A North Carolina court says Tanger Properties can sue its insurers for denying COVID-19 business interruption claims – putting pandemic coverage back in the spotlight.
Tanger Properties Limited Partnership, which owns and operates 39 outlet centers across 20 states, has brought a lawsuit against ACE American Insurance Company and Liberty Mutual Fire Insurance Company after both insurers denied coverage for losses allegedly suffered during the COVID-19 pandemic. The dispute centers on “all-risk” commercial property insurance policies, which Tanger argues should have covered its business interruption and property losses resulting from government orders that restricted business activities and mandated closures at its locations.
After Tanger submitted its claims, both ACE and Liberty Mutual denied coverage. The insurers asserted that Tanger had not established any direct physical loss or damage to property and that the claimed losses were excluded under the policies. Tanger, in response, pointed to the language in its policies, which insured “against all risks of direct physical loss of or damage to property described herein.” The policies did not contain a choice of law provision specifying which state’s law would apply to coverage disputes, but did include a clause stating that the insurer would submit to the jurisdiction of any competent court within the United States at the insured’s request.
The court’s decision, issued on Oct. 27, focused on whether North Carolina law should govern the interpretation of the insurance policies. North Carolina is the only state whose courts have interpreted similar policy provisions as providing coverage for business income lost when government orders deprived businesses of the ability to physically use and operate their premises during the pandemic. The court concluded that North Carolina law should apply, citing Tanger’s status as a North Carolina limited partnership headquartered in Greensboro, as well as its business operations and customer base in the state.
Tanger’s lawsuit includes claims for breach of contract, breach of the implied covenant of good faith and fair dealing, and unfair and deceptive trade practices. The company alleges that the insurers wrongfully denied coverage and failed to reconsider their denial after the North Carolina Supreme Court issued a decision clarifying that, under an all-risk policy with no virus exclusion, coverage exists for business income lost due to government orders related to the pandemic.
With the court denying the insurers’ motion to dismiss, Tanger’s claims against ACE and Liberty Mutual will proceed. The case will address whether the insurers wrongfully denied coverage for pandemic-related business interruption and property losses under the “all-risk” commercial policies. The outcome may have implications for how similar claims are handled and how policy language is interpreted in future coverage disputes involving widespread business disruptions.
The case will now proceed to further hearings.
