Case Information
IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION
SANDY POINT DENTAL, PC, )
)
Plaintiff, )
) Case No. 20 CV 2160 v. )
) Judge Robert W. Gettleman THE CINCINNATI INSUR ANCE )
COMPANY, )
)
Defendant. ) MEMORANDUM OPINION & ORDER
Plaintiff Sandy Point Dental, PC brought a three count complaint against defendant, The Cincinnati Insurance Company, seeking a declaration that defendant must provide coverage under the policy for losses duе to governmental closure orders intended to slow the spread of the Coronavirus and COVID-19, damages and attorneys’ fees under 215 ILCS 5/155, and a claim for breach of contract for failing to provide coverage. Defendant moves to dismiss under Fed. R. Civ. P. 12(b)(6) for failure to state a claim. For the reasons set forth below, the court grants defendant’s motion.
BACKGROUND
Plaintiff is a dentist office. On March 20, 2020, Illinois Governor Pritzker issued an order instructing all “non-essential businesses” to close in order to slоw the spread of COVID-19. That order left dental offices able to do emergency and non-elective work, but not routine work. As a dental office that mostly does routine work, plaintiff alleges that it was effectively forced to shut down for the duration of the crisis. This shut-down has resulted in a substantial loss of revenue for plaintiff.
Defendant issued an insurance policy to plaintiff for the period of October 14, 2017 to October 14, 2020. The relevant provisions can be found in the Building and Persоnal Property Coverage Form and the Business Income Coverage Form. The Business Income Coverage states, in relevant part:
We will pay for the actual loss of “Business Income” … you sustain due to the necessary “suspension” of your “operation” during the “period of restoration”. The “suspension” must be caused by direct physical “loss’ to property at “premises” cause by or resulting from any Covered Cause of Loss.
[…]
We will pay for the actual loss of Business Income you sustain due to the necessary “suspension” of your “operations” during the “period of restoration”. The “suspension” must be caused by direct physical “loss” to property at “premises” which is described in the Declarations and for which a “Business Income” Limit of Insurance is shown in the Declaration. The “loss” must be caused by or result from a Covered Cause of Loss.
The policy defines a Covered Cause of Loss as “RISKS OF DIRECT PHYSCIAL LOSS,” unless expressly excluded by the policy.
The policy also provides Civil Authority coverage. To trigger such coverage, orders of civil authority must “prohibit access to the ‘premises’ due to direct physical ‘loss’ to the property, other than at the ‘premises’, caused by or resulting from a Covered Cause of Loss.”
DISCUSSION
Defendants moved to dismiss pursuant to Fed. R. Civ. P. 12(b)(6). The purpose of such a
motion is to test the sufficiency of the complaint, not to judge the merits of the case. Gibson v.
City of Chicago,
1) Property Damage
The parties agree that Illinois law governs their dispute. In Illinois, the construction of an
insuranсe policy is a question of law. Country Mut. Ins. Co. v. Livorsi Marine, Inc
.
, 856 N.E.2d
338, 342 (Ill. 2006). An insurance policy is to be construed as a whole, “giving effect to every
provision, if possible, because it must be assumed that every provision was intended to serve a
purpose.” Valley Forge Ins. Co. v. Swiderski Elecs., Inc
.
,
The critical policy language here—“direct physical loss”—unambiguously requires some
form of actual, physical damage to the insured prеmises to trigger coverage. The words “direct”
and “physical,” which modify the word “loss,” ordinarily connote actual, demonstrable harm of
some form to the premises itself, rather than forced closure of the premises for reasons
extraneous to the premises themselves, or adverse business consequences that flow from such
closure. See Newman Myers Kreines Gross, P.C. v. Great Northern Ins. Co.,
This holding is consistent with other courts that have evaluated whether the coronavirus causes property damage warranting insurance coverage. See, for еxample, Social Life Magazine, Inc. v. Sentinel Ins. Co. Ltd., No. 20 C 3311 (S.D.N.Y. 2020), ECF No. 25, Ex. B at 5:3-4 (denying a motion for preliminary injunction because the coronavirus does not cause direct physical loss, therefore no coverage was required; the coronavirus “damages lungs. It doesn’t damage printing presses”); Diesel Barbershop, LLC v. State Farm Lloyds, -- F.Supp.3d --, 2020
WL 4724305, at *5 (W.D. Tex. Aug. 13, 2020) (granting a motion to dismiss because the
coronavirus did not cause a direct physical loss, and “the loss needs to have been a ‘distinct,
demonstrable physical alteration of the property.’”); Gavrilides Mgmt. Co. v. Michigan Ins. Co.,
No. 20-258-CB (Mich. 2020), ECF. No. 25, Ex. C (explaining that direct physical loss to
property requires tangible alteration or damage that impacts the integrity of the property, and
dismissing the case because plaintiff failed to allege that the coronavirus had any impact to the
premises); Rose’s 1, LLC v. Erie Ins. Exch., No. 2020 CA 002424 B,
In essence, plaintiff seeks insurance coverage for financial losses as a result of the closure orders. The cоronavirus does not physically alter the appearance, shape, color, structure, or other material dimension of the property. Consequently, plaintiff has failed to plead a direct physical loss—a prеrequisite for coverage. [3]
2) Civil Authority
Plaintiff’s arguments regarding civil authority coverage fail for similar reasons. As noted above, the policy’s civil authority coverage applies only if there is a Covered Cause of Loss, meaning a dirеct physical loss, to property other than the plaintiff’s property. Even then, there is coverage only if the civil authority order, (1) prohibits access to the premises due to (2) direct physical loss to property, other thаn plaintiff’s premises, caused by or resulting from any Covered Cause of Loss.
Just as the coronavirus did not cause direct physical loss to plaintiff’s property, the complaint has not (and likely could not) allege that the coronаvirus caused direct physical loss to other property. By the policy’s own terms, the civil authority coverage does not apply. Failure to meet this requirement alone warrants dismissal of any claim for civil authority coverаge. As to the next prong, while coronavirus orders have limited plaintiff’s operations, no order issued in Illinois prohibits access to plaintiff’s premises. See Syufy Enters. v. Home Ins. Co. of Ind., 1995 WL 129229, at *2 (N.D. Cal. Mar. 21, 1995) (riot-related curfew prevented customеrs from being outside, it did not prohibit access to the insured’s premises). Indeed, plaintiff concedes that dental offices were deemed essential businesses for emergency and non-elective work. Consequently, plaintiff has failed to allege that access to its premises was prohibited by government order, and its claim for civil authority coverage fails.
For the foregoing reasons, Counts I and II are dismissed.
3) Section 155
215 ILCS 5/155 provides “an extracontractual remedy to policy-holders whose insurer’s
refusal to recognize liability and pay a claim under a policy is vexatious and unreasonable.”
Phillips v. Prudential Ins. Co. of America,
For the reasons stated above, defendant’s motion to dismiss (Doc. 25) is granted.
ENTER: September 21, 2020
__________________________________________ Robert W. Gettleman United States District Judge
Notes
[1] The court may take notice of the policy without converting the motion to dismiss into a motion for summary
judgment. Venture Assoc. Corp. v. Zenith Data Sys. Corp.,
[2] Plaintiff heavily relies on Studio 417 Inc. v. The Cincinnati Insurance Co., 20 C 3127-SRB (S.D. Mо. Aug. 12, 2020), a Missouri case that found that the coronavirus caused a physical loss to property warranting insurance coverage. That court rested its decision on that policy’s expansive language, language very different from the policy in the instant case. The unambiguous language in the instant policy warrants a different conclusion—physical damage that demonstrably alters the property is necessary for coverage, and the coronavirus does not cause physical damage.
[3] Plaintiff’s arguments regarding the exclusions are unavailing. By the policy’s plain and unambiguous text, the exclusions are triggered only when there is first a direct physical loss. Having determined that there is no direct physical loss, the court need not address arguments regarding the exclusions.