A Hawai‘i appeals court has given new life to Tiki’s Grill & Bar’s legal battle over its business interruption insurance claim related to the COVID-19 pandemic. On October 29, the state’s Intermediate Court of Appeals overturned a previous ruling that had favored the insurer, DTRIC Insurance Company, and sent the case back for more review.
The dispute started in March 2020 when the owner of the Aston Waikiki Beach Hotel, where Tiki’s Grill & Bar is located, blocked all entrances and exits to the hotel. This action stopped employees and customers from entering the restaurant, even though government orders at the time still allowed carryout and delivery. Because of this, Tiki’s couldn’t operate and lost business.
Tiki’s had an insurance policy with DTRIC that covered lost income when a business had to shut down due to physical loss or damage to the property on the premises. After being locked out, Tiki’s filed a claim for their business interruption losses. DTRIC denied the claim, arguing that the shutdown was due to government orders, not physical damage, and pointed to a virus exclusion in the policy, which barred coverage related to viruses.
Tiki’s challenged this, saying the physical boarding up of the premises by the hotel owner was a direct physical loss, and that the loss was not caused by the virus or government orders. The appeals court took a close look at the insurance policy language. It decided that “physical loss” and “damage” should be understood as separate concepts. The court said that physically blocking access could count as a loss of the property itself under the policy.
Regarding the virus exclusion, the court noted that the insurer had not proven the exclusion clearly applied since the loss came from the physical barrier, not from the virus directly.
The court found there was a real dispute over the facts about whether the business interruption was caused by direct physical loss. Therefore, it removed the previous summary judgment that favored the insurer and sent the case back to the lower court.
This decision does not guarantee Tiki’s will win in the end. However, it highlights that loss of access to insured property due to physical barriers might qualify for coverage under some business interruption policies. It’s an important ruling as other businesses and insurers look at similar pandemic-related claims. The case will continue to unfold in court, with attention on the specific wording of policies and the details of each situation.