The federal district court in North Carolina dismissed the insured’s complaint for losses caused by the COVID-19 pandemic but granted leave to amend the complaint. The Durham Wood Fired Pizza Company LLC, et al. v. The Cincinnati Ins. Co., 2025 U.S. Dist. LEXIS 250083 (M.D. N.C. Dec. 4, 2025).
Plaintiffs were four restaurants who were forced to close based on government shut down orders during the COVID-19 pandemic. The plaintiffs filed business interruption claims under their commercial property policies with Cincinnati Insurance. Cincinnati denied the plaintiffs’ claims because there was no direct physical loss or damage.
The restaurants sued Cincinnati. While the case was pending, the North Caroline Supreme Court held that the business interruption clause at issue did cover losses caused by COVID-era government policies. North State Deli, LLC v. Cincinnati Ins Co., 386 N.C. 733, 908 S.E. 2d 802 (2024). Even though North State Deli allegedly resolved the coverage dispute, the parties did not resolve the claims at issue here. Plaintiffs continued to pursue their claims for (1) declaratory judgment; (2) breach of contract; (3) breach of the implied covenant of good faith and fair dealing; and (4) violations of the North Carolina Unfair and Deceptive Trade Practices Act. Cincinnati moved to dismiss the breach of the implied covenant of good faith and fair dealing and the unfair trade practices causes of action for failure to state a claim.
Turning the breach of the implied covenant of good faith and fair dealing claim, the plaintiffs alleged that Cincinnati denied their claims in bad faith because it made a company-wide decision to deny all coronavirus-related business interruption claims without conducting an individual investigation into such claims. The plaintiffs however, did not allege that an investigation would have turned up any facts that would have affected Cincinnati’s decision on their claims.
Reasonable disagreement did not amount to a breach of the duty of good faith and fair dealing. To the extent the plaintiffs’ breach of the implied covenant of good faith and fair dealing claim was based on the denial of coverage decision, it did not state a claim. The complaint gave no facts setting forth any explanations Cincinnati gave for continuing to refuse to pay the plaintiffs’ claims. The conclusory allegations in the complaint were insufficient to state a claim for breach of the duty of good faith and fair dealing,
Plaintiffs’ brief suggested that there may be facts related to the claim denied beyond those alleged in the complaint. Therefore, the court allowed the plaintiffs ten days to file an amended complaint alleging more facts.
Regarding the claim for unfair trade practices, the plaintiffs alleged that Cincinnati failed to implement reasonable standards for investigating their claims, refused to conduct a reasonable investigation before denying their claims, failed to affirm or deny coverage of their claims within a reasonable amount of time and did not make good faith efforts to promptly settle their claims after North State Deli made liability reasonably clear.
The facts alleged, however, did not support a plausible inference that the way Cincinnati carried out its investigation proximately caused the plaintiffs’ alleged injuries. Similarly, the allegations about how long it took Cincinnati to process their claims did not plausibly state a claim. The plaintiffs alleged only that despite settlement negotiations, Cincinnati did not pay their claims in full. There was no mention, for example, of what amounts, if any, Cincinnati offered to pay, if any, or what terms or conditions it imposed on such payment.
As with the breach of the implied covenant claim, the court gave plaintiffs ten days to file an amended complaint supplementing its factual allegations on the post-North State Deli unfair trade practices claim.