Despite 2024 Ruling, Appeals Court Won’t Budge in Golden Corral COVID Case

The North Carolina Supreme Court in 2024 famously bucked the trend on COVID-19 business-interruption coverage, finding that an insurer owed coverage to a restaurant that was forced to close during the pandemic.

But that ruling is not enough to overturn a federal court decision in a similar case involving Golden Corral restaurants and Illinois Union Insurance Co., the U.S. 4^th Circuit Court of Appeals said this week.

Unless the circumstances are truly extraordinary, a federal court rule that allows a higher court to set aside a judgment “cannot outweigh the fundamental principle of finality of judgments,” Appeals Court Judge Nicole Berner wrote in the July 15 opinion.

“…Though Rule 60(b)(6) permits courts to make exceptions to finality, this unusual relief may be granted only when ‘appropriate to accomplish justice,'” the opinion reads, quoting from a 1949 federal court decision.

Golden Corral, one of the largest U.S. restaurant chains, lost its business-interruption lawsuit in 2021. A federal district court in the Eastern District of North Carolina ruled that the restaurant’s insurance policy, written by Illinois Union, a Chubb subsidiary, did not provide coverage for losses incurred as a result of COVID-19 closure mandates. That ruling was in line with the vast majority of COVID court decisions across the country, which have found that most policies covered only those losses caused by physical damage, and a virus and a government mandate were not physical damage.

But in 2024, the North Carolina Supreme Court surprised the insurance industry by finding the opposite. In North State Deli vs. The Cincinnati Insurance Co., the court found that “a reasonable policyholder in the restaurants’ shoes could expect ‘direct physical loss’ to property, as used in this policy, to include the results of COVID-19-era government orders which affected the restaurants’ use of and access to their physical property.”

Golden Corral used that to ask the 4^th Circuit to tap Rule 60(b)(6) to review the lower federal court’s 2021 decision, arguing that the North State Deli circumstances were very similar. But the appellate judges declined to overturn the district court.

The North State Deli case involved different parties, different circumstances, a different insurance policy wording and different injuries, the panel noted.

Timing was also part of the equation, the appeals court noted.

“Had the North Carolina Supreme Court handed down its ruling in North State Deli before the district court ruled on Illinois Union’s motion for judgment on the pleadings, the district court may well have reached a different conclusion,” the 4^th Circuit panel wrote. “Unfortunately for Golden Corral, the timing was not in its favor.”

In denying Golden Corral’s Rule 60(b)(6) motion, “the district did not act in an arbitrary manner, nor did it fail to consider any judicially recognized factors or rely on erroneous factual or legal premises. Accordingly, we find no abuse of discretion.”