4th Circuit appellate court rules against art studio operator in BI case

The 4th U.S. Circuit Court of Appeals, in its first decision on the issue, joined its sister circuits on Monday in ruling against a policyholder in a COVID-19 business interruption case.

The Richmond, Virginia-based court ruled against Uncork and Create LLC, which operates art studios in Barboursville and Charleston, West Virginia, in a lawsuit filed against Cincinnati Insurance Co. seeking compensation for its COVID-19 business interruption losses, according to the ruling in Uncork and Create LLC v. The Cincinnati Insurance Co. et al.

In upholding a decision by the U.S. District Court in Charleston, a three-judge appeals court panel said the policy defines covered loses as “direct,” “accidental physical loss or accidental physical damage.”

“This policy language is plain and unambiguous,” the decision said. “The need to repair, rebuild, replace, or expend time securing a new, permanent property is a precondition for coverage of lost business income and other expenses.”

“Any alternative meaning of the terms ‘physical loss’ or ‘physical damage’ that does not require a material alteration to the property would render meaningless this pre-condition to coverage for business income loss,” the ruling said.

“Here, neither the closure order nor the COVID-19 virus caused present or impending material destruction or material harm that physically altered the covered property,” said the ruling, which referred to the eight other appeals courts that have held similarly.

Cincinnati Insurance said in a statement, “We thank the court for its careful consideration of this case and are pleased with its decision affirming our commercial property insurance policy does not provide coverage for these COVID-19 losses. “

Plaintiff attorneys did not respond to a request for comment.

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