The South Carolina Supreme Court on Wednesday joined three other state supreme courts in ruling in favor of insurance companies in disputes over covid-related business interruptions.
The state’s Columbia-based Supreme Court was asked by the U.S. District Court for the District of Columbia to determine whether the presence of COVID-19 at several Carolina Ale House facilities operated by Columbia-based Sullivan Management LLC constituted direct physical loss or damage under a commercial property policy issued of Allianz SE units, according to a three-judge panel’s unanimous decision in Sullivan Management LLC v. Fireman’s Fund Insurance Co., and Allianz Global Risks, US Insurance Co.
“The policy does not expressly define ̵6;direct physical loss or damage’; therefore, these terms must be interpreted according to their common meaning,” the ruling said.
Citing “persuasive” rulings from other courts, the decision said: “The claim that a state restraining order caused physical injury or loss is without merit.
“Although the order prohibiting indoor food did affect Sullivan’s financial well-being, the order itself was not directly physical,” said the ruling, which also held that the presence of virus particles on its premises did not constitute physical loss or damage.
Plaintiffs’ attorney Justin Lucey of Justin O’Toole Lucey, PA in Mount Pleasant, South Carolina, said in a statement that he was “surprised and disappointed. We will be filing a motion asking the court to reconsider its reasoning.”
Firefighters Fund attorney Brett Ingerman, a partner with DLA Piper LLP in Baltimore, said in a statement that the court’s decision “adheres to the overwhelming weight of authority” on the question of whether the presence of COVID-19 and corresponding state orders trigger coverage under the policy language.
Laura A. Foggan, a partner with Crowell & Moring LLP in Washington, whose law firm filed 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 is gratifying that Another state supreme court has unanimously concluded that claims for covid-19-related business interruption do not trigger property insurance, which covers situations where there is actually direct physical loss of or damage to property, not just 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 them.