David L. Brown and Alexander E. Davis, partners in Goldberg Segalla’s Greensboro, North Carolina, office, jointly authored an article that was published in Law360 regarding an unexpected ruling from the North Carolina Supreme Court.

The article, titled “Surprise NC COVID Ruling Revises Reasonable Expectations,” delves into North State Deli LLC v. Cincinnati Insurance Co., in which the court reversed a unanimous North Carolina Court of Appeals decision “holding that COVID-19 governmental shutdown orders did not constitute ‘direct physical loss’ to policyholder property, as there was no physical harm to the property itself.”

The unanimous Supreme Court rejected this interpretation of the policies in question as well as the holdings of numerous other state and federal courts across the country, joining Vermont as the only two state supreme courts to rule in favor of policyholders on this issue.

North State Deli involved the claims of a group of restaurant and bar owners who carried similar property insurance policies. During the COVID-19 pandemic, like most businesses around the country, the insureds experienced temporary restrictions due to various government orders and presented evidence these orders caused declines in income. They then sued the insurers, seeking coverage for losses, but the Cincinnati insurers argued the claims were not covered because there was no physical loss of property resulting from the government orders.

The trial court granted partial summary judgement to the insureds because the terms of the policies were too vague, but on appeal, the North Carolina Court of Appeals unanimously reversed the trial court’s decision, opining that the policies only covered “direct, accidental, physical loss or damage.”

However, the North Carolina Supreme Court disagreed, holding the phrase “direct physical loss” was ambiguous and must be construed against the insurer.

David and Alex go on to explain the direct and indirect ramifications of this case, saying, “North State Deli will have a significant impact on coverage litigation in North Carolina. Not only does the opinion open the door to significant COVID-19 claims and litigation surrounding the same, but also potentially expands the breadth of the reasonable expectations doctrine in the state. Attorneys, policyholders and insurance professionals will need to be cognizant of the effect of this opinion on their claims, both as it relates to COVID-19 and beyond.”

READ THE FULL ARTICLE HERE (SUBSCRIPTION REQUIRED)

MORE ABOUT DAVID L. BROWN:

David serves as co-chair of the Global Insurance Services practice group, as he represents insurers and insurance brokers in complex disputes throughout the country in matters involving environmental claims, construction defect claims, broker/agent issues, and directors’ and officers’ liability coverage. He has also handled very large and complex property coverage matters involving fires and other catastrophic losses as well as product liability claims for clients in multiple industries. David is regularly called upon to represent insurers and brokers with respect to their most sensitive matters involving their business practices and their institutional interests. He is also a certified mediator and maintains an active mediation practice.

In addition to being nationally recognized as an insurance expert, David has been consistently recognized by his peers and by judges as a preeminent trial and appellate lawyer. David has tried more than 75 cases to verdict and has been lead counsel in over 50 appeals to state and federal appellate courts. Highly regarded among his colleagues, he is rated AV Preeminent—the highest possible rating—by Martindale-Hubbell.

MORE ABOUT ALEXANDER E. DAVIS:

Alex is an accomplished litigator who focuses his practice on counseling and defending clients in complex insurance coverage and bad faith matters. Alex advises national insurers and other clients about property, casualty, commercial general liability, professional liability, and other policies. He routinely represents clients in declaratory judgment actions to determine coverage under insurance policies and other contracts as well as in bad faith claims and other contractual and extra contractual claims. He also counsels clients in alternative dispute resolution proceedings, including mediations and arbitrations.

In addition to his insurance practice, Alex has more than 10 years of experience representing clients in a variety of general liability and commercial tort claims, including personal injury, product liability, and premises liability actions. He also has extensive experience in construction litigation, representing design professionals, contractors, subcontractors, and developers in complex claims, as well as providing non-litigation support and advice. He has successfully litigated cases at all levels of state trial and appellate courts, as well as in federal trial and appellate courts.