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day curfew imposed during a period of civil disorder in Detroit.98 The insured did not suffer any physical damage to its property.99 The policy covered “loss resulting directly from necessary interruption of business caused by damage to or destruction of real or personal property . . . .”100 The policy also contained a separate provision providing coverage for “actual loss . . . when as a direct result of the peril(s) insured against, access to the premises . . . is prohibited by order of civil authority.”101 In ruling the latter provision did not require damage to the insured’s property, the court treated the civil authority provision as separate from the ordinary business interruption clause, explaining that the civil authority provision did not make any mention of, or reference to, the necessity for physical damage to the premises for coverage to be triggered.102
Similarly, in Southlanes Bowl, Inc. v. Lumbermen’s Mut. Ins. Co., the insureds operated bowling alleys, restaurants, taverns, snack bars, cocktail lounges, and motels.103 After the assassination of Dr. Martin Luther King, Jr., in April 1968, widespread riots and civil commotion accompanied by burning and looting erupted in and around Detroit.104 None of the insureds’ businesses were physically damaged.105 The governor declared a state of emergency, imposed a curfew, and closed all places of amusement.106 In accordance with the governor’s order, the insureds closed their establishments and, as a result, suffered significant business losses.107 The court held there was civil authority coverage because physical damage to the insured premises was not a prerequisite to civil authority coverage.108 However, the court did not describe the civil authority provision at issue in that case. It is thus possible that the language of the civil authority provision did not require direct physical loss or damage to property to trigger civil authority coverage. Accordingly, the particular language of the civil authority provision is critical in evaluating coverage for business losses resulting from curfew orders.
2. No Coverage for Orders Due to Future Threats
Generally, the purpose of a curfew order is to prevent future injury or damage, not to repair prior injury or damage. Most jurisdictions have held that there is no coverage for business income losses caused by orders designed to prevent future threats.
The Northern District of Georgia analyzed a typical civil authority coverage provision in Paradies Shops, Inc. v. Hartford Fire Ins. Co., No. 1:03-CV-3154-JEC, 2004 WL 5704715 (N.D. Ga. Dec. 15, 2004). There, the insured operated gift shops, newsstands, and retail stores located in airport terminals around the country.109 Immediately after the September 11 attacks on the World Trade Center, the Federal Aviation Administration
98 Sloan v. Phoenix of Hartford Ins. Co., 46 Mich. App. 46, 207 N.W.2d 434, 435 (Mich. Ct. App. 1973).
99 Id.
100 Id.
101 Id. at 436.
102 Id. at 436-37.
103 Southlanes Bowl, Inc. v. Lumbermen’s Mut. Ins. Co., 46 Mich. App. 758, 208 N.W.2d 569 (1973).
104 Id., 46 Mich. App. at 759, 208 N.W.2d at 570.
105 Id.
106 Id.
107 Id.
108 Id., 46 Mich. App. at 760, 208 N.W.2d at 570.
109 Paradies Shops, Inc. v. Hartford Fire Ins. Co., No. 1:03-CV-3154-JEC, 2004 WL 5704715, at *1 (N.D. Ga. Dec. 15, 2004).
Insights SPRING2021
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