Dino Drop, Inc. v. Cincinnati Insurance Co., No. 21-2718 (6th Cir. 2022)
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Plaintiffs in this consolidated appeal are businesses that operate Michigan-based restaurants and entertainment venues that made claims against their commercial property insurance policies, held by Cincinnati Insurance, based on COVID-19 losses. These policies contained three provisions under which Cincinnati Insurance would compensate a policyholder only if the policyholder suffered direct physical loss or damage to its covered property, or if loss to a non-policy holder’s property prevented access to a policyholder’s property. Cincinnati Insurance denied their claims, indicating that neither the presence of the COVID-19 virus nor shutdown orders issued by the Michigan governor constituted physical loss or damage.
The district court dismissed the plaintiffs’ claims, finding that, under Michigan law, “direct physical loss” to property covers only tangible harm or damage to property, rather than mere loss of use. The Sixth Circuit affirmed, reasoning that the Michigan Supreme Court would agree with its interpretation of the law–that COVID-19-related shutdown orders do not constitute “direct physical loss or direct physical damage” to property because “a loss of use simply is not the same as a physical loss.” The plaintiffs alleged “not tangible, physical losses, but economic losses.”
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