A Raleigh restaurant owner has filed a class action lawsuit against an insurance carrier that has repeatedly denied interruption coverage to businesses that were shuttered because of COVID-19.
Ashley Christensen filed the lawsuit against Cincinnati Insurance Co. in the U.S. District Court for the Eastern Division of North Carolina on March 15, on behalf of herself and all North Carolina businesses that have business interruption coverage with Cincinnati Insurance.
Christensen was forced to close all of her restaurants and her payroll shrank from 300 employees to around 50, said Gagan Gupta, an attorney with Paynter Law in Raleigh. She contends that Cincinnati hasn’t paid and never had any intent to pay claims billed by businesses that closed because of the pandemic, and “Cincinnati’s premeditated strategy to deny all COVID-19-related claims applies even where an insured’s policy has no virus exclusion.”
Cincinnati has contended that the interruption coverage doesn’t apply because the businesses didn’t suffer actual physical damages or losses due to COVID-19. In an October ruling in favor of 16 other North Carolina restaurants, Durham County Superior Court Judge Orlando Hudson disagreed, saying that a direct “physical loss” is a scenario in which business owners and their employees, customers, vendors, suppliers, and others lose the full range of rights and advantages of using or accessing their business properties.
“This is precisely the loss caused by the government orders,” Hudson wrote. “Plaintiffs were expressly forbidden by government decree from accessing and putting their property to use for the income-generating purposes for which the property was insured. These decrees resulted in the immediate loss of use and access without any intervening conditions. In ordinary terms, this loss is unambiguously a ‘direct physical loss,’ and the policies afford coverage.”
Hudson’s ruling on the restaurant owners’ motion for summary judgment was the first favorable one in the country for business owners who are suing insurers that are refusing to pay for losses due to the pandemic, Gupta said. Cincinnati has appealed Hudson’s ruling, Gupta said.
A representative for Cincinnati declined to comment on the lawsuit.