WEDNESDAY, July 29 — Businesses filing insurance claims for months of financial losses tied to the coronavirus pandemic may be out of luck after a recent ruling in the 30th Circuit Court.
And that’s bad news for the Soup Spoon Cafe in Lansing, whose owner recently lost a legal battle — and perhaps set a new legal precedent — over a $650,000 business interruption insurance claim. The ruling: Insurers may not be liable for revenue losses at businesses tied to government-mandated closures. Many are calling the ruling a win for the insurance industry.
“We were very disappointed. We have these insurance policies in hopes of having the coverage that we thought we had,” said owner Nick Gavrilides, who also owns the Bistro in Williamston. “There are probably thousands of other businesses across the country in this same boat.”
Gavrilides’ insurer refused earlier this year to cover a six-figure claim for two months of revenue losses during Gov. Gretchen Whitmer’s coronavirus-induced lockdown orders. The dispute landed in Judge Joyce Draganchuk’s courtroom on July 1, where she ruled against the claim.
The legal battle boiled down to whether business interruption policies can be applied to instances where there is no physical damage or destruction to a restaurant that was prevented from conducting business as usual, according to recent reports from The Associated Press.
Gavrilides recognized that his insurer specifically didn’t cover losses tied to a viral pandemic, but he maintained that his losses weren’t necessarily tied to COVID-19. They were instead a direct result of Whitmer’s closure orders, which made his dining room — and its cashflow — unusable.
“We don’t disagree with the orders at all. It’s not about that,” Gavrilides said. “We weren’t shut down because of the virus. We didn’t have any staff or customers reported to have coronavirus. We shut down because of the government orders, which we might not have done otherwise.”
Draganchuk said Gavrilides’ argument was “nonsense” in handing down her July 1 decision. Gavrilides said he and his attorney — who argued that coverage should apply because authorities prohibited customers from entry — have discussed filing an appeal. Those plans aren’t concrete.
Meanwhile, the ruling is being hailed as a victory to insurers in what may be the nation’s first final ruling on the question of whether a property insurer is liable for financial damages caused by a coronavirus closure, according to a recent analysis published in the Insurance Journal.
In the ruling, Draganchuk reportedly said that some tangible alteration of property is required to trigger coverage, which would be barred even if Gavrilides had claimed the virus did cause physical damage because of a virus exclusion in his — and most — property insurance policies.