In Brown Jug, Inc. v. Cincinnati Insurance Co., Nos. 21-2644, 21-2715 and 21-2718, (6th Cir. Feb. 23, 2022), the trial court determined that Cincinnati Insurance Co. does not owe coverage for the lost business income seven Michigan restaurant operators suffered after stay-at-home orders restricting in-person dining were issued in response to the COVID-19 pandemic. Late last month, a 6th U.S. Circuit Court of Appeals panel unanimously affirmed the trial court’s dismissal.
In a consolidated appeal, Brown Jug Inc., Chelsea Ventures LLC, Dino Drop Inc. and four other restaurant operators failed to allege that the coronavirus caused property damage or loss because loss of use is not a physical loss, according to U.S. Circuit Judge R. Guy Cole Jr., affirming lower court decisions to grant Cincinnati’s motions to dismiss.
“These policies contained three provisions under which Cincinnati Insurance would compensate a policy holder if-and only if-the policy holder suffered direct physical loss or damage to its covered property, or if loss to a non-policy holder’s property prevented access to a policy holder’s property. Cincinnati Insurance denied plaintiffs’ claims for relief because, in its view, neither the presence of the COVID-19 virus nor shutdown orders issued by the Michigan governor constituted physical loss or damage.
Plaintiffs sought a declaratory judgment that these pandemic-related losses were compensable under the policy. Cincinnati Insurance moved to dismiss the complaints. The district court found that, under Michigan law, “direct physical loss” to property covers only tangible harm or damage to property, rather than mere loss of use. Therefore, the plaintiffs had failed to state a claim.”