NORTH STATE DELI, LLC d/b/a Lucky's Delicatessen

v.

The CINCINNATI INSURANCE COMPANY

Notice: Pursuant to Rule 32(b), North Carolina Rules of Appellate Procedure, this decision is not final until expiration of the twenty-one day rehearing period.

DILLON, Judge.

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

Plaintiffs are sixteen (16) North Carolina restaurants insured by Defendants under the Policies. The issue in this case is whether Plaintiffs are entitled to insurance coverage under their Policies for the business losses they incurred due to the COVID-related shutdowns.

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.

The Policies provide that "Loss" means "accidental physical loss or accidental physical damage."

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. 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.

In May 2020, Plaintiffs sought coverage from Defendants under their Policies for loss of income and expenses from their reduced or stopped business operations, filing a motion for partial summary judgment. Defendants disputed coverage and filed a Rule 12(b)(6) motion to dismiss.

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

"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

"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 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).

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).

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. We considered a similar issue in Harry's Cadillac-Pontiac-GMC Truck Co. v. 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.

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.

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 judgment to Plaintiffs on their First Claim for Relief.

III. Conclusion

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.