A federal judge has ruled a Lake Zurich dentist can’t force his insurance company to pay for business losses he suffered after Gov. JB Pritzker shut down most dental care in Illinois for months in response to the COVID-19 outbreak earlier this year.
On Sept. 21, U.S. District Judge Robert W. Gettleman ruled in favor of The Cincinnati Insurance Company in the dispute with Sandy Point Dental P.C. over so-called business interruption insurance coverage.
In the ruling, Gettleman became the latest judge to back insurers’ positions that a government order prohibiting a business from operating – or, at least, severely curtailing business opportunities and operations – can trigger coverage related to business losses.
U.S. District Judge Robert Gettleman
Rather, the judge determined a business must suffer an actual physical loss to their property to successfully claim the coverage.
“The critical policy language here – ‘direct physical loss’ – unambiguously requires some form of actual, physical damage to the insured premises to trigger coverage,” the judge wrote. “The words ‘direct’ and ‘physical,’ which modify the word ‘loss,’ ordinarily connote actual, demonstrable harm of some form to the premises itself, rather than forced closure of the premises for reasons extraneous to the premises themselves, or adverse business consequences that flow from such closure.
“Plaintiff simply cannot show any such loss as a result of either inability to access its own office or the presence of the virus on its physical surfaces…”
The decision comes more than five months since Sandy Point Dental filed suit in April in Chicago federal court, joining the ranks of a burgeoning number of businesses in Illinois and elsewhere in the U.S. suing their insurance companies for refusing to compensate them for steep financial losses that followed orders issued by Pritzker and other U.S. governors in response to the arrival of the novel coronavirus that causes COVID-19.
In those lawsuits, businesses claim the fact that they were prohibited by force of law from operating their businesses should trigger their insurance coverage for interruption to their business.
The insurance companies, however, argued the policies don’t cover such general public health actions that only indirectly affect businesses. In this case, the insurance company noted the governor never directly ordered Sandy Point to close its offices, but only prohibited them from conducting routine, non-emergency dental work.
They said the policy could only be triggered by some action or damage that prohibited Sandy Point’s staff from accessing their dental offices.
Sandy Point, however, said such routine work made up the bulk of its business, and all but put it out of business for months, until Pritzker lifted the so-called stay at home order, and allowed regular dental care to resume statewide.
Judge Gettleman, however, sided with Cincinnati Insurance on the question of whether the insurer owed any coverage obligations in response to Pritzker’s shutdown orders.
The judge noted this holding was in line with many other decisions in similar cases brought by business owners outside Illinois whose revenue plunged and whose profitability was savaged after governors’ lockdown orders.
“In essence, plaintiff seeks insurance coverage for financial losses as a result of (Pritzker’s) closure orders,” Judge Gettleman wrote. “The coronavirus does not physically alter the appearance, shape, color, structure, or other material dimension of the property. Consequently, plaintiff has failed to plead a direct physical loss – a prerequisite for coverage.”
The judge further noted the dental offices were still allowed by the governor to conduct “emergency and non-elective work,” as Pritzker listed dentistry practices among “essential businesses” in Illinois.
“… Plaintiff has failed to allege that access to its premises was prohibited by government order,” the judge wrote.
This, Gettleman said, also supported Cincinnati Insurance’s denial of Sandy Point’s claim for civil authority coverage.
Sandy Point has been represented by attorney Charles A. Silverman, of Skokie.
Cincinnati Insurance has been defended by attorneys with the firm of Litchfield Cavo, of Chicago.