CHICAGO — A federal judge has dismissed a class action led by the owners of a Logan Square restaurant against Cincinnati Insurance, rejecting claims the insurer owes coverage to the restaurant owners and many other Illinois business owners whose businesses were effectively closed by shutdown orders imposed by Gov. JB Pritzker in response to the COVID-19 pandemic.
T&E Chicago opened its business interruption policy on July 20, 2019, to cover its restaurant, the Navigator Taproom. But Cincinnati denied the claim filed earlier this year, issuing a blanket denial for losses linked to the pandemic and orders from governors to close businesses. That prompted T&E to sign its name to one of many similar legal actions in which companies are suing insurers that denied claims connected with the pandemic and state-ordered business closures.
In an opinion issued Nov. 19, U.S. District Judge Harry Leinenweber granted Cincinnati’s motion to dismiss the complaint, a typical outcome for most similar disputes.
Brian Reid
| Litchfield Cavo
According to Leinenweber, T&E’s argument is based in its description of the policy as “all risks” coverage, which it understood to insure against loss owing to anything expect conditions specifically stipulated in the policy. That stands in contrast to policies for specific types of damage, sure as fire or flood insurance.
In denying the claim, however, Cincinnati asserted the tavern’s lost revenue wasn’t a result of “direct physical damage” or loss, and therefore outside the bounds of the coverage terms.
Although courts generally side with the insured party when a policy term is considered ambiguous, Leinenweber wrote, a disagreement over terms alone doesn’t establish legal ambiguity. T&E explained its policy had separate provisions for loss under business income, extra expense and civil authority, which reference suspension of business operation and expenses incurred under restoration.
It also argued the Illinois Business Income endorsement has additional civil authority coverage and noted Cincinnati didn’t make use of a virus or bacteria loss exclusion, an endorsement the Insurance Services Office developed in 2006.
Cincinnati argued coverages under those headings “apply only to income losses tied to physical loss or damage to property,” Leinenweber wrote, “and not losses incurred to protect the public from disease.”
T&E insisted it should be covered because Pritzker’s executive order closing the state’s bars and restaurants in mid-March constituted a sudden inability to use physical property. But with the building intact, the insurer maintained, the losses are strictly financial.
Leinenweber said he was sympathetic to the tavern’s position. But he didn’t see the supposed ambiguity.
“There are a multitude of cases, including two from Illinois, that have since been decided to interpret policy provisions like these as not providing coverage for COVID-19-related losses,” Leinenweber wrote. “These decisions found no coverage for business closures resulting from civil authority closure orders.”
One such case, decided Sept. 21 in the same district involved Cincinnati as a defendant against Sandy Point Dental. T&E argued that case was “wrongfully decided,” but Leinenweber was unpersuaded. He said he “agrees with the courts that have found that loss of use of property without any physical change to that property cannot constitute direct physical loss or damage to the property. The policy’s use of ‘loss to’ versus ‘loss of’ phrasing supports this conclusion.”
As such, he dismissed the first count, which sought a declaratory judgement, then dismissed the other three counts because they relied on the same interpretation of the policy.
T&E Chicago is represented in the action by attorneys Jeffrey Alan Berman, Ryan M. Kelly and Patrick J. Solberg, with the firm of Anderson Wanca, of Rolling Meadows.
Cincinnati Insurance has been represented by attorneys Brian M. Reid and Michael P. Baniak, of the firm of Litchfield Cavo, of Chicago.