2013.243 Lexington
asserts that Ochsner’s claim is based on the assumption that the two additional physicians it hired

241

Rec. Doc. 63-1 at 25.

242

Rec. Doc. 63.

243

Rec. Doc. 63-1 at 25.

39

after the new clinic opened would have been available to work during the period of indemnity as
well, but that Ochsner has not produced any evidence that it would have been able to hire those
two additional doctors.244 Lexington avers that, after the collapse, Ochsner proceeded with its
plans to hire three primary care physicians, and instead housed them at the main facility, and that
Ochsner “was not in a position to hire any more physicians” until after the period of indemnity for
reasons not related to the collapse.245
Lexington points to the deposition of Janie Gilberti, Ochsner’s Vice President of Primary
Care and Hospital Medicine, who Lexington alleges “admitted [that] she had no additional
applicants to hire” and conceded that she never had to turn any physicians away or rescind any
offers because of the building collapse.246 Lexington also asserts that Ochsner’s accounting expert,
Frank Bocklud, testified in his deposition that he was not aware of any hiring freeze caused by the
collapse.247 Furthermore, Lexington points to the deposition testimony of Michael Hulefeld, who
stated that Ochsner had only planned to hire three primary care physicians for the first year of the
new clinic.248 Lexington also points to an internal email exchange with Janie Gilberti, who said
that Ochsner “did not delay any new hires because we had signed contracts” and that she did not
think “we lost revenue because we were able to find a space to move the physicians.”249 Thus,
according to Lexington, Ochsner could not have lost any revenue in the first year, because it fully

244

Id.

245

Id.

246

Id. at 26 (citing Rec. Doc. 63-2 at 46–48, 50–51).

247

Id. (citing Rec. Doc. 63-4 at 42, 45).

248

Id.

249

Id. at 6.

40

expanded its primary care practice as originally planned, despite the partial collapse of the new
building.250
In response, Ochsner points out that Gilberti testified in her deposition that she “had to stall
[her] recruitment because [she] did not have space to put physicians” after the roof collapsed on
the Ochsner’s new clinic.251 In that deposition, Gilberti further stated that she “did not rescind an
offer,” but that she “did not recruit, though, until [she] knew the space was going to come
available.” 252 Ochsner avers that “[t]his stall meant that Ochsner suffered losses to the
business.”253 Ochsner further contends that George Panzeca, its accounting expert, determined
that Ochsner “sustained a net loss during the period of interruption of September 2012 through the
end of January 2014.”254 Moreover, Ochsner points out that Hulefeld testified that he believed
there was a “revenue delay” because Ochsner “didn’t have the space to hire people until the
building opened.”255
Based on the conflicting evidence presented by both parties, the Court finds that genuine
disputes of material fact exist regarding whether Ochsner suffered any business interruption losses
for the first year of interruption. Lexington has not demonstrated that there are no genuine disputes
of material facts here and that Lexington is entitled to summary judgment as a matter of law on
this portion of Ochsner’s claim for business interruption loss damages. To withstand this motion

250

Id. at 3.

251

Rec. Doc. 83 at 23; Rec. Doc. 83-13 at 8.

252

Rec. Doc. 63-2 at 48.

253

Rec. Doc. 83 at 24.

254

Id.

255

Id. at 5.

41

for summary judgment, Ochsner was only required to show that there is a genuine issue for trial
by presenting evidence of specific facts that it suffered business interruption losses during the first
year of interruption; Ochsner has done so here. Therefore, the Court denies Lexington’s instant
motion for partial summary judgment on part of Ochsner’s business interruption loss claim for the
first year of interruption.256
IV. Conclusion
Based on the foregoing, the Court concludes that there are genuine disputes of material fact
precluding summary judgment regarding all portions of Ochsner’s claim for business interruption
loss damages. The Court finds that Ochsner has presented enough evidence to create a genuine
dispute of material fact regarding its “downstream revenue” damages claim, its comparison of
revenues in Timeframe 1 and Timeframe 2, its “ramp up” cost damages claim, its plan to hire
additional primary care physicians in the first year the clinic would have opened, and its decision
to hire physicians out of residency programs. Lexington has not pointed to sufficient evidence for
the Court to find that, as a matter of law, Ochsner’s business interruption loss damages claim is
too speculative and must be dismissed. Finally, the Court finds that the “Extended Period of
Indemnity” provision allows Ochsner to assert its claim for “ramp up” cost damages such that
Ochsner reaches the condition that would have existed had no loss occurred. In sum, the Court
finds that there are genuine disputes of material fact for all of Ochsner’s business interruption loss
damages, and thus denies Lexington’s instant motion for partial summary judgment.
Accordingly,

256

Rec. Doc. 63.

42

IT IS HEREBY ORDERED that Lexington’s “Motion for Summary Judgment on All or
Certain Portions of Plaintiff’s Claim for Business Interruption Damages”257 is DENIED.

3rd
NEW ORLEANS, LOUISIANA, this ______ day of January, 2017.

________________________________
NANNETTE JOLIVETTE BROWN
UNITED STATES DISTRICT JUDGE

257

Rec. Doc. 63.

43