A North Carolina court has ruled that Cincinnati Insurance Co. must pay 16 restaurants’ claims for business income (interruption) losses due to government-ordered COVID-19 shutdowns – a decision that runs counter to those of most judges who’ve ruled on similar cases.
As hundreds of COVID-19-related lawsuits regarding business interruption coverage make their way through U.S. courts, judge after judge has found in favor of insurer defendants. The central point has been that coverage depends – as specified in the insurance policies – on the policyholder suffering a “direct physical loss.”
“Business income (interruption) policies generally reimburse a business owner for lost profits and continuing fixed expenses when its facilities are closed due to direct physical damage from a covered loss, such as a fire, a riot, or a windstorm,” said Triple-I CEO Sean Kevelighan. “Insurers have been prevailing nationwide in nearly all of the litigated COVID-19 BI lawsuits because, as North Carolina’s Insurance Commissioner has noted, ‘Standard business interruption policies are not designed to provide coverage for viruses, diseases, or pandemic-related losses because of the magnitude of the potential losses.’ ”
“Policy language controls whether COVID-19 interruptions are covered,” said Michael Menapace, a professor of insurance law at Quinnipiac University School of Law and a Triple-I Non-Resident Scholar. “The threshold issue will be whether the insureds can prove their business losses are caused by ‘physical damage to property’.”
Cincinnati Insurance has said it plans to appeal the ruling.
Learn More from The Triple-I Blog
POLL: GOVERNMENT SHOULD PROVIDE BUSINESS INTERRUPTION SUPPORT
U.K. BUSINESS INTERRUPTION LITIGATION SEEMS UNLIKELY TO AFFECT U.S. INSURERS
BUSINESS INTERRUPTION VS. EVENT CANCELLATION: WHAT’S THE BIG DIFFERENCE?
BUSINESS INTERRUPTION COVERAGE: POLICY LANGUAGE RULES
CHUBB CEO SAYS BUSINESS INTERRUPTION POLICIES ARE A GOOD VALUE AND WORK AS THEY SHOULD
U.S. TREASURY WEIGHS IN ON DEBATE SURROUNDING BUSINESS INTERRUPTION INSURANCE
TRIPLE-I CEO AMONG PANELISTS DISCUSSING BUSINESS INTERRUPTION INSURANCE LEGISLATION