LA Bone & Joint v. Transportation Ins

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

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

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

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

Plaintiff—Appellant,

versus

Transportation Insurance Company,

Defendant—Appellee.

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

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

*
Pursuant to 5th Circuit Rule 47.5, the court has determined that this
opinion should not be published and is not precedent except under the limited
circumstances set forth in 5th Circuit Rule 47.5.4.
Case: 21-30300 Document: 00516257930 Page: 2 Date Filed: 03/29/2022

No. 21-30300

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

2
Case: 21-30300 Document: 00516257930 Page: 3 Date Filed: 03/29/2022

No. 21-30300

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

3
Case: 21-30300 Document: 00516257930 Page: 4 Date Filed: 03/29/2022

No. 21-30300

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

4
Case: 21-30300 Document: 00516257930 Page: 5 Date Filed: 03/29/2022

No. 21-30300

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

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

5
Case: 21-30300 Document: 00516257930 Page: 6 Date Filed: 03/29/2022

No. 21-30300

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

6
Case: 21-30300 Document: 00516257930 Page: 7 Date Filed: 03/29/2022

No. 21-30300

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

7