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Law360 (April 13, 2021, 6:26 PM EDT ) North Carolina franchisees of Hand and Stone Massage and Facial Spa can't get any relief under their communicable disease coverage with West Bend Mutual Insurance Co. for pandemic-related losses, a federal judge ruled Tuesday, saying the coronavirus wasn't present at their spas.
U.S. District Judge Richard E. Myers II threw out a business interruption suit by the owners of eight Hand and Stone spas in North Carolina. The massage and spa owners can't show that Gov. Roy Cooper's shutdown order triggered West Bend's communicable disease coverage, he said.
"Because the communicable disease provision makes clear that covered losses must result from a suspension of operations that took place 'due to an outbreak of [e.g., COVID-19] at the insured premises,' plaintiffs' failure to plausibly allege the presence of COVID-19 at any specific place is fatal," he said.
The Hand and Stone franchisees filed suit in the Wake County Superior Court in August 2020, alleging West Bench wrongfully denied coverage for their losses from closing the eight massage and facial spas. The spas were covered for the losses tied to North Carolina's shutdown due to the COVID-19 outbreak, according to the suit, which was removed to the Eastern District of North Carolina.
In Tuesday's ruling, Judge Myers sided with West Bend, finding that Cooper's order didn't mention any specific case of COVID-19 but rather said there was an emergency statewide. While COVID-19 is arguably a communicable disease, the judge said there wasn't any example of its presence at the spas.
Judge Myers held that the Hand and Stone franchisees can't save coverage by arguing the coronavirus was everywhere at the time Governor Cooper's order was issued. The political territories referenced in the shutdown order aren't "insured premises" under the communicable disease coverage, the judge said.
Representatives for the parties didn't respond to requests for comment.
The Hand and Stone franchisees are represented by W. Stacy Miller II of Miller Law Group PLLC.
West Bend is represented by Steven A. Bader and Jennifer A. Welch of Cranfill Sumner & Hartzog LLP.
The case is Blue Coral LLC et al. v. West Bend Mutual Insurance Co., case number 5:20-cv-00496, in the U.S. District Court for the Eastern District of North Carolina.
--Editing by Haylee Pearl.
For a reprint of this article, please contact reprints@law360.com.
