Cook County Circuit Court Dismisses COVID-19 Business Interruption Insurance Claim

Due to COVID-19, business owners are seeking a remedy to resuscitate their ailing businesses that have experienced a drop in sales. As is often the case, when businesses experience setbacks, they explore new and creative sources of revenue to reverse their financial fortunes. Business interruption insurance is a common target to exploit in uncertain financial times.

COVID-19 has triggered a spate of business interruption claims against insurers based on the dubious notion that the virus causes direct physical loss to property.  Policyholder counsel have filed lawsuits for individual claim denials, as well as class actions against some of the country’s most respected insurers. With a large economic output, Illinois has not avoided the concerted effort by the policyholder bar to gain access to business interruption coverage. Insurers who provide protection to Illinois residents and businesses face class actions in Illinois, exposing them to the existential risk of insolvency as the volley of lawsuits threatens to drain their reserves.

In a noteworthy decision, Judge Otto issued an early dismissal order in a case filed by Napleton Auto Group against a firm client.  The insureds contended that their property suffered a direct physical loss because it was contaminated with the virus which caused the insureds' business to suffer. Judge Otto correctly concluded that the insureds "do not, and cannot, allege that their property was altered in appearance, shape, color or other material dimension where a thorough cleaning - or even a relatively short passage of time - would eliminate the contagion and leave the property in its original state."  Further, Judge Otto ruled, even if the insureds could allege direct physical loss, the unambiguous virus exclusion eliminated coverage.

Bruce Lichtcsien of Hinkhouse Williams Walsh represented the firm insurance client.