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United States Court of Appeals for the Sixth Circuit
February 23, 2022, Decided; February 23, 2022, Filed
File Name: 22a0034p.06
[*400] [***2] COLE, Circuit Judge. Businesses across the United States have turned to a variety of sources to recoup economic losses attributable to the COVID-19 pandemic. Plaintiffs in this consolidated appeal are businesses that operate Michigan-based restaurants and entertainment venues that turned to their commercial property insurance policies, held by Cincinnati Insurance Company, for relief. 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 [**2] 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. Because we believe that the Michigan Supreme Court would agree with this interpretation of the law, we affirm the dismissal of plaintiffs' complaints.
A. Factual Background
The Brown Jug, Inc.; Chelsea Ventures, LLC; Dino Drop, Inc.; Buccaroo, LLC; DM Bach Enterprises, LLC; Bucaroo Too, LLC; and 45 Degree Hospitality, Inc. (collectively "plaintiffs") are Michigan-based businesses. They operate restaurants that were covered by identical or substantially similar Cincinnati Insurance Company commercial property insurance policies early in the [**3] COVID-19 pandemic. Like many other restaurants, plaintiffs' operations have been economically affected by the COVID-19 pandemic. Michigan's stay-at-home orders curtailed access to plaintiffs' businesses and restricted in-person activities at their facilities. [***3] Because of COVID-19 outbreaks in Michigan generally, plaintiffs' businesses have been unable to return to normal operations. Two restaurants, one belonging to Brown Jug and one belonging to Dino Drop, were even alleged sources of COVID-19 outbreaks.
To offset these losses, plaintiffs submitted claims for reimbursement to Cincinnati Insurance. The claims hinged on three policy provisions.1 First, the "Business Income" provision, which provides:
Full case includes Shepard's, Headnotes, Legal Analytics from Lex Machina, and more.
27 F.4th 398 *; 2022 U.S. App. LEXIS 4836 **; 2022 FED App. 0034P (6th Cir.) ***
BROWN JUG, INC., dba Little Brown Jug, Inc., dba the Backroom (21-2644); CHELSEA VENTURES, LLC, dba Valiant Bar & Grill (21-2715); DINO DROP, INC., dba M-Brew, dba Dino's Lounge, BUCCAROO, LLC, DM BACH ENTERPRISES, LLC, BUCAROO TOO, LLC, and 45 DEGREE HOSPITALITY, INC., (21-2718), Plaintiffs-Appellants, v. CINCINNATI INSURANCE COMPANY, Defendant-Appellee.
Prior History: [**1] Appeal from the United States District Court for the Eastern District of Michigan at Detroit. 21-2644. No. 2:20-cv-13003—Bernard A. Friedman, District Judge. 21-2715/2718. Nos. 2:20-cv-13002 and 2:20-cv-12549—Mark A. Goldsmith, District Judge.
Dino Drop, Inc. v. Cincinnati Ins. Co., 2021 U.S. Dist. LEXIS 114891, 2021 WL 2529817 ( E.D. Mich., June 21, 2021)Chelsea Ventures, LLC v. Cincinnati Ins. Co., 2021 U.S. Dist. LEXIS 114907, 2021 WL 2529821 ( E.D. Mich., June 21, 2021)Brown Jug, Inc. v. Cincinnati Ins. Co., 2021 U.S. Dist. LEXIS 100063, 2021 WL 2163604 ( E.D. Mich., May 27, 2021)
plaintiffs', physical loss, restaurants, alteration, orders, virus, tangible, alleges, damaged, insurance policy, properties, shutdown, losses, complaints, pandemic, motion to dismiss, issued order, premises
Civil Procedure, Appeals, Standards of Review, De Novo Review, Defenses, Demurrers & Objections, Motions to Dismiss, Failure to State Claim, Contracts Law, Contract Interpretation, Intent, Insurance Law, Business Insurance, Commercial General Liability Insurance, Property Claims