Companies forced to shut down COVID-19 and denied coverage by their insurance companies received a legal boost this month. In a recent decision in North Carolina, the court held that a generally worded business interruption policy covered losses due to closures commissioned by COVID-19. judgment of several restaurants contesting the denial of coverage for their business losses caused by COVID-19. 1 Complaints include sixteen restaurants that purchased "all-risk" insurance from the Cincinnati Insurance Company ("Cincinnati"). The insurances include a common business income and additional expense forms that provide:
(1) Business income
We pay for the actual loss of "Business income" and
"Rental value" you maintain due to necessary "Cancellation" of
your "operations" during the "restoration period."
"revocation" must be caused by direct [accidental physical loss or accidental physical damage] to property in a "19459008]" premises "caused by or as a result of any covered cause of
(2) Additional costs
We will pay extra expenses you maintain during the “19449008] restoration period.” Extra expense means necessary expenses that you
maintain … during the “recovery period” that you would not have
had if there was no direct [accidental physical loss or accidental physical damage] to property caused by or as a result of a covered cause of loss. was not defined in the policy, so the court referred to standard dictionary definitions.The court quoted Merriam Webster as defining "loss" as "act of losing possession" "damage" resulting from "separation" and / or "failure to. . . It also cited Random House Dictionary to define loss as "to be deprived or to be without something one had."
Applying these definitions, the court found that the simple and common meaning of "physical "loss" includes loss of use of business premises due to COVID-19 foreclosure order.
The court rejected Cincinnati's argument that "loss" must involve a physical change of property and not a pure economic loss. The court found that the interpretation was unreasonable after applied another general rule for the interpretation of the policy, that all terms should be given independent meaning and interpreted harmoniously whenever possible.The Court pointed out that the policy's use of the disjunctive term "or" between the terms "physical loss" and "physical injury" supported its conclusion that a "physical loss" does not necessarily require physical damage or alteration of property.
The Court also noted that although Cincinnati's interpretation ng was also reasonable (which the court found was not), the tie would still go to the insured. This is also a main rule for the interpretation of the policy – that ambiguities must be interpreted against the insurer. A term is ambiguous if it can reasonably be interpreted both for and against coverage.
Finally, the Court found that it was "undisputed that the policy does not exclude virus-related causes of loss" and that no other exceptions apply. The court confirmed coverage for these restaurants.
Although a decision of a court in North Carolina is not binding on other courts, it is a persuasive authority that can be invoked in other cases. Many policies have very similar languages. In addition, there are the main rules that this court applied in most other states. In addition, the simple and straightforward reasoning is convincing and will not be difficult for other courts to understand.
Will this decision be a trend? For the economic future of our country and the livelihood of our citizens, let us hope so.
1 North State Deli, LLC et al., V. Cincinnati Ins. Co. No. 20-CVS-025698, (N.C. Super. Ct, (Durham County) October 9, 2020).