On March 24, 2020, Governor Whitmer issued Executive Order (EO) 2020-21 which prohibited nonessential in-person work and required social distancing. This EO was further extended by EO 2020-42. These EOs effectively shut down (at least in some capacity) the restaurant industry.
While many restaurant owners were able to receive relief from the government in the form of the Paycheck Protection Program (PPP) loans and other funds, many likely thought they would be covered by their commercial insurance policy. However, the Michigan Court of Appeals recently ruled that no such relief was available.
In Gavrilides Mgmt. Co., LLC v. Michigan Ins. Co., the Michigan Court of Appeals ruled that the income lost by restaurants as a result of the governmental shutdown was not covered by the restaurant’s commercial insurance policy.
The Court reviewed the specific language of the contract, specifically the “Business Income (and Extra Expense) Coverage Form.” The form laid out various definitions for when the insurance company would pay and exclusions for reasons they would not. The Court found that loss of income caused by the Governor’s EO was not the type of “damage” discussed and contemplated by the insurance policy. Further, an exclusion provided that the insurance company would not pay for any damages caused by or resulting from any virus. As a result, the Court held that the insurance company was not obligated to pay for the insured’s loss of income.
According to an amicus brief submitted in this case, most insurers use “standard-form” policies that are negotiated between the insurance industry and regulatory bodies, and they are offered to policyholders in a take-it-or-leave-it offer. If you own a business with a commercial insurance policy, it is likely that your policy contains similar language. If that is the case, any losses of income experienced as a result of the Governor’s EO would not qualify.
If you are unsure, you can contact one of the attorneys at Demorest Law Firm, PLLC to review your insurance coverage for this situation.
The full case can be found at:
https://www.courts.michigan.gov/siteassets/case-documents/uploads/OPINIONS/FINAL/COA/20220201_C354418_115_354418.OPN.PDF
