In a resounding victory for policyholders, a court in North Carolina ruled that "all-risk" property insurance covers the business interruptions suffered by 16 restaurants during the COVID-19 pandemic. North State Deli, LLC v. Cincinnati Ins. Co. No. 20-CVS-02569 (N.C. Sup. Ct., Cty. Of Durham, October 7, 2020). This is the first decision in the country to state that policyholders are actually entitled to cover for loss of business income as a result of the COVID-19 pandemic. Equally important, the decision illustrates that a proper analysis of the operational policy provisions requires this result. movement of all residents "caused" physical loss "of the policyholders' property under the insurances. The policy in question promised to pay for the loss of "business income" and for "extra costs" caused by "direct" loss of property. . . caused by . . . any covered cause of loss. "They defined" loss "as" unintentional physical loss or accidental physical damage "to property. The policyholders refused for a partial summary assessment that their losses were covered because the government's order caused them to lose the physical use of and access to their restaurants. must have its usual meaning, the court turned to the dictionary for definitions of "direct", "physical" and "loss". The court then ruled that government decisions caused an "immediate loss of use and access without any intervening conditions." As the court concluded, this is "precisely the loss caused by the government's decision":
"[D] irect physical loss" describes the scenario in which entrepreneurs and their employees, customers, suppliers, suppliers and others lose the full range of rights and benefits using or accessing their commercial properties. This is precisely the loss caused by the government's order. The appellants were expressly prohibited by government decision from accessing and using their property for the income-generating purposes for which the property was insured. These regulations resulted in immediate loss of use and access without any intervening conditions. In ordinary terms, this loss is unequivocally a & # 39; & # 39; direct physical loss & # 39; & # 39 ;, and the policy provides coverage.
Central to the Court's conclusion was its adherence to the axiom that different terms in an insurance policy must be "harmoniously interpreted", according to each word is commonly understood meaning. Here, as the court explained, the policy covered "unintentional physical loss or unintentional physical injury." . "
As the Court acknowledged," the parties [d] "question the meaning of" direct physical loss ", and the insurer insists that the policy requires" some form of physical change of property. "By rejecting this argument, which insurers have generally put forward In these lawsuits, the court specifically invoked the black letter principle that ambiguity exists when there is more than a reasonable meaning of the disputed policy terms: the usual [dictionary] meaning. . . is also reasonable, which makes the policy at least ambiguous. "The Court therefore gave 'the ambiguous terms the reasonable definition in favor of coverage' and argued that the phrase 'direct physical loss' includes loss of use or access to covered property even if the property has not changed structurally."
The North State Deli decision provides welcome news to policyholders who have patiently waited for a court to apply the rules for interpreting insurance policy correctly when analyzing COVID-1