A lawsuit filed in North Carolina against insurers for the denial of business interruption coverage is “one to watch” in the US because it could set the tone for similar legal action, according to a law firm.

The approach taken in some cases filed in other jurisdictions allege that government shutdown orders were issued in direct response to evidence of physical damage to property, and so loss of income should be covered under business interruption insurance.

But Jennifer Welch, a litigation and insurance coverage attorney at law firm Cranfill Sumner and Hartzog, said the approach taken in the North Carolina lawsuit – filed by a group of restaurants and bars against various insurers – is quite different.

It means how the case is judged will be of interest both to insurers and the legal community.

“Some of the policies at issue allegedly exclude coverage for losses ’caused directly or indirectly by . . .  virus’, while others do not.

“According to the complaint, however, none of the policies exclude coverage ‘for damages caused by public fear and commotion and/or governmental action implemented in an effort to prevent the arrival of the virus or to mitigate the spread of the virus as opposed to damages caused by the virus itself.’

“The complaint seeks a declaratory judgment that coverage exists under the policies, but it does not include claims for bad faith.

“This case could set the tone for similar lawsuits that may be filed in North Carolina in the coming months,  so it will definitely be one to watch.”