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Ruling says disaster insurance doesn't cover COVID shutdown losses

closed sign in business window
Katie Raymond
Michigan Radio

COVID-related shutdowns were an economic disaster for many Michigan businesses. But the Michigan Court of Appeals says that doesn’t require disaster insurance for businesses to cover losses related to COVID-19 shutdown orders.

The appeals court said the shutdown orders were not physical disasters such as a fire or flood, which are the sort of events disaster insurance typically covers. The court said that means the insurance company was playing by the rules when it denied compensation for losses sustained by The Soup Spoon Café in Lansing and The Bistro in Williamston, which are both owned by the same company.

The court said the damage to the businesses had nothing to do with the restaurants’ physical premises:

"Consequently, moving to a new location would not have permitted plaintiffs’ restaurants to reopen. Likewise, no repair, reconstruction, or replacement of the premises would have permitted plaintiffs’ restaurants to reopen. The clear and unambiguous import of the definition of 'period of restoration' is that the contract expects the loss or damage to be amenable to some kind of physical remediation— either by making tangible alterations or repairs to the premises, or by replacing the premises altogether. No alteration to, or replacement of, plaintiffs’ premises would have permitted the restaurants to reopen."

The appeals court unanimously upheld a lower court. But this is not the final word, said attorney Matthew Heos, who represents the restaurants.

He said the decision is disappointing, but this is an area of the law that is still being sorted out.

“There are other cases around the country that are similar in that kind of loss that is less than your building being burned to the ground or something like that,” he said, adding that he is planning an appeal to the Michigan Supreme Court.

There are other cases in Michigan where courts are being asked to award disaster benefits based on business shutdowns or slowdowns due to COVID orders.

Justin Winslow of the Michigan Restaurant Association said that’s why restaurants and other business owners are closely watching the case.

“It’s concerning for a business to know what their future holds,” said Winslow. “It has been two years of uncertainty and challenging times and this doesn’t help provide any greater certainty to a still-challenged hospitality industry.”

The opinion:


Rick Pluta is Senior Capitol Correspondent for the Michigan Public Radio Network. He has been covering Michigan’s Capitol, government, and politics since 1987.
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