North Carolina’s Pro-Policyholder Trend Continues: Key Takeaways from the Fourth Circuit’s Wake Chapel Decision

In Wake Chapel Church, Inc. v. Church Mutual Insurance Company, the Fourth Circuit affirmed a $1.1 million jury verdict in favor of a policyholder, reaffirming that under North Carolina law insurers cannot defeat all-risk coverage by pointing to a postulated inherent defect or other excluded cause if a covered peril also contributed to the loss.

This decision follows the North Carolina Supreme Court’s 2024 decision in North State Deli, LLC v. Cincinnati Insurance Company, reinforcing North Carolina’s position as a pro-policyholder jurisdiction when compared with other jurisdictions.

Wake Chapel Church, Inc. v. Church Mutual Insurance Company, S.I.

After a December 2018 snowstorm, Wake Chapel Church, Inc. (Wake Chapel) discovered damage to the roof of its sanctuary building and submitted a claim to its property insurer, Church Mutual Insurance Company (CMIC). CMIC denied the claim for insufficient evidence of direct physical damage caused by the claimed causative peril, ice and snow.

Wake Chapel was covered by an all-risk policy issued by CMIC that covered "direct physical loss of or damage to" the buildings caused by “Risks of Direct Physical Loss,” subject to numerous exclusions — including loss caused by "rust, or other corrosion, decay, deterioration, hidden or latent defect, or any quality in property that causes it to damage or destroy itself."

At the four-day jury trial, Wake Chapel's engineer testified that sliding ice and snow caused the roof damage. CMIC's engineer offered contradictory testimony and attributed the damage to other causes. The jury found that CMIC was required to cover $1.1 million in damage to the roof.

On February 19, 2026, the Fourth Circuit affirmed the district court's judgment in all respects.

The Fourth Circuit's Analysis

I. Causation Standard: The Critical Issue for Policyholders

CMIC argued on summary judgment that North Carolina law requires a covered cause must be the "efficient and predominant cause" of the damage to permit recovery under the insurance policy. The district court had rejected that standard, relying on contrary North Carolina precedent for all-risk policies.

The Fourth Circuit agreed. Applying Avis v. Hartford Fire Insurance Co., 195 S.E.2d 545 (N.C. 1973), the court recognized that all-risk policies permit recovery for "nearly all fortuitous losses" unless a specific exclusion applies, and that "coverage will extend when damage results from more than one cause even though one of the causes is specifically excluded."

The district court had instructed the jury that, because the policy was an all-risk policy, North Carolina law required an exclusion cause of loss "must be the sole cause of the injury or damage" to avoid coverage. The Fourth Circuit confirmed that instruction was correct: In North Carolina, all-risk policies provide coverage where a non-excluded cause at least partially contributed to the damage. This standard is highly favorable to policyholders, because it forecloses any insurer argument that coverage is unavailable due to presence of an excluded cause and relieves policyholders from any obligation to differentiate between loss caused by the covered cause and the excluded cause.

North Carolina Law Remains Highly Favorable to Policyholders

The Wake Chapel decision comes a little over a year after another decision based on North Carolina law finding in favor of coverage under an all-risk policy in circumstances rejected in many other states. In North State Deli, LLC v. Cincinnati Insurance Company, 908 S.E.2d 802 (N.C. 2024), the North Carolina Supreme Court held that policyholders' business interruption coverage under all-risk policies was triggered, based on reasonable interpretation of ambiguous language and a reasonable expectation that "direct physical loss" includes loss of use of and access to their restaurants due to COVID-19 government closure orders. The Court also noted that omission of available alternative language, such as virus exclusions, supported, yet was not required for, construction of ambiguous policy terms in favor of coverage.

The North State Deli decision was a significant victory for policyholders and is an outlier among cases in other jurisdictions finding no coverage for losses stemming from government-imposed shutdowns during the pandemic. The North Carolina Supreme Court’s decision, followed now by the Fourth Circuit’s decision in Wake Chapel, may signal a favorable trend in North Carolina law for all-risk policyholders.

What This Means for Policyholders

• All-risk policies provide expansive coverage. Under North Carolina law, all-risk policy terms are given their plain and ordinary meaning, and an insurer cannot invoke an exclusion unless that cause was the sole cause of the damage, because a non-excluded cause need only partially contribute to a loss for coverage to attach.
• Resist the "efficient proximate cause" standard. The Fourth Circuit court rejected the insurer’s attempt to import a more restrictive efficient and predominant cause standard — applicable to non-all-risk policies — into an all-risk coverage dispute. Policyholders should challenge any such argument pointing to the unique nature of all-risk policies.
• Expert testimony is decisive. The outcome in Wake Chapel turned substantially on competing engineering experts. Policyholders should retain qualified experts early in the claims process to document cause and damage with definitive conclusions, not hedged opinions, to establish a record to support coverage.
• Challenge denials. CMIC denied this claim solely on its own engineer's opinion of insufficiency of Wake Chapel’s proof that the snowstorm caused the damage. To sustain its denial, the insurer needed to demonstrate an excluded cause of the damage was solely at work. This case confirms that identification and application of the correct causation standard is critical and can be outcome determinative in insurance cases.

Conclusion

Wake Chapel Church, Inc. v. Church Mutual Insurance Company, S.I. is a meaningful win for all-risk policyholders in North Carolina. The Fourth Circuit’s firm rejection of the insurer's causation arguments reinforces that all-risk policies mean what they say: coverage is broad, exclusions are narrow, and a covered peril need only partially contribute to a loss for the policyholder to prevail. And this case, following on the heels of North State Deli, LLC v. Cincinnati Insurance Company, also reinforces North Carolina’s position as a pro-policyholder jurisdiction with respect to all-risk policies.

This alert is intended to provide general information about legal developments and should not be construed as legal advice.