Let’s take a quick trip back to 2020. Remember that? The world shut down, streets were empty, and businesses were scrambling. For thousands of restaurant owners, retailers, and other entrepreneurs, one of the first calls they made was to their insurance agent. They had business interruption insurance, after all. If a global pandemic forcing a government shutdown isn't an "interruption," what is?
Well, as we all quickly learned, it wasn't that simple. Insurers across the country denied these claims en masse, and for years, the courts have mostly sided with them. The story seemed over.
But every now and then, a case comes along that makes you lean in a little closer. A recent ruling in Hawai'i involving a popular restaurant, Tiki's Grill & Bar, is one of those moments. A state appellate court just breathed new life into their fight, and it’s a fascinating twist in a story we all thought was finished.
So, What Happened with Tiki's Grill & Bar?
Like countless others, Tiki's Grill & Bar in Waikīkī was hit hard by the pandemic. Government shutdown orders in March 2020 forced them to close their doors to in-person dining. They did what any business would do: they filed a claim with their insurer, First Insurance Company of Hawaii, under their business interruption policy.
And, just like countless others, their claim was denied.
The insurance company’s argument was the one we’ve heard time and time again: the policy covers "direct physical loss of or damage to" the property. They argued that the COVID-19 virus, and the government orders related to it, didn't cause any physical damage to the restaurant. The building was still standing. The tables and chairs were fine. So, no coverage. Tiki's sued, a lower court agreed with the insurer and dismissed the case, and that could have been the end of it. But it wasn't.
The Billion-Dollar Question: What is "Physical Loss or Damage"?
This is really the heart of the entire nationwide debate. It’s a phrase that seems simple until you start to poke at it.
Think of it this way: if a fire burns down your kitchen, that's undeniably "direct physical damage." If a hurricane smashes your windows, same thing. The property has been physically altered and is unusable. No one argues with that.
But what about a virus? Can something you can't even see cause "physical loss"?
Insurers and most courts have said no. They argue that for coverage to kick in, there needs to be some kind of tangible, structural change to the property. Since the virus didn't break anything, it doesn't count. The property was just temporarily unusable because of a government order, not because of physical harm.
Here's Why the Hawai'i Court Disagreed
This is where the story gets interesting. The Hawaiʻi Intermediate Court of Appeals looked at the situation and, frankly, saw it differently. They didn't hand Tiki's a final victory, but they did something almost as important: they said the restaurant's argument was plausible enough to deserve its day in court. They reversed the dismissal and sent the case back to the lower court to proceed.
So, what was their reasoning?
The court focused on the specific wording of the policy. They pointed out that the policy covers "direct physical loss of or damage to" property. That little word, "or," is a pretty big deal. The judges suggested that "loss of" could mean something different from "damage to."
Their thinking went something like this: you can "lose" the use of your property without it being physically damaged in the traditional sense. If the COVID-19 virus was present on surfaces, making the property unsafe and unusable for its intended purpose (you know, serving food to people), couldn't that be considered a "physical loss"? The court felt that was a reasonable enough question to explore further.
They basically said that Tiki's claim—that the virus's presence physically transformed the air and surfaces into a dangerous "fomite" capable of causing harm—wasn't something that could just be dismissed out of hand.
What Does This Mean for Other Businesses?
Okay, let's manage expectations here. Does this ruling mean every business with a denied COVID claim is about to get a big check? Almost certainly not.
This decision is from an intermediate appellate court in one state, Hawai'i. It's not binding on courts in California, New York, or anywhere else. And it's very, very specific to the exact wording in that particular insurance policy. Many policies issued after the SARS outbreak in the early 2000s have specific "virus exclusions" that would make this kind of argument impossible.
But here’s why it still matters. It’s a crack in the wall.
For years, the insurance industry has presented a nearly united front, and the courts have largely reinforced it. This ruling shows that some judges are willing to scrutinize the specific language of a policy and consider that "physical loss" might not be as black-and-white as insurers claim. It tells us that the definition of these key terms is still up for debate.
It gives a little bit of leverage and a glimmer of hope to other businesses who might have similar policy language and are located in jurisdictions that might be open to this kind of interpretation. It’s a reminder that in insurance, the exact words on the page are everything.
This fight is far from over for Tiki's Grill & Bar. They still have to prove their case in court. But for the first time in a long time, they—and many other businesses watching from the sidelines—have a real chance to be heard. And in the long, exhausting saga of COVID-19 insurance claims, that's a pretty significant development.
