A state appeals court upheld the dismissal of a class action lawsuit from an Evanston restaurant owner trying to force State Farm to cover hundreds of thousands of dollars in lost income associated with closures ordered by Gov. JB Pritzker during the COVID-19 pandemic.
Attorneys Alexander Loftus, David Eisenberg and Jeffrey Dorman, of the Chicago firm Loftus & Eisenberg, filed the class action suit in Cook County Circuit Court against Bloomington-based State Farm in June 2020. The lawsuit was filed on behalf of named plaintiffs Jaewook and Hyun Lee, owners of the Evanston Grill restaurant.
Cook County Judge Allen Walker granted State Farm’s motion to dismiss the complaint in an opinion filed Jan. 13, 2021, prompting the plaintiffs to appeal to the Illinois First District Appellate Court.
Illinois First District Appellate Justice Mary Ellen Coghlan
Justice Mary Ellen Coghlan wrote the panel’s opinion, issued March 21. Justices Michael Hyman and Carl Walker concurred.
The lawsuit was similar to scores of other class actions filed since the onset of COVID-19, as insurance companies denied business interruption coverage to restaurants, bars and other businesses that were ordered closed by Pritzker and other governors and mayors in many states across the country.
The Lees argued Judge Walker shouldn’t have dismissed their complaint with prejudice, taking issue with his finding that “There is a difference between direct physical loss of property and physical loss to property.” According to the restaurant, Pritzker’s executive orders that closed restaurants “physically prohibited customers from entering” such properties, and the “all-risk” policy it bought from State Farm should provide protection for such a happening.
“The term ‘physical loss’ is undefined,” Coghlan wrote. “Although this court and our supreme court have not yet addressed the COVID-19 business interruption coverage issue raised here, the parties cite numerous decisions of other state and federal courts addressing this issue.”
The panel said it isn’t obligated to follow, but found instructive, a 2021 U.S. Seventh Circuit Court of Appeals opinion, Sandy Point Dental v. Cincinnati Insurance, in which that panel “interpreted the same policy language of ‘direct physical loss’ to covered property.” Coghlan also noted the Seventh Circuit cited a 2001 Illinois Supreme Court opinion, Travelers Insurance v. Eljer Manufacturing, which held “the term ‘physical injury’ unambiguously connotes an alteration in appearance, shape, color or in other material dimension.”
Although Evanston Grill said Judge Walker improperly dismissed its request for declaratory judgment based on a procedural mechanism, “we find otherwise because it is clearly apparent that no set of facts can be proved that would entitle it to relief,” Coghlan wrote, such as “an alteration in appearance, shape, color or in other material dimension to covered property.”
Evanston Grill also invoked the State Farm policy’s virus exclusion, arguing its losses arose from Pritzker's orders, not the virus itself. But the panel said the orders directly resulted from COVID-19 alone, and neither is a distinct cause of economic damage.
“Because we find that Evanston Grill’s claim falls within the virus exclusion, we need not determine whether any other exclusions applied or State Farm’s independent alternative grounds for affirming the dismissal,” Coghlan wrote.
State Farm has been represented in the action by attorneys Bradley Andreozzi and Sulema M. Novak, of the firm of Faegre Drinker Biddle & Reath, of Chicago.