As the World Shuts Down, Hospitality Litigation Heats Up

By: George S. Mahaffey | 3.26.20 | Media

The coronavirus disease (COVID-19) has the world on lockdown, but that hasn’t stopped crafty lawyers from filing lawsuits. Two novel lawsuits are developing in the hospitality industry: an action filed in Florida by disgruntled investors against Norwegian Cruise Lines, and another filed in Louisiana against Lloyd's of London, which centers on insurance coverage issues.  

Visit our  COVID-19  Resource PageOn March 12, 2020, a Norwegian Cruise Lines shareholder filed a securities class action lawsuit in the Southern District of Florida against the company, its CEO, and CFO on behalf of a class of shareholders who purchased Norwegian's shares between February 20 and March 12, 2020. 

In terms of substance, the complaint alleges that the company made a series of false and misleading statements about the status of the coronavirus to entice putative customers to purchase cruises. These purportedly false statements were then widely disseminated. The plaintiff (and others) relied on these statements to purchase Norwegian Cruise stock that was artificially inflated and suffered damages when the truth came out and the stock declined in value. The complaint details various misrepresentations made to cruise customers, but it does not specifically detail what misrepresentations were made directly to the plaintiff (and other stock purchasers), so the viability of the lawsuit may be in question. That said, it would not be surprising to expect similar lawsuits to spring up in the coming months (and years) given the unique manner in which the coronavirus spread and the conflicting information about the virus that was presented at the outset of the pandemic. A copy of the lawsuit can be accessed here.

In addition to the Norwegian Cruise lawsuit, a restaurant in New Orleans, Oceana Grill, has filed suit in Louisiana against Lloyd's of London seeking a declaratory judgment that will force the insurance carrier to pay for losses related to the coronavirus. Oceana's position is that its policy is applicable if there is damage to the property that forces a closure. Oceana’s lawyer stated, "Our hope is that we can confirm the obligations of the insurance companies and this could affect businesses not just in Louisiana, this can affect businesses across America."  Lloyd’s is expected to counter that civil authority orders that close businesses do not necessarily trigger business interruption coverage. Oceana has also argued that the coronavirus caused property damage because it contaminates, among others, surfaces within the establishment. Oceana's position was further bolstered by New Orleans Mayor LaToya Cantrell, who filed an emergency declaration in the same court directing restaurants to limit operations because the coronavirus causes property loss and damage in "certain circumstances." It remains to be seen how Oceana's claim will be resolved by the courts, but it is expected that similar lawsuits will soon be filed across the country. 

The attorneys at Goodell Devries are monitoring developments across the country and will provide updates on significant litigation. If you have questions about how coronavirus may affect your business operations, contact the author, George Mahaffey.