In the ever-emerging business interruption coverage world, Superior Court Judge Orlando F. Hudson Jr., a North Carolina Judge, ruled that Cincinnati Insurance Company owes a group of restaurants coverage for losses which flowed from a North Carolina mandated COVID-19 shutdown, in the matter of North State Deli LLC et al. v. The Cincinnati Insurance Co., 20-CVS-02569, in the State of North Carolina General Court of Justice for the County of Durham. This ruling appears to be the first decision to hold that a government-ordered shutdown to contain the virus caused a “physical loss.”
In previous blog posts (Recent COVID-19 Business Interruption Decision is a Win for Insurers and What You Need to Know About COVID-19 and Business Interruption Insurance Coverage), we set forth that these cases are being fought on the issue of whether there is a “physical loss” which would trigger coverage under many business policies. Judge Hudson Jr. stated that the term direct physical loss includes an:
inability to utilize…something in the real, material or bodily world, resulting from a given cause.”
In sum, physical damage or alteration is not needed to trigger the coverage.