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Judge Rules Business-Interruption Insurance Covers Pandemic Closure

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November 11, 2020

A court in North Carolina has ruled in favor of a policy holder in a COVID-19 business-interruption coverage lawsuit. The plaintiffs were a group of 16 restaurants that had sought coverage, following a government-ordered shutdown in March, 2020. An attorney quoted in an Insurance Journal article says this is the first case he is aware of that found policy holders in this kind of case were owed coverage. “Plaintiffs’ primary contention,” said the court in its order granting plaintiffs’ motion for partial summary judgment, “is that the Government Orders forced Plaintiffs to lose the physical use of and access to their restaurant property and premises, which constitutes a non-excluded ‘direct physical loss.’” Nationally, businesses have filed nearly 1200 cases seeking coverage for lost income due to closure orders, according to a University of Pennsylvania law school litigation tracker. A spokesperson for defendant Cincinnati Insurance says business interruption coverage in this case does not apply because there was no structural alteration to property. North Carolina’s Insurance Commissioner, in an open letter to business owners in April, weighed in on the side of insurers on this question. If they had to cover projected business-continuity losses,  he wrote, it would cripple the industry, cause many carriers to fail, and put other kinds of insurance protection for homes, cars and businesses a risk. Cincinnati Insurance said it intended to appeal.

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