The North Carolina Supreme Court today became the first high court in the country to rule that businesses who purchased property insurance policies without a virus exclusion are entitled to coverage for business interruption losses suffered as a result of the COVID-19 pandemic.

In granting summary judgment in N. State Deli, LLC v. Cincinnati Ins. Co. for a collection of restaurants and bars, North Carolina joins Vermont as the only states whose high courts have ruled for policyholders on this important issue, following the Vermont Supreme Court’s 2022 ruling that such losses potentially are covered.

Anderson Kill P.C. filed amicus briefs supporting the policyholders’ positions in both the North Carolina and Vermont cases.

Marshall Gilinsky, an insurance recovery attorney with Anderson Kill, noted: “This decision is an important win for policyholders in North Carolina and hopefully beyond – one that adheres to basic insurance law principles and holds insurance companies responsible for the promises they make in the policies they sell.”

In its ruling for the bars and restaurants, the North Carolina Supreme Court followed longstanding insurance law principles to conclude that “a reasonable policyholder in the restaurants’ shoes could expect ‘direct physical loss’ to property, as used in this policy, to include the results of COVID-19-era government orders which affected the restaurants’ use of and access to their physical property, and because the policy otherwise contains no exclusion for viruses, we construe the ambiguity here in favor of coverage.”

In several places, today’s ruling drew on the amicus brief Anderson Kill filed on behalf of the Cities of Charlotte and Durham. First, the ruling specifically cited a law review article that was featured prominently in the amicus brief. That article was critical of the many pro-insurance industry rulings on COVID business interruption losses.  Second, the ruling acknowledged an important point from the amicus brief – that 83% of policies purchased in 2019-2020 contained virus exclusions. Thus, as the Cities argued in the amicus brief, the policyholders who purchased policies without such exclusions reasonably expected coverage for virus-related business interruption losses.

Marshall Gilinsky, Rhonda Orin and Madilynn Lee of Anderson Kill P.C. were on the amicus brief filed in support of the policyholders.

Media Coverage

Business Insurance: "North Carolina high court revives eateries' COVID coverage claims" LINK

The Carolina Journal: "State Supreme Court backs bars, restaurants in COVID-related insurance dispute" LINK

ABC News: "North Carolina justices rule for restaurants in COVID-19 claims but against a clothing company" LINK

Law360: "NC Justices Topple Insurer Victory In COVID Coverage Battle" LINK