State Courts Say There Is No COVID-19 Loss Insurance for Restaurants | Company
COLUMBIA, SC (AP) — The South Carolina Supreme Court ruled Wednesday that a sports bar chain cannot recover damages from its insurance policy relating to the COVID-19 pandemic and subsequent shutdown.
The decision in Sullivan Management, LLC v. Fireman’s Fund Insurance Company is the latest victory for insurers, as the nation’s high courts routinely side with them in such disputes. The rulings serve as a cautionary tale about the scope of all-risk policies for local business owners, who are seeing the windows of such pandemic-related lawsuits closing.
The Iowa Supreme Court ruled in April that two restaurants could not collect damages for business lost following the governor’s indoor dining order. The Massachusetts High Court issued a similar decision the same month. In June, a Connecticut state judge dismissed a case from the Mohegan Tribal Gaming Authority. And more than a dozen restaurants lost a similar lawsuit in July in the North Carolina Court of Appeals.
In South Carolina, the court accepted the insurance company’s argument that there must be “physical alteration, destruction, or permanent dispossession of property” to make an insurance claim. Inability to use the property is not sufficient to trigger coverage.
“Fireman’s Fund is pleased that the South Carolina Supreme Court has found, like nearly every other appellate court in the nation, that neither the presence of the COVID-19 virus nor government shutdown orders cause loss or harm. physical damage under its property insurance policy,” Brett Ingerman, an attorney for the insurance company, said in a statement.
Lawyers for Sullivan Management, owner of the Carolina Ale House franchise, disputed that point. They argued that the policy, which did not clearly define “physical loss” and “physical damage”, covered losses incurred when the property became “unfit or unusable for its purpose”.
Since the policy covers the costs necessary to “mitigate, contain, remediate, treat (and) test” communicable diseases, restaurant owners argued they should have been able to collect the insurance payments.
Justin Lucey, who represented the restaurant chain, noted that the judges issued district court rulings on several of the “most controversial” policy terms. This includes the issue of communicable disease coverage.
In March 2020, Republican Governor Henry McMaster signed an executive order banning indoor dining. In May he lifted the restrictions and in October he allowed restaurants to open at full capacity.
In many cases, the window for this dispute also closes. Most policies have a two-year statute of limitations, according to the Insurance Coverage Law Center.