Hunton Insurance Recovery Blog

The North Carolina business court recently handed a win to policyholders in a COVID-19 business interruption lawsuit arising from the pandemic-related closure of Tanger outlet centers across the country. Tanger Props. Ltd. P’ship v. ACE Am. Ins. Co., 2025 NCBC 66 (Oct. 27, 2025). Tanger’s insurers moved to dismiss the lawsuit on the basis that the insurance policies are governed by Georgia law, not North Carolina law, where the Supreme Court has held that all-risk policies must cover loss resulting from COVID-19 interruptions. Unpersuaded by the insurers, the court denied the motion finding that Tanger established a sufficiently close connection to North Carolina law.

Background

Tanger Outlets owns and operate thirty-nine outlet centers throughout twenty states and is headquartered in North Carolina. Tanger obtained coverage for its operations under all-risk policies, which insured against “all risks of direct physical loss of or damage to property described” in the policies and resulting business interruption loss.

Following the COVID-19 outbreak, governmental entities in the various states in which Tanger operates outlets issued orders restricting business activities. As a result, Tanger took action, including physically modifying its properties, temporarily shutting down locations and suspending business activities. Tanger provided notice of this loss to its insurers in April 2020. Its insurers denied coverage contending that Tanger did not sustain any direct physical loss of or damage to the property.

The North State Deli Decision

In late 2024, the Supreme Court of North Carolina issued an opinion in N. State Deli, LLC v. Cincinnati Insurance Co., in which it held that an all-risk insurance policy with no virus exclusion provided coverage for virus-related shutdowns due to government orders.

Following the decision, Tanger filed the coverage action against its insurers challenging their coverage denial. Tanger also sent a renewed demand letter to its insurers requesting reconsideration in light of the North State decision.

Thereafter, the insurers moved to dismiss Tanger’s claims.

The Motions to Dismiss

The Breach of Contract Claim

The insurers’ motion to dismiss focused on whether North Carolina law applied to the interpretation of the policies. The court explained that North Carolina courts consistently apply the principle of lex loci contractus in addressing conflict of law issues. The principle mandates the application of the substantive law of the state where the last act to make a binding contract occurred. The insurers argued that this act occurred in Georgia when Tanger’s broker received the policies and accordingly, mandated the application of Georgia law.

Tanger disagreed, arguing that N.C.G.S. § 58-3-1 mandated that the insurance contracting occurred in North Carolina and, thus, North Carolina law must apply to the dispute.  The statute provides in pertinent part:

All contracts of insurance on property, lives, or interest in this State shall be deemed to be made therein, and all contracts of insurance the applications for which are taken within the State shall be deemed to have been made within this State and are subject to the laws thereof.

The court noted that application of N.C.G.S. § 58-3-1 requires a close connection between North Carolina and the interest insured. The insurers argued that because only two of the thirty-nine outlets owned by Tanger are in North Carolina, there was not a close connection.

The court articulated and then analyzed the factors essential to determining whether the requisite close connection exists.  These factors include:

1. the extent of the insured’s operations/contacts in North Carolina;
2. whether the policy is a commercial policy;
3. the insurer’s awareness that it is insuring a North Carolina company;
4. whether the insurance policy contains a choice of law provision; and
5. whether the insurer is registered to do business in North Carolina.

The court explained that the greatest weight is placed on the first factor. Thus. the fact that Tanger’s headquarters is located in Greensboro, North Carolina weighed heavily in favor of finding close contacts. Additionally, Tanger is organized under the laws of North Carolina, operated two outlets in the state, and served over 1,300,000 customers in North Carolina during the policy period. As a result, the court found that Tanger indeed had a close connection to the state.

The court also found that the remaining factors to weigh in favor of Tanger. The policies were commercial policies, the insurers were aware that Tanger’s headquarters is located in North Carolina, there was no choice of law provision in the policies, and ACE and Liberty Mutual are licensed to do business in North Carolina.

Accordingly, with all of the factors weighing in favor of Tanger, the court denied the insurers’ motions to dismiss the claims for breach of contract and declaratory judgment.

The UDTPA Claim

The court also separately considered whether Tanger’s claims for violations of North Carolina’s Unfair and Deceptive Trade Practices act based on the insurers’ alleged violation of North Carolina’s Unfair Claims Settlement Act could continue. Tanger alleged that the insurers violated seven subparts of N.C.G.S. § 58-63-15(11), which stemmed from the insurers’ refusal to reconsider their initial denial after the North State Deli decision was issued.

The court found that the claim could proceed because the insurers failed to show that case law clearly established that North Carolina did not permit a UDTPA claim under the circumstances.  The court also pointed to two North Carolina federal courts that denied Rule 12 motions in cases alleging a breach of N.C.G.S. § 58-63-15(11) where the plaintiff alleged the insurer failed to revise its earlier position based on new information. Thus, the UPTPA claim could also proceed.

Takeaways

While the decision is not surprising in light of North State Deli, the decision underscores the significant role that choice of law has in an insurance coverage dispute.  It is essential, therefore, that policyholders evaluate their claim under all potentially applicable states’ laws to aid in setting the most advantageous strategy should it become necessary to fight for coverage.