Many business owners have been devastated by the effects of the SARS-CoV-2 (“COVID-19”) pandemic. It has not just caused physical harm but has caused substantial economic damage as well. The news is replete with stories of businesses suffering and going out of business. Business owners are left grasping for answers to questions like, “What do we do next?”

A recent ruling out of Durham County may provide some answers, at least in part, to the questions being posed by North Carolina business owners who have suffered losses because of interruptions to their businesses due to COVID-19.

In North State Deli, LLC et al. v. The Cincinnati Insurance Company et al., Case No. 20-CVS-2569, a group of restaurant owners sued their insurance company seeking coverage for losses suffered because of governmental orders during the pandemic and seeking reimbursement of business losses and expenses.

Each restaurant had purchased an “all-risk” property insurance policy from The Cincinnati Insurance Company which was effective for the relevant period. According to the Court’s October 7, 2020 Order, the policies provide as follows:

Business Income: We will pay for the actual loss of “Business Income” and “Rental Value” you sustain due to the necessary “suspension” of your “operations” during the “period of restoration.” The “suspension” must be caused by direct “loss” to property at a “premises” caused by or resulting from any Covered Cause of Loss.
Extra Expense: We will pay Extra Expense you sustain during the “period of restoration.” Extra Expense means necessary expenses you sustain . . . during the “period of restoration” that you would not have sustained if there had been no direct “loss” to property caused by or resulting from a Covered Cause of Loss.

Each restaurant sought coverage for loss of use of their restaurant and extra expenses which were caused by governmental shut-down orders. The restaurant owners alleged that the governmental orders caused them to lose the physical use of and access to their restaurant properties.
In granting partial summary judgment in favor of the restaurant owners, the Durham County Superior Court found that all-risk policies provide coverage for all risks unless excluded. The Court found that the governmental orders caused covered losses which were not excluded in these instances and, therefore, were recoverable.

Business owners should watch this case and others as they progress through the North Carolina courts. Before assuming that a particular policy will provide similar coverage, or that any particular governmental order has caused a covered loss, business owners should carefully review their specific business policies to determine if there might be coverage for any losses related to COVID-19.

Call the attorneys at Vann Attorneys, PLLC to discuss your legal matters.