Court Opinion

ID: 6497645
Source: CourtListenerOpinion
Date Created: 2022-07-05 12:06:33.207159+00
Date Added: 2024-06-11T09:07:28.847086
License: Public Domain

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.
                    NORTH STATE DELI, LLC V. THE CINCINNATI INSURANCE CO.

                                             2022-NCCOA-455

                                            Opinion of the Court

           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.
                  NORTH STATE DELI, LLC V. THE CINCINNATI INSURANCE CO.

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                                        Opinion of the Court

     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,

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

     Amendment to Declaration of State of Emergency in the City of Durham (Mar. 25, 2020).
                  NORTH STATE DELI, LLC V. THE CINCINNATI INSURANCE CO.

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                                       Opinion of the Court

     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
                    NORTH STATE DELI, LLC V. THE CINCINNATI INSURANCE CO.

                                           2022-NCCOA-455

                                          Opinion of the Court

       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.
                    NORTH STATE DELI, LLC V. THE CINCINNATI INSURANCE CO.

                                          2022-NCCOA-455

                                         Opinion of the Court

       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
                    NORTH STATE DELI, LLC V. THE CINCINNATI INSURANCE CO.

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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.