South Carolina Supreme Court rejects insurance coverage for COVID losses

A sign in a store informs customers that face masks are required upon entry. Picture taken on May 2, 2022. REUTERS/David ‘Dee’ Delgado

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  • South Carolina Supreme Court Rules Restaurants Not Entitled to Coverage for COVID-19 Losses
  • High courts in Massachusetts, Iowa and Wisconsin have reached similar conclusions

(Reuters) – The South Carolina Supreme Court on Wednesday became the fourth state high court to conclude that businesses’ insurance policies did not cover losses they suffered during the COVID-19 pandemic and government-imposed collection restrictions.

The South Carolina Supreme Court has ruled that the presence of COVID-19 in or near restaurants belonging to the Carolina Ale House franchise and the resulting state indoor dining bans do not trigger coverage under a commercial property insurance policy.

The restaurants’ owner, Sullivan Management LLC, argued the presence of COVID-19 and government orders qualified as “direct physical loss or damage” to its properties under a policy issued by units of Allianz SE, including Fireman’s Fund Insurance Co.

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Those orders include one by Republican Gov. Henry McMaster, issued in March 2020, early in the pandemic, before vaccines were developed, banning sit-in dining in restaurants to limit the spread of the coronavirus.

But Justice Kay Hearn, writing for a unanimous 5-0 court, said that “mere loss of access to a business is not the same as direct physical loss or damage” and that instead the damage must be “something material and tangible” in need of repair .

Justin O’Toole Lucey, an attorney for Sullivan, said in an email that he was “very disappointed,” saying that “the court’s analysis ultimately violates the canon of insurance contract construction — to the benefit of the insurance industry — to the detriment of South Carolina insured.”

Brett Ingerman, an attorney for the Fireman’s Fund at DLA Piper, said in a statement that his client was pleased that the court reached the same conclusion as “almost every other appellate court in the country.”

In her ruling, Hearn noted that her decision was consistent with most federal and state courts that have affected the “tidal wave” of lawsuits by firms trying to force insurers to cover billions of dollars in losses they suffered during the pandemic. .

These include a growing number of state supreme courts, which have the final say on how to interpret state insurance laws. The high courts of Massachusetts, Iowa and Wisconsin, like those of South Carolina, ruled in favor of the insurance companies.

The South Carolina Supreme Court took up the case at the request of a federal judge hearing Sullivan’s case, who had certified the state law issues to the state’s highest court for review.

The case is Sullivan Management LLC, v. Fireman’s Fund Insurance Co, Supreme Court of South Carolina, No. 2021-001209.

For Sullivan: Justin O’Toole Lucey of the Lucey Law Firm

For Fireman’s Fund: Brett Ingerman of DLA Piper

Read more:

Wisconsin Supreme Court rejects insurance coverage for COVID losses

The Iowa Supreme Court most recently rejected insurance coverage for business losses from COVID

For the first time, the Massachusetts Supreme Court rejects insurance for business losses due to COVID

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Nate Raymond

Thomson Reuters

Nate Raymond reports on the federal court system and litigation. He can be reached at nate.raymond@thomsonreuters.com.