The North Carolina Supreme Court delivered mixed verdicts Friday on lawsuits involving businesses seeking financial relief for losses caused by the COVID-19 pandemic. The rulings addressed claims under “all-risk” commercial property insurance policies, favoring some restaurant owners while rejecting a clothing chain’s claims due to specific policy exclusions.
Restaurants Secure Victory in Insurance Dispute
In one case, a group of 16 North Carolina restaurants and bars successfully argued that their insurance policies with Cincinnati Insurance Co. should cover income lost due to government-mandated shutdowns during the pandemic.
The court found that Cincinnati’s policies failed to define the term “direct physical loss” and lacked explicit exclusions for virus-related disruptions. Writing for the court, Justice Anita Earls emphasized that ambiguous policy terms should be interpreted in favor of policyholders.
“It is the insurance company’s responsibility to define essential policy terms and the North Carolina courts’ responsibility to enforce those terms consistent with the parties’ reasonable expectations,” Earls wrote.
This decision overturns an earlier appellate ruling, offering hope to similar businesses that sustained financial losses due to pandemic restrictions.
Clothing Chain Denied Coverage Due to Policy Exclusion
In a separate case, the Supreme Court ruled against Cato Corp., a Charlotte-based clothing retailer with over 1,300 stores nationwide. The company had sued Zurich American Insurance Co. for refusing to cover losses incurred during the pandemic.
While the court agreed that Cato sufficiently alleged “direct physical loss or damage” to its property, Justice Earls wrote that the retailer’s policy explicitly excluded coverage for viral contamination. Zurich American successfully demonstrated that this exclusion applied to the case, barring Cato from recovering damages.
Wider Implications for COVID-19 Claims
These two cases were among eight COVID-19-related lawsuits heard by the North Carolina Supreme Court in October. The justices have yet to issue rulings on most of the remaining cases, which could further clarify insurance coverage disputes tied to the pandemic.
Student Refund Lawsuit Ends in Deadlock
The court also announced a split decision on a case brought by former University of North Carolina students seeking refunds for tuition, housing, and fees after in-person instruction was canceled during the spring 2020 semester.
The lawsuit was dismissed by lower courts, citing a law passed by the General Assembly granting colleges immunity from pandemic-related legal claims for that semester. With one justice recusing herself, the remaining six justices were evenly divided, meaning the lower court’s dismissal will stand.
