Stein, hospitality group seek argument time in COVID insurance case

Both the North Carolina attorney general and the state Restaurant and Lodging Association hope to take part in an upcoming oral argument at the state’s highest court. The case deals with a dispute over insurance coverage for restaurant business losses during COVID pandemic shutdowns.

North State Deli v. The Cincinnati Insurance Company is the first of eight COVID-related cases the North Carolina Supreme Court will hear on Oct. 22-23. Sixteen restaurants operating across North Carolina are asking the high court to overturn a decision from the state Appeals Court. The businesses want Supreme Court justices to restore a trial judge’s decision that “business interruption” insurance policies covered restaurant losses related to the pandemic and government shutdown orders.

State Attorney General Josh Stein’s office filed a motion Tuesday asking for five minutes of argument time during the North State Deli case. Neither the plaintiffs nor defendants agreed to give up any of their 30 minutes in the hour-long argument. The attorney general’s request would require the Supreme Court to extend the case’s argument time by five minutes.

“The Attorney General has statutory authority to enforce our State’s consumer protection and fair competition laws,” according to the motion filed by Solicitor General Ryan Park. “Hearing the Attorney General’s views on the important consumer‐protection issues in this case may therefore assist the Court.”

If the state Supreme Court agrees to extend argument time to accommodate the attorney general, Solicitor General Fellow Kaeli Czosek would make her first argument at North Carolina’s highest Court.

On the same day that Stein’s office submitted its request, the North Carolina Restaurant and Lodging Association and Restaurant Law Center filed a separate motion. Those groups also hope to take part in the North State Deli case. Plaintiffs in the case agreed to give up five minutes of argument time for the restaurant groups.

The association and law center filed an amicus, or friend-of-the-court, brief in the case.

“Restaurant Amici’s argument would assist this Court in understanding the property insurance policy language at issue in this case — ‘direct physical loss’ — and the practical implications of ruling in favor of Defendant-Appellees, and thereby holding that the ordinary meaning of that policy language provides no coverage for the government-mandated shutdown orders that caused unprecedented damage to the hospitality industry,” according to the motion.

“While the pandemic’s devastating impact was unprecedented, the underlying risks — specifically, the virus and resulting Government Orders — were foreseeable,” the restaurant groups argued. “The hospitality industry and insurers like the Defendant-Appellees, who design property policies specifically for hospitality businesses, were well aware of these risks. Hospitality policyholders have a reasonable expectation that their coverage will protect against such known risks, and they would never agree to forgo this protection.”

The defendant insurance company in the case chose not to include a specific provision in its policy to “exclude virus-related perils from coverage,” the restaurant groups argued.

“Not only do this Court’s precedents make clear that the absence of an exclusion is relevant to determining the scope of coverage, additionally, insurers nationally have admitted that the lack of a virus exclusion evinces an intent to cover related risks,” the motion continued. “Virus-related causes of loss are ever-present on the minds of those operating hospitality businesses. A court-made rule ignoring an insurer’s choice to omit a virus exclusion would disrupt the expectations of thousands of restaurants and hotels that purposefully purchase policies omitting such exclusions — as Plaintiff-Appellants did here.”

There is no deadline for the state Supreme Court to decide whether the attorney general and restaurant groups can take part in the Oct. 22 argument.