NC restaurants can't get insurance payouts for losses from COVID-19 restrictions: Appeals Court

RALEIGH, N.C. -- Over a dozen North Carolina restaurants that closed during the coronavirus pandemic when government orders restricted their services can't be recompensed for those financial losses through their commercial insurance policies, the state Court of Appeals ruled on Tuesday.

The unanimous ruling by a three-judge panel reverses an October 2020 decision by Superior Court Judge Orlando Hudson in Durham County. He declared the language in the restaurant owners' policies provided coverage for lost business income and extra expenses when government orders limited the access to and use of their eateries. Gov. Roy Cooper first issued a statewide order in March 2020 limiting sales to carry-out and delivery services only. Most of the restaurants that sued were located in the Triangle area.

Court of Appeals Judge Chris Dillon, writing Tuesday's opinion, said the panel agreed with the insurers who argued the governmental restrictions didn't result in "direct physical loss or damage to the property" that are required for payouts. Dillon cited a 1997 state court ruling, as well as recent decisions by the 4th U.S. Circuit Court of Appeals involving business interruptions caused by COVID-19 orders.

The restaurants' "desired definition of 'physical loss' as a general 'loss of use' is not supported by our case law or the unambiguous language in the policies," the opinion reads. Judges Toby Hampson and April Wood joined in Tuesday's decision. Since the ruling was unanimous, the state Supreme Court wouldn't be obligated to hear the case if the restaurant owners sought an appeal.