South Carolina top court rejects insurance coverage for COVID losses

A sign at a store informs customers that face masks are required upon entry. Picture taken on May 2, 2022. REUTERS/David 'Dee' Delgado
  • South Carolina Supreme Court rules restaurants not entitled to coverage for COVID-19 losses
  • Massachusetts, Iowa and Wisconsin top courts reached similar conclusions

(Reuters) - South Carolina's highest court on Wednesday became the fourth state's top court to conclude that businesses' insurance policies do not cover losses they suffered during the COVID-19 pandemic and government-imposed gathering restrictions.

The South Carolina Supreme Court ruled that the presence of COVID-19 in or near restaurants belonging to the Carolina Ale House franchise and ensuing state prohibitions on indoor dining did not trigger coverage under its commercial property insurance policy.

The restaurants' owner, Sullivan Management LLC, argued the presence of COVID-19 and the 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.

Register now for FREE unlimited access to

Those orders included one Republican Governor Henry McMaster issued in March 2020, at the onset of the pandemic before vaccines were developed, prohibiting on-site dining in restaurants to curb the spread of coronavirus.

But Justice Kaye Hearn, writing for a unanimous 5-0 court, said the "mere loss of access to a business is not the same as direct physical loss or damage," and that instead the damage needed to be "something material and tangible" needing repair.

Justin O'Toole Lucey, a lawyer for Sullivan, in an email said he was "very disappointed," saying the "the court’s analysis ultimately violates a canon of insurance contract construction – in favor of the insurance industry – to the detriment of South Carolina insureds."

Brett Ingerman, a lawyer for Fireman’s Fund at DLA Piper, in a statement said his client was pleased the court had reached the same conclusion as "nearly every other appellate court in the country."

Hearn in her ruling noted her decision was in keeping with most federal and state courts that have weighed in on the "tidal wave" of cases by businesses attempting to force insurers to cover the billions of dollars in losses they suffered during the pandemic.

Those include a growing number of state high courts, which have the final word on how to interpret their state's insurance laws. The highest courts of Massachusetts, Iowa and Wisconsin like South Carolina's have ruled for 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 questions of state law to the state's highest court to address.

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

For Sullivan: Justin O'Toole Lucey of Lucey Law Firm

For Fireman's Fund: Brett Ingerman of DLA Piper

Read more:

Wisconsin top court rejects insurance coverage for COVID losses

Iowa top court latest to reject insurance coverage for COVID biz losses

In a first, Massachusetts top court rejects insurance for COVID business losses

Register now for FREE unlimited access to

Our Standards: The Thomson Reuters Trust Principles.

Thomson Reuters

Nate Raymond reports on the federal judiciary and litigation. He can be reached at