(Article from Insurance Law Alert, September 2021)
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A Louisiana federal district court denied an insurer's motion to dismiss a suit seeking civil authority coverage, finding that the complaint sufficiently alleged property damage and a prohibition on access to the insured property. Pathology Lab. Inc. v. Mt. Hawley Ins. Co., 2021 WL 3378596 (W.D. La. Aug. 3, 2021).
The coverage dispute arose out of local and federal executive orders issued in connection with a hurricane that made landfall in Louisiana. A medical laboratory sought coverage for financial losses incurred during the duration of the government orders. The insurer denied coverage, arguing that civil authority coverage was unavailable because the orders were issued in anticipation of property damage (rather than in response to actual property damage) and did not completely prohibit access to the insured property. The court rejected both assertions.
The court acknowledged that an initial mandatory evacuation order, issued prior to the hurricane's arrival, did not trigger civil authority coverage because no property damage had yet occurred. However, the court concluded that subsequent orders requiring evacuation and business closures were issued in response to "extensive physical damage to all areas" surrounding the insured premises.
The insurer also argued that the government orders did not completely prohibit access to the insured premises as required by Louisiana law. In particular, the insurer claimed that the orders used non-mandatory language (e.g., "should") and included daily curfews that restricted access only during certain hours of the day. In addition, the insurer emphasized that laboratory employees accessed the property during the periods of closure to perform exigent medical services. Rejecting these assertions, the court concluded that access to the laboratory was "completely prohibited" based on the extent of physical devastation to nearby property and the mandatory nature of the orders, and that employees' alleged violations of those orders to perform urgent procedures were irrelevant.
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