Another Group of “Locked-Down” Businesses Locked Out of Business Interruption Coverage

In Gavrilides Mgt Co v Michigan Ins Co, the Michigan Court of Appeals held – deciding a question of first impression in this state – that government shut-down orders and/or capacity restrictions, intended to slow the spread of COVID-19, do not trigger business interruption coverage, because such claims do not arise out of any direct physical loss. 

In May, the Court of Appeals issued two decisions following Gavrilides – Gourmet Deli Ren Cen v Farm Bureau Gen Ins Co of Michigan, and Massage Bliss, Inc v Farm Bureau Gen Ins Co of Michigan, – despite various arguments from the insureds that Gavrilides was wrongly decided and/or distinguishable. 

Although non-binding, Gourmet Deli Ren Cen and Massage Bliss seem to confirm that – consistent with the Sixth Circuit’s “Erie guess” in Brown Jug, Inc v Cincinnati Ins Co, 27 F4th 398 (CA 6, 2022) – such claims are not covered regardless of whether the policy contains a virus exclusion.

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