Restaurant owners in Chicago and elsewhere have won a round in their fight to force a Wisconsin-based insurance company to pay them for losses they suffered when Gov. JB Pritzker, as well as other governors and mayors, shut down their dining rooms in 2020 in the name of fighting COVID-19.
On Jan. 22, U.S. District Judge Edmond Chang denied the attempt by Society Insurance to dismiss the lawsuits brought against it by a host of restaurant owners from Illinois or elsewhere. The restaurant owners have contended the insurer should pay up under the terms of the restaurants’ business interruption insurance policies.
In the ruling, Judge Chang stated specifically he believes the restaurants have the ability to prove the government-ordered shutdowns of indoor restaurant dining could be construed as a “physical loss” under the terms of their insurance policies.
“… A reasonable jury could find (at least on the factual record so far) that the novel coronavirus and the resulting pandemic proximately caused the business interruptions,” Judge Chang wrote in his opinion. “… Even if the government shutdown orders (and not the pandemic itself) played a causal role in the Plaintiffs’ losses, and even if those orders cannot be construed as a ‘direct physical loss,’ the shutdown orders were proximately caused by the pandemic.”
Judge Chang further noted the policies issued by Society Insurance do “not contain a specific exclusion of coverage for losses due to a virus or pandemic.”
The decision in favor of the restaurants is “highly significant for businesses … who have suffered financial losses due to the pandemic and paid insurance premiums to protect against those losses,” said Shannon McNulty, an attorney with the Clifford Law Offices, of Chicago. McNulty is serving as co-lead counsel for restaurant owner, Valley Lodge Corp., the plaintiffs in one of the three bellwether cases against Society.
Valley Lodge operates two restaurants in north suburban Glenview and Wilmette.
Valley Lodge was just one of a host of restaurant owners who have sued their insurers in Illinois and across the country in the wake of losses suffered amid government-ordered shutdowns to combat the COVID-19 pandemic.
In Illinois, Pritzker issued executive orders, citing emergency powers given him under state law, closing down indoor restaurant dining, among other societal and business activities, at various times in 2020.
The restaurant industry has said the results of those shutdowns have been devastating on restaurant owners and workers, as well as on the hospitality sector overall.
To seek some relief from the financial crunch, the restaurant owners have filed claims to their insurers, seeking coverage under their so-called business interruption insurance policies.
However, to date, those claims have been largely denied by insurers, leaving restaurant owners who paid their premiums holding the bill for many thousands of dollars in losses suffered when governors and mayors ordered their dining rooms and taverns closed.
Many business owners have turned to the courts, suing their insurers.
So many lawsuits were filed against Society Insurance, the federal courts consolidated them into one action before Judge Chang. From those suits, Chang selected three cases to serve as “bellwethers” – essentially, cases brought toward trial, to test the legal waters and chances of success for all the others.
Those cases included actions brought in Illinois by Valley Lodge and Big Onion Tavern Group, which operates Fatpour, Hopsmith, Woodie’s Flat and The Irish Oak in Chicago.
To date, many lawsuits brought by businesses against other insurers have been crushed against a wall of exclusions cited by insurers to justify denying coverage.
Judges in other cases, for instance, have found coverage is excluded for losses caused by a virus or pandemic. Judges have also ruled coverage specifically for losses suffered as a result of actions by a “civil authority” still isn’t mandated, even if the restaurants suffered losses caused by the order of a governor or mayor, because the restaurant owners were never denied access to their restaurants, or because the orders came as a result of a response to a pandemic.
In the Society case, Judge Chang ruled against the restaurants seeking coverage for losses suffered under orders from the “civil authorities.”
He also found the restaurants could still access their property, and could still conduct some business, either through drive-through and carryout service.
However, Chang said the restaurants appeared to be on firmer legal footing on their claims that the insurer may have misrepresented the scope of their coverage, and allegedly improperly denied the claims out of hand.
The judge said more proceedings are required on those questions, among others.
In addition to the Clifford Law firm, plaintiffs are represented by attorneys Timothy W. Burns, of Burns Bowen Bair, of Madison, Wis.; Shelby S. Guilbert Jr., of King & Spalding, of Atlanta; Adam J. Levitt, of DiCello Levitt Gutzler, of Chicago; and W. Mark Lanier, of the Lanier Law Firm, of Houston.
Society is represented by attorneys Thomas B. Underwood, of Purcell & Wardrope, of Chicago, and Laura A. Foggan, of Crowell & Moring, of Washington, D.C.