Michigan Judge Denies Coverage For Business Interruption Losses Due To COVID-19 Regulations

Following our April 1 webinar COVID-19 Financial Remedies: Force Majeure, Business Interruption Insurance Coverage and Contractual Provisions, Kelley Drye & Warren LLP would like to update attendees on a development in the judicial interpretation of business interruption coverage in the time of COVID-19.

A Michigan state court judge has ruled that Michigan Insurance Company (“Michigan Insurance”) is not required to cover its insured’s business interruption losses caused by COVID-19 regulations.

In Gavrilides Management Company, et al. v. Michigan Ins. Co, Plaintiff Gavrilides Management Company (“Gavrilides”) alleged that a virus exclusion in its policy did not bar coverage because the losses it sustained stemmed from loss of property use due to government regulations regarding COVID-19, not due to the behavior of the virus itself. On July 2, Judge Joyce Draganchuk dismissed Gavrilides’ case finding that, not only were Gavrilides’ business losses excluded under the virus exclusion, but that business interruption losses for loss of use of property was not recoupable under a policy that covered ​“physical loss or damage.”

It remains to be seen how the Gavrilides case will influence the resolution of other business interruption insurance cases nationwide, if at all, including the pending multidistrict litigation: In re: COVID-19 Business Interruption Protection Insurance Litigation.

Kelley Drye & Warren LLP will be closely monitoring the case law as it progresses. Please click here if you would like to be kept abreast of current developments.