The restaurants argued that they have been economically impacted by the state's stay-at-home orders and restrictions to in-person dining. The plaintiffs submitted a claim to its insurers under three policy provisions— business income," "extra expenses" and "civil authority," according to the three-judge Sixth Circuit panel's opinion.

Cincinnati Insurance denied each of plaintiffs' claims because it contended that there was no physical loss or damage to plaintiffs' properties—or, in the case of the civil authority provision, no physical loss or damage to property other than plaintiffs' covered property, according to the opinion.

When considering the definition of "loss," the panel initially sought to apply the law of Michigan's highest court. The federal court had to make an "Erie guess," or determine how the high court would resolve the issue if presented, since the state's high courts have not yet ruled directly on the matter.

In February 2022, the Michigan Court of Appeals determined that the word "physical" required the loss or damages to have a tangible and measurable effect on the premises. The federal appeals panel also examined nearly identical policy language under Ohio and Kentucky law, specifically with regard to the COVID-19 pandemic.

The Sixth Circuit previously found in favor of insurers in business interruption lawsuits stemming from those two states.

" … [W]e have concluded that COVID-19-related shutdown orders do not constitute 'direct physical loss or direct physical damage' to property because 'a loss of use simply is not the same as a physical loss,' Judge R. Guy Cole Jr. wrote for the panel, joined by Judges Joan Larsen and Eric Murphy.

Courts across the country have been considering whether insurance companies have a duty to provide coverage to policyholders for losses stemming from the global pandemic. 

So far, in addition to the Sixth Circuit, every federal circuit court to address the issue—including the Second, Seventh, Eighth, Ninth, 10th and 11th circuits—has sided with the insurance company defendants, according to the University of Pennsylvania Carey Law School's COVID Coverage Litigation Tracker.

A spokesperson for the Cincinnati Insurance Co. said the insurer is happy with the Sixth Circuit's ruling. 

In a statement to Law.com, spokesperson Betsy Ertel said, "We are pleased that the Sixth Circuit has now upheld dismissals in Ohio, Kentucky and Michigan, agreeing that commercial property insurance policies do not provide coverage for these COVID-19 claims."

Attorney James J. Kelly, of Jim Kelly Law in Farmington Hills, Michigan, represented the plaintiffs and did not return a request for comment.

Attorneys Dennis M. Dolan and Laurence J.W. Tooth, of Litchfield Cavo LLP in Chicago, and Bradford S. Moyer and Jeffrey C. Gerish, of Plunkett Cooney in Grand Rapids, Michigan, represented the Cincinnati Insurance Co. The parties did not return a request for comment before publication.