State Court Rules in Favor of Restaurants in Business Interruption Insurance Case, Nov. 19, 2020

A North Carolina court has ruled in favor of a group of restaurants and required the insurance company to provide business interruption coverage. The court agreed with the plaintiffs that government stay-at-home orders and travel restrictions caused the restaurants to suffer a physical loss because they lost physical use and physical access to their businesses. The policy at issue defined “loss” as “accidental physical loss or accidental physical damage,” but did not define “direct”, “physical loss”, or “physical damage.” The court agreed that the businesses lost the full use and advantage of their business premises. The court rejected the insurance company's argument that tangible physical loss was required because, even if true, that rendered the policy language ambiguous. Despite the fact that this was a state-level case, other courts may find the reliance on standard contract interpretation principles persuasive. For more information on business insurance issues, visit Tax Facts Online.