By: Matthew Blake, Attorney at Law
In April 2020, North Carolina Commissioner of Insurance Mike Causey penned a letter advising that business interruption insurance policies were not “designed” to provide coverage for pandemic-related losses. Now, a trial judge has reached the opposite conclusion in a ruling that could send shockwaves through the entire insurance industry. Commissioner Causey’s letter stated that insurance coverage is modeled on the chance occurrence of an insured loss so that potential losses are not too heavily concentrated. His letter indicated that small business closures mandated in response to COVID-19 could result in business continuity losses in excess of $300 billion each month when the total of funds in reserve for all U.S. home, auto, and business insurers total only $800 billion. He indicated that payment of business interruption claims for pandemic-related losses could “cripple” the insurance industry. In contrast to those concerns, Judge Orlando Hudson recently granted partial summary judgment in favor of a group of North Carolina restaurants. He ruled that business interruption insurance covers losses due to the COVID-19 pandemic because government-mandated shutdowns deprived all persons of use of the affected restaurants, which he reasoned was direct physical loss covered by the policies. Cincinnati Insurance Company plans to appeal the ruling.
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