Civil-authority “stay-at-home” orders issued in the wake of the COVID-19 pandemic were just one layer of the outbreak’s sweeping impact on people and businesses worldwide.
The pandemic has resurfaced in North Carolina in another way – policyholders have invoked a North Carolina Supreme Court decision to rehash cases that have already been adjudicated with finality.
During the COVID-19 pandemic, countless commercial policyholders throughout the United States claimed “stay-at-home” orders as a basis for triggering business income coverage under their commercial property policies. Some policies explicitly exclude coverage for loss arising from a virus. See Cato Corp. v. Zurich American Insurance Co., 386 N.C. 667, 909 S.E.2d 144 (N.C. Dec. 13, 2024). But for many claims, the seminal coverage issue turned on relevant policy provisions requiring “direct physical loss” caused by a “covered cause of loss” – did the potential or alleged presence of COVID-19 constitute “direct physical loss?” Prior to the Supreme Court of North Carolina’s decision in North State Deli, LLC v. The Cincinnati Insurance Company, 386 N.C. 733, 908 S.E.2d 802 (N.C. Dec. 13, 2024) (defining “direct physical loss” broadly to include loss of use due to civil authority orders), most courts nationwide—including many federal courts and lower state courts in the Tar Heel State—answered the question in the negative.
Considering North State Deli, can other policyholders now undo earlier adverse North Carolina coverage decisions? Likely not. Although both the North Carolina and Federal Rules of Civil Procedure allow certain relief from final judgments, one federal district court recently found that a change in decisional law does not warrant disturbing the finality of a prior judgment. In Golden Corral Corp. v. Ill. Union Ins. Co., No. 5:20-CV-349-D, 2025 WL 1399989 (E.D.N.C. May 14, 2025), the policyholders argued that North State Deli required the court to vacate its prior judgment on the pleadings pursuant to Federal Rule of Civil Procedure 60(b)(6).
However, to obtain the catchall relief offered by Rule 60(b)(6), a party must demonstrate “extraordinary circumstances.” In Golden Corral, the court emphasized that the policyholders’ circumstances did not justify disregarding the “weighty consideration” of judicial finality and concluded that a change in decisional law did not meet the “extraordinary circumstances” standard required to warrant relief under Rule 60(b)(6). Although Golden Corral is persuasive rather than binding authority, it offers insight into how other North Carolina courts considering similar motions for relief from prior coverage decisions may similarly prioritize finality under applicable law.
