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N.C. appeals court overturns pro-policyholder COVID ruling

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COVID ruling

A North Carolina state appeals court on Tuesday overturned a lower court ruling in policyholders’ favor in a COVID-19 business interruption case.

Separately, an Illinois state appeals court last week affirmed a lower court ruling in a COVID-19 business interruption case.

On Oct. 9, 2020, a North Carolina state court judge ruled in favor of a group of 16 restaurants that filed suit against the Cincinnati Insurance Co. in state court in Durham that were seeking a declaratory judgment the insurer must replace their lost business income and extra expenses under their coverage, according to the ruling in North State Deli, LLC et al. v. The Cincinnati Insurance Co., et. al.

A Raleigh-based three-judge appeals court overturned that ruling, stating, “we conclude the unambiguous terms of the Policies did not provide the coverage Plaintiffs sought.”

The decision cited a 1997 case as well as more recent cases by the 4th U.S. Circuit Court of Appeals in Richmond, Virginia. “We agree with these courts that the relevant provisions of the Policies are unambiguous. 

“Plaintiffs did not allege that their loss resulted from physical harm to their property, but that the Governmental Orders resulted in loss of business…According to the plain language of the Policies, only direct accidental, physical loss or damage to the property is covered,” the panel said, in overturning the lower court ruling.

Policyholder attorney Stuart M. Paynter of The Paynter Law Firm PLLC in Hillsborough, North Carolina, said in a statement, “We are examining our options for further review.” The insurer’s attorneys did not respond to a request for comment.

In the Illinois case, a three-judge panel of a Chicago-based appeals court affirmed a ruling last Thursday by a Chicago trial court, in a case filed by 14 Illinois taverns and restaurants operating under the name Bulldog Ale House, according to the decision in State & 9 Street Corp., d/b/a/ Bulldog ale House et al. v. Society Insurance, A Mutual Co.

Plaintiffs “seem to conflate and equalize property damage liability coverage and business interruption coverage,” the ruling said, referring to the businessowners policies they had purchased.

The ruling said the purpose of the coverage they purchased “is to protect insureds from physical loss of or damage to property, such as the occurrence of a tornado or fire.

“This type of policy limits coverage for business losses and generally does not insure business interruption without the presence of physical loss,” it said, citing the 7th Circuit’s Sandy Point Dental ruling, and affirming the lower court’s dismissal.

Information on attorneys was not available.