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South Carolina Supreme Court rules against policyholders in COVID case


The South Carolina Supreme Court joined three other state supreme courts on Wednesday and ruled in insurers’ favor in COVID-related business interruption litigation.

The state’s Columbia-based high court was asked by the U.S. District Court in Columbia to rule on whether COVID-19’s presence in several Carolina Ale House establishments operated by Columbia-based Sullivan Management LLC constituted direct physical loss or damage under a commercial property policy issued by Allianz SE units, according to a three-judge panel’s unanimous ruling in Sullivan Management LLC v. Fireman’s Fund Insurance Co., and Allianz Global Risks, US Insurance Co.

“The policy does not expressly define ‘direct physical loss or damage’; therefore, those terms must be interpreted under their common meaning,” the ruling said. 

Citing “persuasive” rulings by other courts, the decision said, “The contention that a government shut-down order caused physical damage or loss is meritless.

“While the order prohibiting indoor dining certainly affected Sullivan’s financial well-being, the order itself was not directly physical,” said the ruling, in holding also that the virus particles’ presence in its facilities does not constitute physical loss or damage.

Plaintiff attorney Justin Lucey of Justin O’Toole Lucey, P.A in Mount Pleasant, South Carolina, said in a statement he was “Surprised and disappointed. We will be filing a motion for the Court to reconsider its reasoning.”

Fireman’s Fund attorney Brett Ingerman, a partner with DLA Piper LLP in Baltimore, said in a statement, the court’s ruling “joins the overwhelming weight of authority” on the issue of whether COVID-19’s presence and corresponding government orders triggers coverage under the policy language.

Laura A. Foggan, a partner with Crowell & Moring LLP in Washington, whose law firm submitted an amicus brief on behalf of the American Property Casualty Insurance Association and the National Association of  Mutual Insurance Cos., said in a statement, “It’s gratifying that another state supreme court has unanimously concluded that COVID-19 related business interruption claims do not trigger property insurance coverage, which covers situations where there actually is direct physical loss of or damage to property, not simply economic loss.”

South Carolina is the fourth state supreme court to rule against policyholders in comparable litigation. In June, the Wisconsin Supreme Court joined the Iowa and Massachusetts state supreme courts in ruling against them.