Ford of Slidell, LLC et al v. Starr Surplus Lines Insurance Company
ORDER that Defendant Starr Surplus Lines Insurance Companys Rule 12(b)(6) Motion to Dismiss is GRANTED. Signed by Chief Judge Nannette Jolivette Brown on 11/18/2021. (caa)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
FORD OF SLIDELL, LLC, et al.
CASE NO. 21-858
STARR SURPLUS LINES INSURANCE CO.
This litigation stems from a denial of insurance coverage for damages allegedly arising
from the COVID-19 pandemic. Pending before the Court is Defendant Starr Surplus Lines
Insurance Company’s (“Starr”) “Rule 12(b)(6) Motion to Dismiss.”1 Plaintiffs Ford of Slidell,
LLC, Nissan of Slidell, LLC, Supreme Automotive Group, LLC, Supreme Chevrolet, LLC,
Supreme Domestics, LLC, Supreme Imports, LLC, and Kramor of Plaquemine, LLC
(collectively, “Plaintiffs”) oppose the motion.2 Considering the motion, the memoranda in support
and in opposition, the arguments made at oral argument, the record, and the applicable law, the
Court grants the motion.
In this litigation, Plaintiffs—several car dealerships in Louisiana—allege that on
November 27, 2019, they entered into an all-risk commercial insurance policy (the “Policy”) with
Starr to cover the car dealerships and their business locations for “front-end sales, parts, service,
Rec. Doc. 13.
Rec. Doc. 15.
and body shop departments or services.”3 According to Plaintiffs, the Policy provided “coverage
for business interruption, extra expenses, and civil authority losses” from November 27, 2019
through November 27, 2020.4 During this time, Plaintiffs allegedly “paid the six-figure premium
due which [Starr] happily accepted.”5 Plaintiffs allege that under the Policy, coverage extended
to “all risks unless expressly excluded or limited by language in the body of the policy or through
a separate exclusion endorsement.”6 Plaintiffs highlight two provisions of the Policy. First, the
“business interruption” provision of the Policy provides for coverage in the case of “business
interruption and any actual loss resulting from necessary interruption of Plaintiffs’ normal
business operations caused by direct physical loss or damage to real or personal property” (the
“Business Interruption” provision). Second, the “extra expense” provision provides coverage for
“expenses related to reducing loss, and for extra expenses” incurred following direct physical loss
or damage of the properties (the “Extra Expense” provision).7
In March and April 2020, in response to the COVID-19 pandemic, “federal, state, and
local authorities issued orders and guidelines for business[es] and people, that directly and
indirectly applied to Plaintiffs” (the “Emergency Orders”).8 Plaintiffs alleged that due to the
pandemic they “began suffering business interruption losses and extra expenses in March 2020.”9
Plaintiffs further claim that the COVID-19 virus was either present at the covered locations or
Rec. Doc. 5 at 4.
Id. at 4, 7.
Id. at 7.
Id. at 8.
Id. at 8–10.
Id. at 11–14.
Id. at 14.
there was an “imminent risk of on-site viral presence” during the pandemic as evidenced by “the
level and reach of the pandemic in Southeast Louisiana,” and because employees working at the
dealerships were diagnosed with COVID-19.10 Plaintiffs aver that in response to the pandemic
they “followed orders and guidelines to reduce the presence of the virus, including reducing
working hours for non-essential personnel and for support staff, and limiting daily hours of
operation, and controlling all work and business spaces so that there would be fewer people in all
areas and departments” and “performed extensive cleaning and disinfecting of all premises.”11
Plaintiffs also acknowledge that their premises remained open during the COVID-19 pandemic
because they were classified as essential businesses.12
Plaintiffs claim that during this time they suffered a loss of business income and extra
expenses, which Plaintiffs allege should be covered under the terms of the Policy’s Business
Interruption and Extra Expenses provisions.13 Nevertheless, Plaintiffs allege that Starr denied
coverage, claiming that (i) the Policy’s Pollution and Contamination Exclusion Clause (the
“Contamination Clause”) excludes coverage for Plaintiffs’ claim; (ii) Plaintiffs had not suffered
physical loss as required under the terms of the Policy; and (iii) Plaintiffs were not otherwise
covered under the Policy, including under the Civil Authority provision and Ingress/Egress
provision.14 Plaintiffs contend that Starr’s denial of coverage represents a breach of the Policy
and a breach of the duty of good faith, as well as statutory duties of the insurer under Louisiana
Id. at 15.
Id. at 14.
Id. at 15, 17.
Id. at 18–19.
law.15 In addition to damages, Plaintiffs seek a judicial declaration as to its rights and Starr’s
obligations under the Policy.16
On April 29, 2021, Plaintiffs filed a complaint in this Court, asserting diversity jurisdiction
pursuant to Title 28, United States Code, Section 1332.17 On May 10, 2021, Plaintiffs filed an
On July 29, 2021, Starr filed the instant motion to dismiss.19 Plaintiffs filed an opposition
to the instant motion on August 17, 2021.20 The Court held oral argument on the motion on August
25, 2021. On August 25, 2021, with leave of Court, Starr filed a reply brief in further support of
the motion to dismiss.21
II. Parties’ Arguments
Starr’s Arguments in Support of the Motion to Dismiss
Starr moves the Court to dismiss Plaintiffs’ claims pursuant to Federal Rule of Civil
Procedure 12(b)(6), arguing that the Policy did not provide coverage for any of Plaintiffs’
COVID-related losses. Starr makes two principal arguments: (i) Plaintiffs suffered no “direct
physical loss or damage” as required for coverage, and (ii) Plaintiffs’ claims were excluded from
Id. at 21–24.
Id. at 21, 24.
Rec. Doc. 1.
Rec. Doc. 5.
Rec. Doc. 13.
Rec. Doc. 15.
Rec. Doc. 22.
coverage under the Policy’s Contamination Clause.22 Given that the Policy did not provide
coverage for Plaintiffs’ COVID-related losses, Starr contends that Plaintiffs’ claims for bad faith
claims processing necessarily fail.23
Physical Loss or Damage
Starr first argues that Plaintiffs do not allege losses that are covered under the terms of the
Policy.24 Starr claims that the Policy unambiguously covers only “direct physical loss or damage”
to property.25 According to Starr, “direct physical loss or damage” requires a “distinct,
demonstrable, physical alteration of the property” or “actual physical change or injury to the
property.”26 Starr claims that Plaintiffs, in alluding to the presence of COVID-19 at their
dealerships and the effect of the Emergency Orders on their business, have not stated a claim for
“physical loss or damage” to the property such that they would be covered because “COVID
damages people, not property.”27 Starr contends that Plaintiffs’ attempt at broadening the
definition of “direct physical loss” to include the possible presence of the virus and the
implementation of the Emergency Orders has been “repeatedly rejected” by recent court
Since Plaintiffs have failed to allege “direct physical loss or damage,” Starr argues that
Rec. Doc. 13.
Rec. Doc. 13-1 at 24–25.
Id. at 6.
Id. at 6–8, 12–14, 17–21.
Id. at 9–10.
Id. at 9–10, 14.
Id. at 14–17.
the Policy does not cover Plaintiffs’ claims.29 Starr alleges that the each provision cited by
Plaintiffs––the Business Interruption provision, the Extra Expenses provision, the Civil Authority
Provision, and the Ingress/Egress provision––require direct physical loss or damage.30 Moreover,
Starr claims that the Civil Authority Provision is inapplicable here because it only applies “where
access to an insured’s property is prevented or prohibited by an order of civil authority issued as
a direct result of physical damage to other premises in the proximity of the insured’s property.”31
Starr argues that Plaintiffs have failed to state a claim for such coverage in this case because the
Emergency Orders were “preventative efforts to prevent the general spread of the COVID-19
virus, and not in response to any specific physical damage to property.”32
Alternatively, Starr argues that even if this Court were to find that Plaintiffs had stated a
claim for direct physical loss and were therefore covered under the Policy, the Policy’s
Contamination Clause precludes coverage.33 Starr highlights the language of the Contamination
Clause, which provides that there is no coverage for loss or damage resulting from
“contamination.”34 Starr further highlights that the Policy defines “contaminants” to include a
“virus,” such as the COVID-19 virus.35 Considering that Plaintiffs’ claims “arise clearly and
entirely from” the COVID-19 virus, Starr asserts that Plaintiffs’ allegations fall squarely within
Id. at 17.
Id. at 18.
Id. at 19.
Id. at 19–21.
Id. at 21.
the unambiguous provisions of the Contamination Exclusion” and are excluded from coverage.36
Starr further clarifies that they have not and do not rely upon the “pollution exclusion” provision
of the Policy.37
Plaintiffs’ Arguments in Opposition to the Motion to Dismiss
In opposition, Plaintiffs dispute both of Starr’s arguments for dismissal.
Direct Physical Loss or Damage
First, Plaintiffs contend that they have alleged “direct physical loss or damage” sufficient
for coverage under the Policy.38 Plaintiffs argue that they have adequately alleged that the
presence of COVID-19 within the insured premises, along with the Emergency Orders restricting
the covered businesses, caused “direct physical loss or damage” as required for business
interruption coverage.39 Plaintiffs claim that the Emergency Orders caused property loss by
“restricting the services they could provide and limiting access to their locations.”40 Plaintiffs
further argue that the presence of COVID-19 on the insured premises “caused property damage
by turning highly occupied buildings and small spaces into tangible virus incubators potentially
or actually super-spreading the virus from asymptomatic patrons and employees to building
surfaces and building air systems to a steady stream of unsuspecting people who, in turn, become
infected and contributed their own COVID-19 virus to that building, or another heavily trafficked
Id. at 24.
Id. at 22–23.
Rec. Doc. 15 at 10–11.
Id. at 11.
building, to continue and expand the cycle of infection.”41 Plaintiffs allege that the presence of
COVID-19 made their buildings “uninhabitable and unusable” until they were cleaned by
Plaintiffs.42 Plaintiffs contend that they have therefore adequately alleged property loss or damage
that “resulted in actual loss of business income and extra expenses” to show coverage under the
Plaintiffs further claim that Starr’s argument that Plaintiffs failed to allege “direct physical
loss or damage” at most shows that the language of the Policy is ambiguous, and Plaintiffs argue
that ambiguity “should be construed in favor of coverage.”44 Plaintiffs aver that using canons of
statutory interpretation, both “direct physical loss” and “damage” within the Policy’s phrasing of
“direct physical loss or damage” must be given effect.45 Plaintiffs contend that under the plain
meaning and reasonable expectations of insurance policy purchasers, the dictionary definition,
and Louisiana precedent, structural damage is not required for there to be a “physical loss.”46
Plaintiffs argue that instead, “the inability to use the property due to a physical condition—here,
the actual and/or threatened presence of COVID-19 and the physical limitations on the property
as the result of the emergency orders and guidance—is physical loss covered under the Policy.”47
Further, Plaintiffs seek to distinguish cases in which courts found that losses due to
COVID-19 did not constitute “physical loss or damage” by arguing that, unlike such cases, they
Id. at 11–12.
Id. at 12.
Id. at 14.
Id. at 14–19.
Id. at 16.
have adequately alleged both the existence of the Emergency Orders and the presence of COVID19 on the insured property.48
Plaintiffs further argue that the Contamination Clause does not preclude coverage.49
Plaintiffs contend that this clause is really a “Pollution and Contamination Exclusion Clause.”50
Under the Policy, Plaintiffs claim that “contamination” is not defined; instead, a definition is
provided only for “Pollutants or Contaminants.”51 While the definition for Pollutants and
Contaminants includes “virus,” Plaintiffs argue that ‘contamination’ is not a defined term and,
thus, cannot be read to exclude coverage.52 Moreover, Plaintiffs argue that to the extent Starr
seeks to invoke the “pollution” portion of the exclusion, such exclusion does not apply to the
COVID-19 virus under the test set out by the Louisiana Supreme Court in Doerr v. Mobile Oil
Starr’s Arguments in Further Support of the Motion to Dismiss
Direct Physical Loss of Damage
In reply, Starr again argues that “direct physical loss or damage” requires a physical
alteration of property.54 Starr contends that the presence of COVID-19 does not equate to physical
Id. at 20–27.
Id. at 27.
Id. at 28.
Id. at 28–29.
Id. at 30 (citing Doerr, 2000-0947 (La. 12/19/00); 774 So. 2d 119, 135, opinion corrected on reh’g, 20000947 (La. 3/16/01); 782 So. 2d 573)).
Rec. Doc. 22 at 5.
damage, as Plaintiffs have failed to allege how the insured properties were damaged or physically
altered.55 Starr asserts that Louisiana courts have routinely held that the presence of COVID-19
does not constitute physical loss.56 Starr further argues that Plaintiffs’ attempts at distinguishing
“damage” and “loss” is unpersuasive and has been rejected by other Louisiana courts. 57 Starr
contends that the language of the policy makes clear that Plaintiffs’ reading of the Policy to not
require any physical alteration is incorrect.58
Starr argues that Plaintiffs are likewise not entitled to coverage under the Civil Authority
provision of the Policy.59 Starr highlights that Plaintiffs have not alleged damage to any property
within one mile of an insured location, as required by the Civil Authority provision, and have
admitted that their business remained open during the pandemic.60 Additionally, Starr contends
that the Policy is not ambiguous.61
In the event the Court does find that Plaintiffs have alleged physical loss or damage, Starr
argues that Plaintiffs’ claims are still excluded from coverage under the Policy’s Contamination
Clause.62 Starr contends that the Clause excludes contamination, including viruses .63 Starr asserts
Id. at 6–7.
Id. at 7.
Id. at 9.
Id. at 10–11.
Id. at 11.
Id. at 11–12.
Id. at 12–14.
Id. at 14.
Id. at 14–15.
that Plaintiffs’ attempt at distinguishing between “contamination” and “contaminant” is
unpersuasive, and argues that Doerr is inapplicable in this case because the “contamination”
exclusion is separate and distinct from the pollution exclusion.64
III. Legal Standards
Legal Standard for Rule 12(b)(6) Motion to Dismiss
Federal Rule of Civil Procedure 12(b)(6) provides that an action may be dismissed “for
failure to state a claim upon which relief can be granted.”65 A motion to dismiss for failure to
state a claim is “viewed with disfavor and is rarely granted.”66 “To survive a motion to dismiss,
a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim for relief that
is plausible on its face.’”67 “Factual allegations must be enough to raise a right to relief above the
speculative level.”68 A claim is facially plausible when the plaintiff has pleaded facts that allow
the court to “draw a reasonable inference that the defendant is liable for the misconduct alleged.”69
On a motion to dismiss, asserted claims are liberally construed in favor of the claimant,
and all facts pleaded are taken as true.70 However, although required to accept all “well-pleaded
facts” as true, a court is not required to accept legal conclusions as true. 71 “While legal
Id. at 15–16.
Fed. R. Civ. P. 12(b)(6).
Kaiser Aluminum & Chem. Sales, Inc. v. Avondale Shipyards, Inc., 677 F.2d 1045, 1050 (5th Cir. 1982).
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
Twombly, 550 U.S. at 556.
Id. at 570.
Leatherman v. Tarrant Cnty. Narcotics Intelligence & Coordination Unit, 507 U.S. 163, 164 (1993); see
also Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322–23 (2007).
Iqbal, 556 U.S. at 677–78.
conclusions can provide the framework of a complaint, they must be supported by factual
allegations.”72 Similarly, “[t]hreadbare recitals of the elements of a cause of action, supported by
mere conclusory statements” will not suffice.73
The complaint need not contain detailed factual allegations, but it must offer more than
mere labels, legal conclusions, or formulaic recitations of the elements of a cause of action.74 That
is, the complaint must offer more than an “unadorned, the defendant-unlawfully-harmed-me
accusation.”75 From the face of the complaint, there must be enough factual matter to raise a
reasonable expectation that discovery will reveal evidence as to each element of the asserted
claims.76 If factual allegations are insufficient to raise a right to relief above the speculative level,
or if it is apparent from the face of the complaint that there is an “insuperable” bar to relief, the
claim must be dismissed.77
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.”78 “The Louisiana Civil Code provides that ‘[t]he judiciary’s role in interpreting insurance
Id. at 679.
Id. at 678.
Lormand v. U.S. Unwired, Inc., 565 F.3d 228, 257 (5th Cir. 2009).
Moore v. Metro. Human Serv. Dep’t, No. 09-6470, 2010 WL 1462224, at *2 (E.D. La. Apr. 8, 2010)
(Vance, J.) (citing Jones v. Bock, 549 U.S. 199, 215 (2007)); Carbe v. Lappin, 492 F.3d 325, 328 n.9 (5th Cir. 2007).
In re Katrina Canal Breaches Litig., 495 F.3d 191, 206 (5th Cir. 2007) (quoting Cadwallader v. Allstate
Ins. Co., No. 2002-1637, p. 3 (La. 6/27/03); 848 So. 2d 577, 580). See also Mark v. Sunshine Plaza, Inc., No. 16455, 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)) (quotation marks omitted) (alterations omitted).
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.’”79 “Interpretation of an
insurance contract generally involves a question of law.”80
If the contract is clear and unambiguous and does not have absurd consequences, the court
applies the ordinary meaning of the contractual language.81 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.”82 “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 [to] achieve an absurd
conclusion.”83 “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.”84
In the Amended Complaint, Plaintiffs assert claims for breach of contract and a breach of
the duty of good faith and statutory duties of the insurer under Louisiana law.85 Specifically,
Wisznia Co., 759 F.3d at 448–49 (quoting Mayo v. State Farm Mut. Auto. Ins. Co., No. 2003-1801, p. 3
(La. 2/25/04); 869 So. 2d 96, 99). See also La. Civ. Code arts. 2045, 2047.
In re Katrina Canal Breaches Litig., 495 F.3d at 206 (citing Bonin v. Westport Ins. Corp., No. 2005-0886,
p. 4 (La. 5/17/06); 930 So. 2d 906, 910).
Prejean v. Guillory, 2010-0740, p. 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, C.J.).
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)).
Id. at 208 (quoting Cadwallader, No. 2002-1637 at p. 3; 848 So. 2d at 580).
Rec. Doc. 5.
Plaintiffs allege that Starr breached its insurance contract with Plaintiffs by denying coverage for
losses Plaintiffs sustained as a result of the COVID-19 pandemic.86 In the instant motion, Starr
argues that Plaintiffs’ claims should be dismissed for two main reasons: (1) Plaintiffs do not allege
“direct physical loss or damage” to the insured property as required for coverage under the
provisions of the Policy; and (2) the Policy’s Contamination Clause precludes coverage for the
alleged losses.87 Each argument is addressed in turn. In analyzing these issues, the Court applies
Louisiana law as required by the Erie/Klaxon doctrine.88
Whether Plaintiffs Have Alleged Direct Physical Loss to the Covered Property
In the instant motion, Starr argues that Plaintiffs have failed to allege coverage under the
terms of the Policy because the Emergency Orders and the presence of COVID-19 on Plaintiffs’
property do not qualify as “direct physical loss or damage.”89 In opposition, Plaintiffs contend
that they have alleged physical loss or damage through the presence of COVID-19 on their
property and on account of the Emergency Orders.90 Plaintiffs also argue that any ambiguity over
whether effects of the pandemic constitute “direct physical loss or damage” should be construed
in favor of coverage.91
See generally Rec. Doc. 13.
See Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941); Sorrels Steel Co. v. Great Sw. Corp.,
906 F.2d 158, 167 (5th Cir 1990) (“A federal court sitting in diversity follows the choice of law rules of the state in
which it sits.”). “Under the Louisiana choice-of-law regime, the law of the state where the insurance contract was
issued and executed generally governs the interpretation of that contract.” Woodfield v. Bowman, 193 F.3d 354, 360
(5th Cir. 1999). Here, the Policy was issued under the Insurance Code of the State of Louisiana. Rec. Doc. 5-1 at 11.
In addition, the parties agree that Louisiana law governs the instant dispute. Rec. Doc. 13-1 at 12; Rec. Doc. 15 at
Rec. Doc. 13-1 at 12.
Rec. Doc. 15 at 10–12.
The Policy states, in pertinent part:
This POLICY covers the property insured hereunder against all risks of direct
physical loss or damage to covered property while at INSURED LOCATIONS
occurring during the Term of this POLICY, except as hereinafter excluded or
Both the Business Interruption provision and Extra Expenses provision, relied on by Plaintiffs
to show coverage, likewise provide coverage for “direct physical loss or damage.”93 The Policy
does not define “direct physical loss or damage.” Starr argues that direct physical loss or damage
requires a “distinct, demonstrable, physical alteration of the property” or “any actual physical
change or injury to the property.”94
In opposition, Plaintiffs urge a broader interpretation of “physical loss or damage.”
Plaintiffs argue that they have adequately alleged direct physical loss or damage because the
Emergency Orders caused property loss by “restricting the services they could provide and
limiting access to their locations” and because the presence of COVID-19 on the insured
premises caused property damage by making Plaintiffs’ buildings “uninhabitable and unusable”
until they were cleaned by Plaintiffs.95 Moreover, Plaintiffs argue that “physical loss or damage”
does not require structural damage.96 Plaintiffs argue that any ambiguities surrounding the
meaning of “physical loss or damage” should be construed in favor of coverage.97
However, Plaintiffs’ attempts at expanding the definition of “physical loss or damage” to
Rec. Doc. 5-1 at 18 (emphasis added).
Id. at 35, 58.
Rec. Doc. 13-1 at 14.
Rec. Doc. 15 at 11–12.
Id. at 13–17.
Id. at 12.
include non-structural damage has already been denied by the Fifth Circuit and other courts in
this district. Fifth Circuit precedent is clear that tangible damages are necessary to satisfy the
“physical loss or damage” language of a policy, even when a policy provides coverage in cases
of physical loss or damage. In Trinity Industries, Inc. v. Insurance Co. of North America, the Fifth
Circuit, applying Louisiana law, found that “the language ‘physical loss or damage’ strongly
implies that there was an initial satisfactory state that was changed by some external event into
an unsatisfactory state—for example, the car was undamaged before the collision dented the
bumper.”98 Similarly, in Hartford Insurance Co. of Midwest v. Mississippi Valley Gas Co., the
Fifth Circuit, analyzing a policy that covered only “direct physical loss of or damage to” insured
property, found that “[t]he requirement that the loss be ‘physical,’ given the ordinary definition
of that term, is widely held to exclude alleged losses that are intangible or incorporeal and,
thereby, to preclude any claim against the property insurer when the insured merely suffers a
detrimental economic impact unaccompanied by a distinct, demonstrable, physical alteration of
Numerous district courts have likewise read this requirement for tangible damages to
apply in the context of COVID-19 closure orders. For example, in Q Clothier New Orleans, LLC
v. Twin City Fire Insurance Co., the plaintiff-companies sought coverage under an insurance
policy which, like the Policy here, required “direct physical loss of or physical damage to
property.”100 The plaintiffs argued that they incurred losses due to the mandatory closure of their
916 F.2d 267, 270–71 (5th Cir. 1990).
181 F. App’x 465, 470 (5th Cir. 2006) (quoting 10A Couch on Ins. § 148:46) (applying Mississippi law);
see also Diesel Barbershop, LLC v. State Farm Lloyds, No. 20-461, 2020 WL 4724305, at *5 (W.D. Tex. Aug. 13,
2020) (“It appears that within our Circuit, the loss needs to have been a distinct, demonstrable physical alteration of
the property.”) (internal quotation omitted).
No. 20-1470, 2021 WL 1600247, at *2 (E.D. La. Apr. 23, 2021) (Lemelle, J.).
businesses in response to the COVID-19 pandemic, and asserted coverage under the equivalent
business interruption and extra expense provisions of their policy.101 The district court dismissed
the plaintiffs’ claims, holding that the plaintiffs’ claim that “the pandemic and the governor’s
stay-at-home order caused damage to its property which cannot be used for its intended use,”
failed to state a claim for physical loss or damage. 102 The court held that “[a]bsent evidence that
[their] property sustained physical and demonstrable alteration, [the plaintiffs’] damages do not
meet the Fifth Circuit’s definition of covered physical loss or damage.”103 Although Q Clothier
is not binding on this Court, it serves as persuasive authority, especially given that Plaintiffs’
claims here are even weaker than those of the plaintiffs in Q Clothier. Here, Plaintiffs’ businesses
were not closed due to the Emergency Orders. Instead, they “remained open as businesses
determined essential by the governing authorities.”104 Plaintiffs, therefore, did not suffer
physical loss or damage due to the Emergency Orders.105
While Plaintiffs attempt to distinguish this case by highlighting that COVID-19 was
actually present on the insured premises, this too has been deemed by courts to be insufficient to
allege physical loss or damage. For example, in Coleman E. Adler & Sons, LLC v. Axis Surplus
Id. at *1.
Id. at *7.
Rec. Doc. 5 at 14.
Although not binding on this Court, numerous other district courts have likewise held. See, e.g., Pierre
v. Transp. Ins. Co., No. 20-1660, 2021 WL 2754651, at *1 (W.D. La. July 1, 2021) (“[T]here is a universe of
Louisiana jurisprudence concerning pandemic-related business interruption claims wherein the courts have held that
COVID-19 pandemic does not cause direct physical loss of or damage to property.”); Terry Black's Barbecue, LLC
v. State Auto. Mut. Ins. Co., 514 F. Supp. 3d 896, 906 (W.D. Tex. 2021) (“Plaintiffs’ businesses, moreover, were
never shut down as a result of the civil authority orders. They continued to offer take-out services and, subsequently,
limited capacity dine-in services. . . . Accordingly, Plaintiffs have not alleged a direct physical loss of their property
from the civil authority orders.”). In fact, this Court cannot find a single case from within the Fifth Circuit in which
a court held differently.
Insurance Co., the plaintiffs, owners of jewelry stores and a reception venue in Louisiana, argued
that they were covered under their insurance policy, which required “direct physical loss of or
damage to” the insured property, because COVID-19 was present in the insured locations and
prevented the use of the property.106 Another judge in this district rejected the plaintiffs’ claims,
holding that since the plaintiffs had not “shown any evidence that their properties have suffered
from ‘physical and demonstrable alteration,’ [the plaintiffs had] not met the Fifth Circuit’s
definition of ‘physical loss or damage’” because “COVID-19 harms people, not property.”107
Likewise, in Q Clothier, the district court noted that the possible presence of COVID-19 did not
constitute “direct physical loss” because “effective health measures such as social distancing,
capacity limitations, curbside pickup alternatives, and mask wearing allow for businesses to
safely continue operation.”108 Again, while neither case is binding on this Court, each is
persuasive given the similarities to this matter.
Finally, Plaintiffs’ arguments regarding prior Louisiana cases in which courts found
physical loss based on the presence of a non-COVID-19 potentially harmful material on the
covered premises are unavailing in the context of COVID-19. For example, Plaintiffs cite to In
No. 21-648, 2021 WL 2476867, at *1 (E.D. La. June 17, 2021) (Barbier, J.).
Id. at *2.
2021 WL 1600247 at *7. See also Laser & Surgery Ctr. of Acadiana LLC v. Ohio Cas. Ins. Co., No. 211236, 2021 WL 2702123, at *3 (W.D. La. June 14, 2021), report and recommendation adopted, No. 21-1236, 2021
WL 2697990 (W.D. La. June 30, 2021) (“This Court agrees with the foregoing line of cases that the presence of the
virus does not constitute physical loss or damage sufficient to trigger coverage.”); Lafayette Bone & Joint Clinic,
Inc. v. Transp. Ins. Co., No. 21-317, 2021 WL 1740466, at *3 (W.D. La. May 3, 2021) (“[E]very district court within
the circuit to address the issue has determined that a building’s exposure to the coronavirus does not meet this
requirement.”); Terry Black’s Barbecue, 514 F. Supp. 3d at 907 (“Even assuming that the virus that causes COVID19 was present at Plaintiffs’ properties, it would not constitute the direct physical loss or damage required to trigger
coverage under the Policy because the virus can be eliminated. The virus does not threaten the structures covered by
property insurance policies, and can be removed from surfaces with routine cleaning and disinfectant.”); Vandelay
Hosp. Grp. LP v. Cincinnati Ins. Co., No. 3:20-1348-D, 2021 WL 2936066, at *6 (N.D. Tex. July 13, 2021) (“Even
if Vandelay has sufficiently alleged that COVID-19 was present in its restaurants, it has not adequately alleged that
COVID-19 caused physical damage or loss.”).
re Chinese Manufactured Drywall Products Liability Litigation to argue that the presence of a
potentially injurious material in a building may constitute a covered physical loss.109 In Chinese
Drywall, a district judge in the Eastern District of Louisiana found that the plaintiffs had suffered
“direct physical loss” when drywall rendered their homes “unusable and uninhabitable” due to
“damage to the electrical wiring, appliances, and devices, as well as the ever-present sulfur
gases.”110 Here, however, Plaintiffs have not alleged that COVID-19 rendered the insured
premises unusable and uninhabitable. Plaintiffs were never forced to close their businesses due
to the Emergency Orders, and Plaintiffs have failed to allege any facts supporting the idea that
the presence of COVID-19, for which Plaintiffs “performed extensive cleaning and disinfecting
of all premises,”111 made the insured premises useless, as “the virus can be eliminated.”112
Although it is not clear that Plaintiffs are asserting a claim for coverage under the Civil
Authority Provision of the Policy based on the Emergency Orders, to the extent such a claim
exists, it too should be dismissed. The Civil Authority Provision provides:
This POLICY is extended to include, starting at the time of physical loss or damage,
the actual loss sustained by the Insured, resulting directly from an interruption of
business as covered hereunder, during the length of time, not exceeding the number
of days shown under TIME LIMITS stated in the Declarations, when, as a direct
result of damage to or destruction of property within one (1) statute mile of an
INSURED LOCATION by the peril(s) insured against, access to such described
premises is specifically prohibited by order of civil or military authority.113
There are several reasons this provision does not apply to Plaintiffs’ claims based on the
Rec. Doc. 15 at 17–18 (citing In re Chinese Manufactured Drywall Prods. Liab. Litig., 759 F. Supp. 2d
822, 832 (E.D. La. 2010) (Fallon, J.)).
759 F. Supp. 2d at 832–34.
Rec. Doc. 5 at 15.
Terry Black’s Barbecue, 514 F. Supp. 3d at 907.
See Rec. Doc. 5-1 at 36.
Emergency Orders: (i) Plaintiffs were never prohibited from accessing the insured premises as
they were deemed essential businesses exempt from COVID-related closures; (ii) Plaintiffs do
not state a claim for damage to or destruction of property within one mile of the insured premises;
and (iii) Plaintiffs have not claimed that the Emergency Orders were the result of damage to a
nearby property.114 Accordingly, Plaintiffs have not stated a claim for coverage under the Civil
For these reasons, Plaintiffs do not sufficiently allege direct physical loss or damage to
the covered properties as required under the relevant provisions of the Policy and therefore, were
not covered under the Policy for their COVID-19 related losses.
Whether the Contamination Clause of the Policy Excludes Coverage for Plaintiffs’
In the alternative, Starr argues that the Contamination Clause of the Policy bars insurance
coverage for Plaintiffs’ alleged losses because the Clause specifically excludes from coverage
losses due to a “virus.”115 In opposition, Plaintiffs contend that the Contamination Clause does
not bar coverage.116 Plaintiffs acknowledge that “Pollutants or Contaminants” is defined by the
Policy to include viruses.117 However, Plaintiffs argue that the Contamination Clause only
excludes from coverage “contamination,” an undefined term, not contaminants.118
See, e.g., Padgett v. Transp. Ins. Co., No. 21-1086, 2021 WL 2559597, at *4 (W.D. La. June 1, 2021),
report and recommendation adopted, No. 21-1086, 2021 WL 2555377 (W.D. La. June 22, 2021) (holding that a civil
authority provision did not provide coverage for COVID-19 “because Governor Edwards’s stay-home orders did not
prohibit the plaintiffs from accessing their premises and/or because the plaintiffs could not show physical loss or
Rec. Doc. 13-1 at 21–24.
Rec. Doc. 15 at 28.
Id. at 29.
Id. at 28–29.
Because the Court finds that Plaintiffs do not adequately allege direct physical loss or
damage to the covered properties, it need not determine whether the Contamination Clause
precludes coverage in this case. However, assuming arguendo that the Court did find that
Plaintiffs alleged direct physical loss to the covered premises, the plain language of the
Contamination Clause precludes Plaintiffs’ claim for coverage.
The Contamination Clause provides:
This POLICY does not insure against loss or damage caused by or resulting from
any of the following regardless of any cause or event contributing concurrently or
in any other sequence to the loss:
2. the actual or threatened release, discharge, dispersal, migration or
seepage of POLLUTANTS at an INSURED LOCATION during the
Term of this POLICY unless the release, discharge, dispersal,
migration, or seepage is caused by fire, lightning, leakage from fire
protective equipment, explosion, aircraft, vehicles, smoke, riot, civil
commotion or vandalism. This POLICY does not insure off-premises
cleanup costs arising from any cause and the coverage afforded by
this clause shall not be construed otherwise.119
The Policy later defines “POLLUTANTS or CONTAMINANTS” as:
The term “POLLUTANTS” or “CONTAMINANTS” shall mean any solid, liquid,
gaseous or thermal irritant or CONTAMINANT including, but not limited to,
smoke, vapor, soot, fumes, acids, alkalis, chemicals, virus, waste, (waste includes
materials to be recycled, reconditioned or reclaimed) or hazardous substances as
listed in the Federal WATER Pollution Control Act, Clean Air Act, Resource
Conservation and Recovery Act of 1976, and Toxic Substances Control Act, or as
designated by the U.S. Environmental Protection Agency.120
With regard to insurance policy coverage and exclusions, the Louisiana Supreme Court
has stated, “[a]lthough the insured bears the burden of proving a policy of insurance affords
coverage for an incident, the insurer bears the burden of proving the applicability of an
Rec. Doc. 5-1 at 23. Plaintiffs include arguments in the opposition brief about the inapplicability of the
second prong of the Contamination Clause concerning pollution. Rec. Doc. 15 at 29–31. Starr does not seek to invoke
the pollution portion of the Contamination Clause, so the Court need not analyze this prong.
Rec. Doc. 5-1 at 32 (emphasis added).
exclusionary clause within a policy.”121 “Policy exclusions must be clearly stated. Any ambiguity
in an insurance policy’s exclusions is construed to afford coverage.”122
Here, the Contamination Clause unambiguously excludes coverage for losses resulting
from COVID-19. It provides that “contamination” is precluded from coverage.123 Because only
the term “contaminant,” not contamination, is defined by the Policy to include a virus, Plaintiffs
attempt to draw stark differences between the terms “contamination” and “contaminant.”
Nevertheless, contamination is defined by Merriam-Webster as “1. a process of contaminating; a
state of being contaminated; 2. Contaminant.”124 The two terms are synonymous, and it appears
clear that the policy, in excluding coverage for contamination, intends to thereby exclude
contaminants, such as viruses, as well. Moreover, “[t]he fact that an exclusion could have been
worded more explicitly does not necessarily make it ambiguous.”125 Therefore, Plaintiffs’
attempts to differentiate between “contamination” and “contaminant” are unavailing.
COVID-19 falls directly into the definition of contaminant and is therefore excluded from
coverage. Contaminant is defined under the Policy to include a “virus.”126 The Centers for Disease
Control and Prevention (“CDC”) defines COVID-19 as “a disease caused by a virus called SARS121
Jones v. Est. of Santiago, 2003-1424, p. 12 (La. 4/14/04); 870 So. 2d 1002, 1010 (citing Doerr, 20000947 at p. 5; 774 So. 2d at 124, modified on other grounds on reh’g, 00-0947 (La. 3/16/01); 782 So. 2d 573)); see
also Blackburn v. Nat. Union Fire Ins. Co. of Pittsburgh, 2000-2668, p. 6 (La. 4/3/01); 784 So. 2d 637, 641 (“The
insurer bears the burden of proving the applicability of an exclusionary clause within a policy.”); La. Maint. Servs.,
Inc. v. Certain Underwriters at Lloyd’s of London, 616 So. 2d 1250, 1252 (La. 1993) (“The insurer has the burden
of proving that a loss comes within a policy exclusion.”); Russ, 10A Couch on Ins. § 148:52 (3d ed. 2010).
La. Maint. Servs., 616 So. 2d at 1252; see also Yount v. Maisano, 627 So. 2d 148, 151 (La. 1993) (“Any
ambiguity in an exclusion should be narrowly construed in favor of coverage.”).
Rec. Doc. 5-1 at 23.
Contamination, Merriam-Webster.com, https://www.merriam-webster.com/dictionary/contamination
(last visited August 20, 2021) (emphasis added).
In re Katrina Canal Breaches Litig., 495 F.3d at 210.
Rec. Doc. 5-1 at 32.
CoV-2.”127 Therefore, it is clear that COVID-19 falls squarely within the language of the
As a final note, Plaintiffs’ attempt at invoking the Louisiana Supreme Court’s holding in
Doerr v. Mobil Oil Corp. is unavailing here.128 In Doerr, the Louisiana Supreme Court,
considered a total pollution exclusion in an insurance policy and provided factors to determine if
the exclusion should apply, including: (i) “[w]hether the insured is a ‘polluter’ within the meaning
of the exclusion,” (ii) “[w]hether the injury-causing substance is a ‘pollutant’ within the meaning
of the exclusion,” and (iii) “[w]hether there was a ‘discharge, dispersal, seepage, migration,
release or escape’ of a pollutant by the insured within the meaning of the policy.”129 Plaintiffs
urge this Court to apply these factors to the Contamination Clause and find that the Clause does
not exclude coverage. The Court is not persuaded by this argument. The Contamination Clause
includes two distinct subsections. The first subsection excludes “contaminants.” This subsection
is plainly not a total pollution exclusion like the clause at issue in Doerr. While it is arguable that
the second subsection of the Contamination Clause is a pollution exclusion, the first subsection
of the Clause is distinct and excludes coverage for contamination specifically, not pollution
generally.130 As recognized by Plaintiffs themselves, a virus such as COVID-19 “does not come
within the ambit of environmental pollutants that are traditionally the subject of such [pollution]
https://www.cdc.gov/coronavirus/2019-ncov/faq.html#Basics (last visited August 20, 2021).
2000-0947; 774 So.2d 119.
Id. at 135.
See Paternostro v. Choice Hotel Int’l Servs. Corp., No. 13-0662, 2014 WL 6460844, at *14 (E.D. La.
Nov. 17, 2014) (Fallon, J.), opinion clarified on denial of reconsideration, No. 13-0662, 2015 WL 471784 (E.D. La.
Feb. 4, 2015) (finding that Doerr did not apply to bacteria or bacteria exclusions in commercial liability policies).
exclusions.”131 Given that a virus is distinct from pollution, as Plaintiffs recognize, and precluded
from coverage under the “contamination” subsection in the Contamination Clause, the Louisiana
Supreme Court’s analysis in Doerr is not applicable here.
Considering the foregoing reasons, Plaintiffs have not alleged any facts to show insurance
coverage under the Policy for losses resulting from the presence of COVID-19 on the insured
premises and due to the Emergency Orders. Given that Plaintiffs were not covered by the Policy
for their COVID-related losses, Plaintiffs’ breach of contract, breach of statutory duties, and
breach of the duty of good faith necessarily fail.132 Accordingly,
IT IS HEREBY ORDERED that Defendant Starr Surplus Lines Insurance Company’s
“Rule 12(b)(6) Motion to Dismiss”133 is GRANTED.
NEW ORLEANS, LOUISIANA, this _____ day of November, 2021.
NANNETTE JOLIVETTE BROWN
UNITED STATES DISTRICT COURT
Rec. Doc. 15 at 30.
Specifically, Plaintiffs’ claim for a breach of statutory duties under La. R.S. 22:1973 and La. R.S.
22:1892 is not cognizable without a valid underlying insurance claim. See Q Clothier, 2021 WL 1600247 at *11
(citing Pelle v. Munos, 2019-0549 (La. App. 1 Cir. 2/19/20); 296 So. 3d 14, 25) (“The penalties authorized by these
statutes do not stand alone; they do not provide a cause of action against an insurer absent a valid, underlying
Rec. Doc. 13.
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