A group of North Carolina restaurateurs will have their COVID-19 business interruption claims lawsuit heard by the North Carolina Supreme Court this fall.
The case involves Cincinnati Insurance Co’s decision not to include a virus-specific exclusion in its "all-risk" policies, according to court filings.
According to AM Best, the plaintiffs argue they purchased "all-risk" policies to cover any unexpected risks, unless explicitly excluded. According to the initial complaint, the policies did not exclude viruses from coverage.
The restaurateurs had specifically sought coverage for viruses, citing concerns after a norovirus outbreak affected businesses in the state. The plaintiffs contend that during negotiations, they worked to ensure virus coverage was included.
The complaint also claims that the policies were silent on governmental shutdowns, excluding only government actions related to the seizure or destruction of property. This, according to the plaintiffs, suggests that other government actions, such as shutdown orders during the pandemic, should be considered covered perils.
The National Restaurant Association's Restaurant Law Center and the North Carolina Restaurant & Lodging Association have filed an amici curiae brief, supporting the restaurateurs. In their filing, the groups argue they can help clarify how the term "direct physical loss" would be understood by an average person.
They also noted policyholders' expectations regarding coverage and the insurer's decision not to include a virus exclusion in these policies.
The Restaurant Law Center attorneys stated in the brief that virus-related losses are a constant concern for those operating in the hospitality sector. They argued that a ruling ignoring the insurer's decision to omit a virus exclusion could disrupt the expectations of thousands of businesses that specifically purchased policies without such exclusions.
Though similar COVID-related business interruption suits have been dismissed in other states, the Restaurant Law Center's Executive Director Angelo I. Amador pointed out that these cases are governed by state law. He emphasized that decisions from other states, such as the New Jersey Supreme Court ruling in January, do not control North Carolina courts.
Amador stated that each state must examine its own laws and legal precedents when determining the outcome of such cases.
The North Carolina Attorney General’s Office has also filed a brief, requesting to present oral arguments. The office aims to offer its perspective on consumer protection issues involved in the case but declined to comment beyond its filing.
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