MYRTLE BEACH, S.C. (WBTW) — A South Carolina restaurant franchise can’t say that COVID-19 caused physical damage to its businesses, according to an answer Wednesday from the South Carolina Supreme Court.
The decision stems from five questions posed to the state court regarding language in the insurance policy for Sullivan Management, LLC, which owns Carolina Ale House. The supreme court issued an answer to the “certified question” regarding physical damage but said the other four should be answered by other courts.
Carolina Ale House has a handful of locations in South Carolina, including in Myrtle Beach. It also has restaurants in North Carolina, Georgia, Florida and Tennessee.
The court heard arguments in the case on June 8, and published its decision Wednesday morning.
Sullivan Management filed a claim with Fireman’s Fund Insurance Company and Allianz GLOBAL Risks US Insurance Company stating that Gov. Henry McMaster’s March 2020 executive order temporarily barring indoor restaurant dining falls under the insurance policy’s criteria for “direct physical loss or damage” and caused it to lose profits. The claim was denied.
“Physical loss or damage” has to be “discernable,” the court stated, citing different dictionaries’ interpretations of terms.
“The contention that a government shut-down order caused direct physical loss or damage is meritless,” the court wrote. “While the order prohibiting indoor dining certainly affected Sullivan’s financial well-being, the order itself was not directly physical.”
The company argued that the presence of virus particles counts as physical damage, according to the ruling. However, the court said that “loss connotates destruction.”
“While Sullivan took steps to mitigate the spread, such as increasing cleaning or installing plexiglass, these acts are different than restoring damaged or loss property,” the ruling reads. “In other words, Sullivan had nothing to ‘repair, replace, or rebuild[,]’ thus further demonstrating that direct physical loss or damage requires something material and tangible.”
The South Carolina Supreme Court is aware of “the tidal wave of litigation” hitting other circuits nationwide regarding if the loss of income from the shutdowns fall under insurance plans, according to the ruling.