IN THE COURT OF APPEALS OF NORTH CAROLINA

2022-NCCOA-455

No. COA21-293

Filed 5 July 2022

Durham County, No. 20 CVS 02569

NORTH STATE DELI, LLC d/b/a LUCKY’S DELICATESSEN, MOTHERS & SONS, 

LLC d/b/a MOTHERS & SONS TRATTORIA, MATEO TAPAS, L.L.C. d/b/a MATEO 

BAR DE TAPAS, SAINT JAMES SHELLFISH LLC d/b/a SAINT JAMES SEAFOOD, 

CALAMARI ENTERPRISES, INC. d/b/a PARIZADE, BIN 54, LLC d/b/a BIN 54, 

ARYA, INC. d/b/a CITY KITCHEN and VILLAGE BURGER, GRASSHOPPER LLC 

d/b/a NASHER CAFE, VERDE CAFE INCORPORATED d/b/a LOCAL 22, FLOGA,

INC. d/b/a KIPOS GREEK TAVERNA, KUZINA, LLC d/b/a GOLDEN FLEECE, VIN 

ROUGE, INC. d/b/a VIN ROUGE, KIPOS ROSE GARDEN CLUB, LLC d/b/a 

ROSEWATER, and GIRA SOLE, INC. d/b/a FARM TABLE and GATEHOUSE 

TAVERN, Plaintiffs,

v.

THE CINCINNATI INSURANCE COMPANY; THE CINCINNATI CASUALTY 

COMPANY; MORRIS INSURANCE AGENCY INC.; and DOES 1 THROUGH 20, 

INCLUSIVE, Defendants.

Appeal by Defendants from order entered 9 October 2020 by Judge Orlando F. 

Hudson, Jr., in Durham County Superior Court. Heard in the Court of Appeals 9 

March 2022.

The Paynter Law Firm, PLLC, by Gagan Gupta and Stuart M. Paynter, for 

Plaintiffs-Appellees.

Brooks, Pierce, McLendon, Humphrey & Leonard, LLP, by Kimberly M. 

Marston, Jim W. Phillips, Jr., and Gary S. Parsons, for Defendants-Appellants.

Robinson & Cole LLP, by Roger A. Peters, II, for amici curiae American 

Property Casualty Insurance Association and National Association of Mutual 

Insurance Companies.
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Deputy Solicitor General Sarah G. Boyce for amicus curiae The State of North 

Carolina.

Kimberly M. Rehberg for amici curiae City of Charlotte, City of Durham, and 

Former State Commissioner of Insurance George Wayne Goodwin.

Robinson, Bradshaw & Hinson, P.A., by Richard C. Worf, Jr., and Covington 

& Burling LLP, by Allison Hawkins, for amicus curiae United Policyholders 

and National Independent Venue Association.

Crabtree Carpenter, PLLC, by Guy W. Crabtree, and Thompson Hammerman 

Davis LLP, by Gary S. Thompson and Kristin C. Davis, for amicus curiae North 

Carolina Restaurant & Lodging Association and Restaurant Law Center.

DILLON, Judge.

¶ 1 Defendants appeal from an Order Granting Plaintiffs’ Rule 56 Motion for 

Partial Summary Judgment. In this case, we must interpret provisions of Plaintiffs’ 

commercial insurance policies (the “Policies”). Because we conclude the unambiguous 

terms of the Policies did not provide the coverage Plaintiffs sought, we reverse the 

ruling below.

I. Background

¶ 2 Plaintiffs are sixteen (16) North Carolina restaurants insured by Defendants 

under the Policies.

1 The issue in this case is whether Plaintiffs are entitled to 

insurance coverage under their Policies for the business losses they incurred due to 

 

1 Each Plaintiff’s policy has identical relevant provisions.
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the COVID-related shutdowns. 

¶ 3 The Policies each contain a provision providing for the loss of the restaurants’ 

business income (“Business Income Provision”):

We will pay for the actual loss of “Business Income” . . . you 

sustain due to the necessary “suspension” of your 

“operations” during the “period of restoration”. The 

“suspension” must be caused by direct “loss” to property at 

a “premises” caused by or resulting from any Covered 

Cause of Loss.

¶ 4 The Policies provide that “Loss” means “accidental physical loss or accidental 

physical damage.”

¶ 5 In March of 2020, state and local government orders were issued in response 

to the COVID-19 pandemic (the “Governmental Orders”). The Governmental Orders 

restricted restaurant operations to carry-out/take-out and delivery operations only.2 

Following these orders, fourteen (14) of sixteen (16) Plaintiffs closed their restaurants 

completely. Two restaurants continued to operate under the Governmental Orders’ 

limitations until fully closing in May 2020. Plaintiffs decided to close their 

restaurants due to the financial repercussions of the Governmental Orders. 

¶ 6 In May 2020, Plaintiffs sought coverage from Defendants under their Policies 

for loss of income and expenses from their reduced or stopped business operations, 

 

2 See North Carolina Executive Orders No. 116-18, 120-21, 131; see also Second 

Amendment to Declaration of State of Emergency in the City of Durham (Mar. 25, 2020). 
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filing a motion for partial summary judgment. Defendants disputed coverage and 

filed a Rule 12(b)(6) motion to dismiss.

¶ 7 After hearing argument on the motions, the trial court entered judgment for 

Plaintiffs on their First Claim for Relief, which sought a declaratory judgment that 

“the Policies cover Business Income and Extra Expense . . . resulting from 

governmental action that forced Plaintiffs to suspend operations.” Plaintiffs’ First 

Claim for Relief did not seek damages or other relief. The trial court concluded that 

“the Policies provide coverage for Business Income and Extra Expenses for Plaintiffs’ 

loss of use and access to covered property mandated by the Governmental Orders as 

a matter of law.” Defendants appealed from the trial court’s Order Granting 

Plaintiffs’ Rule 56 Motion for Partial Summary Judgment (the “Order”).

II. Standard of Review

¶ 8 “In North Carolina, determining the meaning of language in an insurance 

policy presents a question of law for the Court.” Accardi v. Hartford Ins. Co., 373 

N.C. 292, 295, 838 S.E.2d 454, 456 (2020). We review these questions of law de novo

on appeal. Register v. White, 358 N.C. 691, 693, 599 S.E.2d 549, 552 (2004).

III. Analysis

¶ 9 “When interpreting an insurance policy, courts apply general contract 

interpretation rules. As in other contracts, the objective of construction of terms in 

an insurance policy is to arrive at the insurance coverage intended by the parties 
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when the policy was issued.” Accardi, 373 N.C. at 295, 838 S.E.2d at 456 (internal 

quotation marks and citation omitted). A court should construe a policy in accordance 

with its terms, but ambiguous terms are construed against the insurer and in favor 

of the policyholder. Id. at 295, 838 S.E.2d at 456. Ambiguity exists when a provision 

is “fairly and reasonably susceptible to either of the constructions for which the 

parties contend.” Wachovia Bank & Tr. Co. v. Westchester Fire Ins. Co., 276 N.C. 348, 

354, 172 S.E.2d 518, 522 (1970).

¶ 10 A term should be given its defined meaning if provided in the policy. Id. at 

354, 172 S.E.2d at 522. If a term is not defined within the policy, the court “must 

define the term in a manner that is consistent with the context in which the term is 

used, and the meaning accorded to it in ordinary speech.” Accardi, 373 N.C. at 295, 

838 S.E.2d at 457. “Care will be taken to give the various clauses of the policy an 

interpretation consistent with the main purpose of the contract[.]” Woodell v. Aetna 

Ins. Co., 214 N.C. 496, 499, 199 S.E. 719, 721 (1938).

¶ 11 Here, Defendants argue that the trial court erred in concluding that the 

Governmental Orders temporarily restricting the scope of their restaurant operations 

constituted direct physical loss or damage to the property. We agree for the reasoning 

below. Because this issue is dispositive in this case, we decline to address Defendants’ 

alternative argument.

¶ 12 We considered a similar issue in Harry’s Cadillac-Pontiac-GMC Truck Co. v. 
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Motors Ins. Co., 126 N.C. App. 698, 486 S.E.2d 249 (1997). That case involved 

potential customers who were unable to access the insured location due to a 

snowstorm blocking the entrance. Id. at 699, 486 S.E.2d at 250. Our Court concluded

there to be no coverage under a business interruption clause when the insured 

property was not “caused by direct physical loss of or damage to property at the 

premises” as required by the policy. Id. at 700, 486 S.E.2d at 251. 

¶ 13 Further, recent cases from the Fourth Circuit have agreed that similar or 

identical policy provisions do not provide coverage for business interruption losses 

due to COVID-19 governmental orders because there is no direct physical loss or 

damage to the insured property. See, e.g., Fs Food Group LLC v. Cincinnati Ins. Co., 

2022 US Dist. LEXIS 22598 (Feb. 8, 2022); Summit Hosp. Grp., Ltd. v. Cincinnati 

Ins. Co., 2021 U.S. Dist. LEXIS 40613 (E.D.N.C. Mar. 4, 2021). These cases involve 

the application of North Carolina law, and we find them persuasive.

¶ 14 We agree with these courts that the relevant provisions of the Policies are 

unambiguous. Plaintiffs did not allege that their loss resulted from physical harm to 

their property, but that the Governmental Orders resulted in loss of business. 

Plaintiffs’ desired definition of “physical loss” as a general “loss of use” is not 

supported by our caselaw or the unambiguous language in the Policies. According to 

the plain language of the Policies, only direct, accidental, physical loss or damage to 

the property is covered. Therefore, the trial court erred in granting partial summary 
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judgment to Plaintiffs on their First Claim for Relief. 

III. Conclusion

¶ 15 We reverse the trial court’s grant of partial summary judgment to Plaintiffs on 

their First Claim for Relief and direct the trial court to enter summary judgment in 

favor of Defendants on this claim.

REVERSED AND REMANDED.

Judges HAMPSON and WOOD concur.