COVID-19 (CORONAVIRUS)
Restaurateurs Taking COVID Business Interruption Suit to North Carolina Supreme Court
RALEIGH, N.C. //BestWire// - A group of restaurateurs will have their COVID-19 business interruption claims lawsuit heard this fall by the North Carolina Supreme Court, which will consider arguments including why Cincinnati Insurance Co. decided not to include a virus-specific exclusion in its “all-risk” policy, according to court filings.
The restaurateurs said they sought business interruption coverage so they would be protected when the “unimaginable hits,” and purchased “all risk” policies that covered “every one of those unimaginable risks” unless the policy explicitly excluded them, according to the initial complaint. However, nothing in the policies excluded viruses from coverage.
Further, during negotiations the plaintiffs worked to ensure coverage for viruses was included, according to the complaint. One of the restaurant owners specifically requested the coverage because of a norovirus, also known as the winter vomiting disease, outbreak at restaurants and other businesses in North Carolina.
The initial complaint also says the policies are quite on the topic of governmental shutdowns, and only exclude governmental actions order the seizure or destruction of property. Plaintiff’s counsel said this shows the carrier acknowledged other government actions would be considered covered perils.
The National Restaurant Association’s Restaurant Law Center and North Carolina Restaurant & Lodging Association filed a amici curiae, or friend of the court brief, which said they could help clarify during oral arguments how an average person would understand the meaning of “direct physical loss." The trade groups also said they could provide details on policyholders' expectations for coverage and why the carrier decided not to exclude virus in these policies.
“Virus-related causes of loss are ever-present on the minds of those operating hospitality businesses,” Restaurant Law Center lawyers wrote in the brief. “A court-made rule ignoring an insurer’s choice to omit a virus exclusion would disrupt the expectations of thousands of restaurants and hotels that purposefully purchase policies omitting such exclusions.”
Although this case is similar to other COVID-related business interruption suits heard in courts around the country, Restaurant Law Center Executive Director Angelo I. Amador said the issue is governed by state law. Other states have largely dismissed these suits, including one heard by the New Jersey Supreme Court in January (BestWire, Jan. 26, 2024).
“Thus, what happened in other states is not controlling on the courts in North Carolina, as each state needs to look at its own law and legal precedent individually,” Amador said in an emailed statement.
The North Carolina Attorney General’s Office also filed a brief requesting to present oral arguments to aid the court’s decision making and allow the office to express its views on an important consumer-protection issue, according to court filings.
The Attorney General's Office declined to comment beyond its amici curiae filing. Attempt to gain further comment from Cincinnati Insurance was unsuccessful.
Oral arguments in this case are slated to being Oct. 22.
The Cincinnati Insurance Co. has a current Best's Financial Strength Rating of A+ (Superior).
(By Steve Hallo, senior associate editor, BestWire: Steve.Hallo@ambest.com)