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Law360 (May 27, 2021, 9:15 PM EDT) -- A Michigan federal judge on Thursday tossed two restaurants' COVID-19 business interruption suit against Cincinnati Insurance Co., saying the eateries failed to show they experienced any property damage covered by the insurance.
U.S. District Judge Bernard A. Friedman granted summary judgment to Cincinnati, finding that The Brown Jug Inc. could not allege that its pandemic-related losses triggered the restaurants' owner's $655,000 all-risk policy.
"The interruptions to daily life caused by the COVID-19 pandemic" do not cause property damage, the judge said. "The natural meaning of the terms "accidental physical loss or accidental physical damage" requires that the insured experience a loss different in nature than that alleged in the present case."
The Brown Jug owns two restaurants in Ann Arbor called The Little Brown Jug and The Back Room. According to the suit, the eateries were forced to shut down and lost access to the locations because of the pandemic and government closure orders last year, incurring significant financial and physical loss to their property.
But Cincinnati denied coverage after the restaurants submitted insurance claims, asserting that the eateries did not suffer any direct physical loss or damage, a precondition for coverage. Brown Jug has argued that the coronavirus, which is airborne and transmitted through droplets, can attach to a property surface for days, causing physical damage.
The restaurants contended that their all-risk policy does not exclude viruses or pandemics, so they are entitled to coverage.
None of the Brown Jug's alleged losses — including the cost of cleaning and rearranging furniture, and loss of income due to government orders — were tangible, physical losses as required under the policy, Judge Friedman said on Thursday.
While the restaurants said they needed to disinfect surfaces and rearrange physical space, they failed to show any repair or replacement, the judge added, saying he agrees with the "vast majority" of courts that have found that the coronavirus does not cause property damage and is not covered under commercial property policies.
More than 80% of COVID-19 business interruption suits filed by businesses against their insurers have been dismissed permanently in federal courts, according to judicial data compiled by the University of Pennsylvania Carey Law School.
Representatives of the parties could not be immediately reached for comment on Thursday.
The restaurants are represented by James J. Kelly of Jim Kelly Law PC.
Cincinnati Insurance is represented by Bradford S. Moyer of Plunkett Cooney and Dennis M. Dolan of Litchfield Cavo.
The case is The Brown Jug Inc. v. Cincinnati Insurance Co., case number:2:20-cv-13003, in the U.S. District Court for the Eastern District of Michigan.
--Editing by Rich Mills.
For a reprint of this article, please contact reprints@law360.com.
