543 F.Supp.3d 582
N.D. Ill.2021Background
- Image Dental, an elective dental practice in the Chicago area, suspended in-person operations after Illinois Executive Orders during the COVID-19 pandemic and claimed lost business income.
- Its Citizens Insurance business owners policy provided Business Income/Civil Authority/Extra Expense coverage "for direct physical loss of or damage to" covered property and tied civil-authority coverage to physical loss within one mile.
- The policy also contained a Virus exclusion (no coverage for loss caused directly or indirectly by any virus) and an Ordinance or Law exclusion (no coverage for loss from enforcement or compliance with laws regulating use of property).
- Image Dental sued for declaratory relief and class claims (Business Interruption, Civil Authority, Extra Expense) after Citizens denied the claim; Citizens moved to dismiss for failure to plead physical loss and because exclusions apply.
- The court held that (1) the policy requires a "direct physical loss of or damage to" property and Image Dental alleged only economic loss from closure, and (2) even if coverage existed, the Virus and Ordinance/Law exclusions bar recovery; the complaint was dismissed with leave denied as futile.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the policy cover pandemic-related shutdown losses absent physical alteration to property? | Policy covers suspension of operations and "loss" includes loss of use from closure orders. | Coverage requires a "direct physical loss of or damage to" covered property; mere loss of use/economic loss is insufficient. | Denied — policy requires physical loss/damage; economic shutdown alone does not trigger coverage. |
| Does the Virus exclusion bar coverage for losses caused by COVID-19 and related orders? | Losses stem from government orders and the pandemic, not the virus itself; pandemic is not specifically listed. | The Virus exclusion bars loss caused directly or indirectly by any virus; COVID-19 is a virus and thus exclusion applies. | Held for defendant — Virus exclusion applies to losses at issue. |
| Does the Ordinance or Law exclusion bar coverage for losses caused by compliance with closure orders? | Some losses may be "result of the orders" but not necessarily excluded or factual development may matter. | The Ordinance or Law exclusion precludes loss caused by enforcement/compliance with laws regulating use of property, even if property is not damaged. | Held for defendant — the closure orders fall within the exclusion. |
| Should the complaint be dismissed with leave to amend? | Leave to amend could cure defects with additional facts. | Plaintiff already amended twice; additional amendment would be futile given policy language and exclusions. | Dismissal with prejudice — further amendment denied as futile. |
Key Cases Cited
- Travelers Ins. Co. v. Eljer Mfg., Inc., 197 Ill. 2d 278 (Ill. 2001) (policy language construed by plain meaning; "physical" injury requires alteration of property)
- Outboard Marine Corp. v. Liberty Mut. Ins. Co., 154 Ill. 2d 90 (Ill. 1992) (unambiguous policy terms construed by plain, ordinary meaning)
- Sandy Point Dental, PC v. Cincinnati Ins. Co., 488 F. Supp. 3d 690 (N.D. Ill. 2020) (similar conclusion that shutdowns without physical alteration do not trigger business income coverage)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (pleading standard: factual allegations must plausibly give rise to liability)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility pleading standard)