Raleigh, North Carolina — In a landmark decision, the North Carolina Supreme Court recently ruled in favor of 15 local bars and restaurants in a dispute over COVID-19 insurance coverage with Cincinnati Insurance Company. This unanimous decision underscored the broad interpretation of “direct physical loss” under commercial property insurance policies, including losses stemming from government-mandated shutdowns due to the pandemic.
The case, centered around North State Deli and 14 other businesses, has been closely watched for its potential implications on similar insurance disputes nationwide. The court’s interpretation extends coverage to encompass temporary closures and usage restrictions imposed during the COVID-19 pandemic, setting a precedent that temporary inability to use a property could qualify as a “physical loss.”
Authored by Associate Justice Anita Earls, the 24-page decision reverses an earlier ruling by the North Carolina Court of Appeals which had favored the insurance company. The Supreme Court’s decision not only sided with the businesses but also remanded the case back to the appeals and trial courts for further proceedings consistent with their findings.
In a related ruling involving the retailer Cato, the court came to an opposite conclusion. Cato’s lawsuit was denied due to explicit exclusions in its insurance policy regarding “viral contamination.” This difference highlights the significant impact of policy specifics on coverage disputes related to the pandemic.
The series of legal challenges doesn’t end there. On October 22, the Supreme Court heard additional arguments related to the pandemic’s impact on businesses and educational institutions. Among these were cases involving the Board of Governors of the University of North Carolina concerning pandemic closures at colleges, which could further define the scope of institutional liability and insurance coverage during unprecedented public health crises.
Further compounding the court’s busy docket, arguments were heard on October 23 in four more pandemic-related cases. These included challenges from other business and educational entities against state and local officials, reflecting a broader questioning of governmental authority and public health mandates amidst the ongoing pandemic recovery efforts.
This cluster of cases underscores a significant legal exploration of the intersections between public health, governmental authority, and economic survival in times of crisis. The decisions, starting with the ruling in favor of North State Deli and its cohort, may influence similar cases across the United States, where thousands of businesses seek clarity on their insurance coverage concerning COVID-19 related losses.
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