SWEET BERRY CAFÉ, INC., Plaintiff and Counterdefendant-Appellant, v. SOCIETY INSURANCE, INC., Defendant and Counterplaintiff-Appellee.
No. 2-21-0088
Appellate Court of Illinois, Second District
March 15, 2022
2022 IL App (2d) 210088
JUSTICE JORGENSEN delivered the judgment of the court, with opinion. Justice Brennan concurred in the judgment and opinion. Justice McLaren specially concurred, with opinion.
Appeal from the Circuit Court of Kane County. No. 20-CH-266. Honorable Kevin T. Busch, Judge, Presiding.
¶ 1 In this insurance coverage case, plaintiff, Sweet Berry Café, Inc. (Café), sought a declaration that its commercial property insurance policy with defendant, Society Insurance, Inc. (Society), covered business income losses it suffered due to the COVID-19 pandemic and the Governor‘s executive orders, which restricted in-person dining, but not carryout or delivery services, at restaurants and similar establishments. The trial court entered judgment on the pleadings (
I. BACKGROUND
A. Complaint Allegations
¶ 4 On May 27, 2020, Café, located in South Elgin, filed a declaratory-judgment complaint (
¶ 5 The complaint noted that, after the World Health Organization characterized the COVID-19 outbreak as a pandemic, the Governor, Jay Robert Pritzker, issued Executive Order 2020-7 on March 16, 2020, whose goal was to slow the spread of the virus by minimizing in-person interaction in an environment with “frequently used services in public settings, including bars and restaurants,” stating that the reduction of on-premises consumption of food and beverages was warranted. Exec. Order No. 2020-7, 44 Ill. Reg. 5536 (Mar. 16, 2020), https://www.illinois.gov/government/executive-orders/executive-order.executive-order-number- 7.2020.html [https://perma.cc/A4AF-T8TT].1 On March 20, 2020, the Governor issued a closure order (Executive Order 2020-10, the stay-at-home order), requiring Illinois residents to stay at home, except for essential travel for essential work, supplies, аnd outdoor activities through April 7, 2020. Exec. Order No. 2020-10, 44 Ill. Reg. 5857 (Mar. 20, 2020), https://www.illinois.gov/government/executive-orders/executive-order.executive-order-number-10.2020.html
¶ 6 Café asserted that it sustained losses due to the orders addressing the virus and the pandemic. It was required to cease and/or significantly reduce operations at its locations. The orders, it alleged, prohibited access to its premises and continued orders required Café to cease and/or significantly reduce operations at, and prohibited access to, its premises. Café also alleged that it sustained losses due to the virus‘s physical presence “at, in, on, and/or around” its premises and due to its presence and spread in the community. It also asserted that the virus can be transmitted by way of human contact with surfaces, human-to-human contact at the premises, and human contact with airborne particles emitted into the air at the premises. The virus, Café argued, rendered items of physical property unsafe and impaired its value and function and physically altered the air.
B. Society‘s Policy
¶ 8 Society‘s policy (No. BP18040353-5, for the policy period from December 31, 2019, through December 31, 2020) includes forms published by Insurance Services Office, Inc. (ISO), and used in the insurance industry. The policy does not include the ISO standard virus exclusion form or otherwise reference the word “virus,” other than in reference to a computer virus, and it contains no reference to “pandemic.”
¶ 9 In the “Business Owners Special Property Coverage Form,” the policy states:
“A. Coverage
We will pay for direct physical loss of or damage to Covered Property at the premises described in the Declarations caused by or resulting from any Covered Cause of loss.
* * *
3. Covered Causes of Loss
Direct Physical Loss3 unless the loss is excluded or limited under this coverage form.” (Emphases added.)
¶ 10 The policy also contains certain “Additional Coverages,” which are the focus of this appeal, including for “Business income“:
“5. Additional Coverages
* * *
g. Business Income
(1) Business Income
(a) 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 of or damage to covered property at the described premises. The loss or damage must be caused by or result from a Covered Cause of Loss * * *(b) We will only pay for loss of Business Income that you sustain during the ‘period of restoration’ and that occurs within 12 consecutive months after the date of direсt physical loss or damage.” (Emphasis added.)
¶ 11 Another additional coverage is for “Extra Expense“:
“h. Extra Expense
(1) We will pay necessary Extra Expense you incur during the ‘period of restoration’ that you would not have incurred if there had been no direct physical loss or damage to covered property at the described premises. The loss or damage must be caused by or result from a Covered Cause of Loss.” (Emphasis added.)
¶ 12 The “Exclusions” section of the property coverage form contains the “Ordinance or Law” exclusion:
“B. Exclusions
1. We will not pay for loss or damage caused directly or indirectly by any of the following. Such loss or damage is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss. These exclusions apply whether or not the loss event results in widespread damage or affects a substantial area.
a. Ordinance or Law
The enforcement of or compliance with any ordinance or law:
(1) Regulating the construction, use or repair of any property; or
(2) Requiring the tearing down of any property, including the cost of removing its debris.
This exclusion, Ordinance Or Law, applies whether the loss results from:
(1) An ordinance or law that is enforced even if the property has not been damaged; or
(2) The increased costs incurred to comply with an ordinance or law in the course of construction, repair, renovation,
remodeling or demolition of property or removal of its debris, following a physical loss to that property.” (Emphases added.)
¶ 13 Finally, the “Property definitions” section states:
“H. Property Definitions
* * *
12. ‘Period of restoration’ means the period of time that:
a. Begins immediately after the time of direct physical loss or damage for Business Income or Extra Expense coverage caused by or resulting from any covered Cause of Loss at the described premises; and
b. Ends on the earlier of:
(1) The date when the property at the described premises should be repaired, rebuilt or replaced with reasonable speed and similar quality; or
(2) The date when business is resumed at a new permanent location.
‘Period of restoration’ includes any increased period required to repair or reconstruct the property to comply with the minimum standard of, or compliance with any ordinance оr law, in force at the time of loss, that regulates the construction or repair,
or requires the tearing down of property. The expiration date of this policy will not cut short the ‘period of restoration[.’ ] ” (Emphasis added.)
C. Society‘s Countercomplaint
¶ 15 Society filed a countercomplaint for declaratory judgment, seeking a declaration that Café‘s alleged loss of business income was not caused by a covered cause of loss; Café had not sustained a “direct physical loss of or damage to Covered Property“; the policy did not cover the losses Café claimed under the business income, extra expense, or civil authority additional coverages; and the ordinance or law, “Consequential Loss,” and “Acts or Decisions” exclusions excluded Café‘s claim.
D. Society‘s Motion for Judgment on the Pleadings
¶ 17 On October 23, 2020, Society also moved for judgment on the pleadings (
¶ 18 Specifically, as to the business income or extra expense additional coverages, Society argued that there was no coverage because (1) “physical” loss is one that causes a change in the physical characteristics of the covered property, not an intangible loss such as diminution in value; (2) the partial temporary limitation of Café‘s operations imposed by the executive orders was not a “physical loss” or “damage” as a matter of law and was similar to a change in zoning that alters the hours a business can be open or a reduction of building capacity, not a physical alteration in the property; (3) the actual or suspected presence of the virus on the property did not cause a “direct physical loss” or “damage” and was not a covered cause of loss because it did not physically alter the property or render the premises unsafe, the virus could be removed with cleaning agents, and Café‘s losses were, at mоst, economic, not a “direct physical loss” or “damage“; and (4) the period- of-restoration clause was further evidence that “physical loss” or “damage” required a tangible change in the physical characteristics of the property, where it refers to a “loss” or “damage” that causes a “physical” alteration of the property requiring the property to be repaired, rebuilt, or replaced.
¶ 19 Society also argued that the ordinance or law exclusion prevented coverage for Café‘s claim. It argued that, even if Café could establish coverage, its claim was barred by this exclusion, which excluded losses caused by ordinances or laws that regulate the use of any property.
¶ 20 Society sought judgment in its favor and against Café as to Society‘s counterclaim and Café‘s complaint.
E. Trial Court‘s Ruling
¶ 22 On February 4, 2021, the trial court granted judgment on the pleadings in Society‘s favor and against Café, finding no coverage. The court noted that the policy provided coverage arising from a “dirеct physical loss of” property and “damage” to property. Regarding “direct physical loss,” the court noted that the dictionary definition of “loss” was “the act of losing possession” and deprivation. Deprivation, in turn,
¶ 23 Further, the court noted that it would reach the same conclusion considering the type of policy, the nature of the risks involved, and the overall purpose of the contract. It characterized the policy as an all-risk policy that covered “direct physical loss,” unless it was specifically excluded. It noted that the parties could have, but did not, agree to exclude losses caused by viruses. The court found “conceivable” that a viral pathogen could render the property unusаble for a time. Construing the policy strictly against Society and broadly for coverage, the court found that the policy covered “lost income resulting from the temporary loss or limited use of covered property when the direct loss of use is caused by viral contamination.”
¶ 24 Next, the court addressed Café‘s two asserted reasons for its lost income: the virus‘s omnipresence, which renders the building unsafe for normal use at full capacity, and the executive orders that severely restricted how restaurants may operate, primarily limiting them to preparing food on site for delivery and carryout. First, as to the virus, the court noted that Café had been operating during the pandemic, consistent with the Governor‘s restrictions. Its allegations relating to any actual physical damage, the court found, were “speculative and hyperbole.” It took judicial notice of the fact that the virus had not rendered other businesses unsafe or unusable and that the virus is easily destroyed with cleaning agents and ultraviolet light. Thus, Café had fаiled, it found, to allege a covered loss.
¶ 25 Second, as to the executive orders, the court determined that they were the reason that Café had reduced or restricted its operations. However, this did not trigger coverage. Such losses were excluded, it determined, because they resulted from “enforcement or compliance with any ordinance or law.” The court found that Café was prevented from fully using its premises, because it chose to comply with the restrictions, not because of viral contamination.
¶ 26 Café appeals. The Restaurant Law Center and the Illinois Restaurant Association filed a brief as amici curiae in support of Café‘s position.
II. ANALYSIS
A. Preliminary Matter
¶ 29 Initially, we address Society‘s argument that Café‘s nature-of-the-case statement violates
¶ 30
B. Standard of Review and Contract Interpretation Principles
¶ 32 The trial court granted judgment on the pleadings in Society‘s favor and against Café. Section 2-615(e) of the Code of Civil Procedure (Code) (
¶ 33 Under Illinois law, the general rules governing the interpretation of contracts govern the interpretation of insurance policies. Bituminous Casualty Corp. v. Iles, 2013 IL App (5th) 120485, ¶ 20. A court‘s primary objective in construing the language of a policy is to ascertain and give effect to the intentions of the parties as expressed in their agreement. Pekin Insurance Co. v. Precision Dose, Inc., 2012 IL App (2d) 110195, ¶ 31. If the policy terms are clear and unambiguous, they must be given their plain and ordinary meanings. American States Insurance Co. v. Koloms, 177 Ill. 2d 473, 479 (1997). The “usual and ordinary” meaning of a phrase is ” ‘that meaning which the particular language conveys to the popular mind, to most people, to the average [person], *** to a business [person],
¶ 35 If the language is reasonably susceptible to more than one meaning, it is considered ambiguous and will be construed strictly against the insurer, who drafted the policy. Koloms, 177 Ill. 2d at 479. Provisions that limit or exclude coverage are interpreted even more liberally in favor of the insured. Id. The test is not what the insurer intended its words to mean, but what a reasonable person in the insured‘s position would understand them to mean. Insurance Co. of Illinois v. Markogiannakis, 188 Ill. App. 3d 643, 655 (1989). If an insurer relies on an exclusionary provision, it must be clear and free from doubt that the provision prevents coverage. Cincinnati Insurance Co. v. American Hardware Manufacturers Ass‘n, 387 Ill. App. 3d 85, 108 (2008). We review de novo issues of contract interpretation, including whether a contract is ambiguous. See Central Illinois Light, 213 Ill. 2d at 153.
C. Business Income and Extra Expense Coverages
¶ 37 Café first argues that the trial court erred in finding that its loss was not covered because the virus had not rendered other businesses unusable, was easily destroyed, and did not prevent all use of the property. Café contends that the virus was the root cause of its restricted use of its premises and, thus, its loss of income, and that Society‘s policy covered that loss. It contends that the trial court erred in taking judicial notice that the virus had not rendered other businesses unusable and that the virus is easily destroyed. Café
¶ 38 Society responds that neither the Governor‘s orders nor any alleged presence of the virus altered the tangible, physical characteristics of the premises or permanently physically dispossessed Café of its property. Café‘s temporary reduction in operations, Society contends, was not the result of a “direct physical loss of or damage to” insured property.
¶ 39 We conclude that the policy unambiguously requires a physical alteration or substantial dispossession, not merely loss of use, which is what Café sufficiently pleaded it experienced. Both the business income and extra expense coverage provisions in Society‘s policy require a “direct physical loss of or damage to” Café‘s property that is “caused by or resulting from a Covered Cause of Loss” and provide coverage for cеrtain losses occurring “during the ‘period of restoration.’ ” A covered cause of loss is defined as a “Direct Physical Loss unless the loss is excluded or limited under this coverage form.”
¶ 40 The policy does not define “direct physical loss of or damage to.” The term “physical loss” is more relevant to our inquiry. “Loss” means “the act or fact of being unable to keep or maintain something or someone” (Merriam-Webster‘s Online Dictionary, www.merriam-webster.com/dictionary/loss (last visited Mar. 2, 2022) [https://perma.cc/Y7C8-5SRA]) or “DEPRIVATION” (Webster‘s Third New International Dictionary (1993)). The term “physical” modifies “loss.” “Physical” means “having material existence: perceptible especially through the senses and subject to the laws of nature” and “of or relating to material things.” Merriam-Webster‘s Online Dictionary, www.merriam-webster.com/dictionary/physical (last visited Mar. 2, 2021) [https://perma.cc/P2HX-KAVB]. Finally, the term “direct” means “marked by absence of an intervening agency, instrumentality, or influence” or “characterized by close logical, causal, or consequеntial relationship.” Merriam-Webster‘s Online Dictionary, www.merriam-webster.com/dictionary/direct (last visited Mar. 2, 2021) [https://perma.cc/D8Y9-2LAK]. Thus, “physical loss” unambiguously requires that the deprivation be caused by a material thing, which necessarily rules out economic losses resulting from Café‘s inability to fully run its business. The trial court ignored the term “physical” and, instead, looked only at the definition of “loss” in determining that loss of use is a covered loss.
¶ 42 Mindful of the policy‘s unambiguous requirement that the deprivation be caused by a material thing, we turn to consider Café‘s specific arguments. In its complaint, Café alleged that it sustained losses both due to the virus‘s presence at and around its premises and due to the executive orders. Both theories fail.
¶ 43 First, Café alleged that the virus has a material existence and physically damages tangible property by rendering it unusable because it adheres to surfaces, creating a dangerous property condition and “direct physical loss of or damage to” the property. Case law assessing asbestos claims and noxious gas contamination cases, which present analogous scenarios, have held that such intangible damage may cause “physical loss” or physical “damage.” See, e.g., Inns by the Sea v. California Mutual Insurance Co., 286 Cal. Rptr. 3d 576, 587-89 (Ct. App. 2021) (citing cases addressing presence of ammonia, wildfire smoke, asbestos, unsafe carbon monoxide levels, odor from methamphetamine operation, persistent cat urine odor, or sulfuric gas); see also Farmers Insurance Co. of Oregon v. Trutanich, 858 P.2d 1332, 1335-36 (Or. Ct. App. 1993) (relying on case law addressing airborne particulates and first holding that pervasive odor from methamphetamine operation was physical because it damaged a house; also, relying on a case involving gasoline and vapor contamination and infiltration, holding that the cost of removing the odor was a “direct physical loss,” where odor produced by methamphetamine lab infiltrated the house). However, we agree with the case law that has found these cases distinguishable, because, unlike here, the substances rendered the premises unusable. See, e.g., Inns by the Sea, 286 Cal. Rptr. 3d at 588-90 (finding the asbestos, gas, and smoke cases inapplicable because the virus, unlike the substances in the other cases, did not cause the premises to be uninhabitable or unsuitable for their intended purpose, where the government orders were issued in response to the virus‘s presence in the community at large; even if the plaintiff had sterilized its premises, it would still have had to suspend its operations to comply with the orders); see also Sandy Point Dental, P.C. v. Cincinnati Insurance Co., 20 F.4th 327, 334 (7th Cir. 2021) (distinguishing gas cases on the
¶ 44 As we must read the policy as a whole (Wilson, 237 Ill. 2d at 455; Gibbs, 242 Ill. App. 3d at 152), we note that the period-of-restoration provision supports our conclusion. Thе policy provides coverage of lost business income and extra expense during the “period of restoration,” which begins at the time of “direct physical loss or damage *** caused by or resulting from any covered Cause of Loss” at the premises and ends on the earlier of (1) the date when the property “should be repaired, rebuilt or replaced with reasonable speed and similar quality” or (2) “[t]he date when the business is resumed at a new permanent location.” It includes “any increased period required to repair or reconstruct the property to comply with the minimum standard of, or compliance with[,] any ordinance or law, in force at the time of loss, that regulates the construction or repair, or requires the tearing down of property.” This provision assumes physical alteration
¶ 45 Café‘s second theory is that the executive orders prohibited access to its business and that the continued orders required it to cease and/or significantly reduce access to, and operations at, its premises. These orders, it asserts, caused “direct physical loss of or damage to” its property. We disagree. The executive orders did not cause a tangible “loss of or damage to” Café‘s property, which is what is required for coverage under the business income аnd extra expense provisions. They merely prohibited in-person dining, which is one use of the property, but permitted food preparation for carryout dining and delivery. Café seeks to equate loss of use with “direct physical loss,” which it cannot do. The prohibition on in-person dining was not connected to any change in the physical condition of the premises or property at the premises, nor did it cause any physical harm to the premises or any property. It caused an economic loss for Café.
¶ 46 Café also argues that “direct physical loss” must mean something other than “direct physical damage.” It contends that, otherwise, the policy contains surplus language. It argues that “direct physical loss” includes “loss of use.” We disagree. Café‘s interpretation reads out the word “physical” from the policy. Nor does “loss” have the same meaning as “loss of use.” Loss of use without “physical loss” is not covered. See Firenze Ventures LLC, 2021 WL 5865710, at *3 (“physical loss” does not refer to any deprivation; it refers to “a deprivatiоn caused by a tangible or concrete change in the condition or location of the thing that is lost“). Further, here, the policy uses the term “loss of use” elsewhere, indicating that it has a different meaning than mere “loss.” For example, in the exclusion for consequential losses, the policy provides that Society “will not pay for loss or damage caused by or resulting from” consequential losses, specifically, “[d]elay, loss of use or loss of market.” (Emphasis added.)
¶ 47 Finally, Café also notes that Society‘s policy did not contain a virus exclusion. We conclude that this is of no import here. Unless the policy already granted coverage, which it does not do, a virus exclusion was not necessary. Further, the absence of an exclusion cannot “create an ambiguity in an otherwise unambiguous insuring clause.” Inns by the Sea, 286 Cal. Rptr. 3d at 593-94.
¶ 48 We note that our decision is consistent with the majority of cases throughout the country interpreting the application of similar provisions to pandemic-related losses. See id. at 579 n.1 (in opinion dated November 15, 2021, noting that “overwhelming majority of federal district court cases find no possibility of coverage under commercial property insurance policies for a business‘s pandemic-related loss of income” and each federal appellate court to consider the issue concluded the same; collecting cases); Image Dental, LLC v. Citizens Insurance Co. of America, 543 F. Supp. 3d 582, 591-92 (N.D. Ill. 2021) (citing cases); see also 10A Couch on Insurance § 148:46 (Steven Plitt et al. eds., 3d ed. Nov. 2021 update) (“The requirement that the loss be ‘physical,’ given the ordinary definition of that term, is widely held to exclude alleged losses that are intangible or incorporeal and, thereby, to preclude any claim against the property insurer when the insured merely suffers a detrimental economic impact unaccompanied by a distinct, demonstrable, physical alteration of the property.“).
¶ 49 Indeed, all published federal appellate court decisions have ruled in the insurance companies’ favor. See Terry Black‘s Barbeque, L.L.C. v. State Automobile Mutual Insurance Co., 22 F.4th 450, 453, 455-58 (5th Cir. 2022) (applying Texas law and affirming judgment on the pleadings in insurer‘s favor; holding that the plaintiff restaurant group, which suspended dine-in service in response to pandemic-related government orders, did not sustain “direct physical loss” of property under the business income or extra expense coverages; concluding that the plaintiff did not sufficiently allege any tangible alteration or deprivation of its property; this interpretation was consistent with period-of-restoration provision; the nature of the policy focused on commercial property, but the claimed loss was only an economic loss that did not have a tangible effect on the property; limitation on use of dining rooms was not a physical loss of property, but a loss of use for its intended purpose); 10012 Holdings, Inc. v. Sentinel Insurance Co., 21 F.4th 216, 220-23 (2nd Cir. 2021) (applying New York law and affirming dismissal for failure to state a claim; holding that the plaintiff art gallery, which had to resort to online sales in response to pandemic-related government orders, failed to sufficiently allege a “direct physical loss” under the policy‘s business income and extra expense coverages; case law required direct “physical” “damage,” which was not alleged; New York courts applying New York law had reached the same conclusion in pandemic-related cases; and “direct physical loss” and “physical damage” did not extend to mere loss of use of premises, where there was no “physical damage” to the premises); Goodwill Industries of Central Oklahoma, Inc. v. Philadelphia Indemnity Insurance Co., 21 F.4th 704, 709-12 (10th Cir. 2021) (applying Oklahoma law and affirming dismissal for failure to state a claim; holding that the plaintiff nonprofit, which suspended its retail store/donation center operations to comply with pandemic-related government orders, failed to sufficiently allege coverage under business income provision; policy did not cover “direct physical loss of” property for suspension-related losses; term required “immediate and perceptible destruction or deprivation of property,” аnd the plaintiff did not lose physical control of its property, nor was it destroyed; intangible losses are not physical losses; “physical loss” includes deprivation of property without any damage to it, not deprivation of some particular use; period-of-restoration provision was consistent with this meaning; and majority of courts had similarly construed the relevant terms); Sandy Point Dental, 20 F.4th at 329-37 (applying Illinois law and affirming dismissal of the plaintiffs’ complaints for failure to state a claim, where the parties (dental practice, restaurant group, and hotel group) sought coverage for business losses resulting from either the virus or the closure orders; holding that the plaintiffs failed to allege “direct physical loss of or damage to” property; “[w]hatever ‘loss’ means, it must be physical in nature” because the term “direct physical” modifies “loss“; period-of-restoration provision
¶ 50 As Café notes, several district court decisions have interpreted similar insurance policy provisions to cover, or at least possibly cover, losses due to government COVID-19 closure orders. See, e.g., Seifert v. IMT Insurance Co., 542 F. Supp. 3d 874, 878-81 (D. Minn. 2021) (Minnesota law; executive orders closed the plaintiff‘s hair salon and barbershop; finding that Minnesota law did not require structural or tangible injury to property); Derek Scott Williams PLLC v. Cincinnati Insurance Co., 522 F. Supp. 3d 457, 462-64 (N.D. Ill. 2021) (Texas law; government order postponed elective surgeries and nonemergency medical and dental procedures; declining to dismiss business income claims; finding that “physical loss” “is broad enough tо cover *** a deprivation of the use of [the plaintiff‘s] premises” because that is its common meaning); In re Society Insurance Co. COVID-19 Business Interruption Protection Insurance Litigation, 521 F. Supp. 3d 729, 741-43 (N.D. Ill. 2021) (Illinois, Wisconsin, Minnesota, and Tennessee laws; restaurant and other hospitality-industry plaintiffs); Elegant Massage, LLC v. State Farm Mutual Automobile Insurance Co., 506 F. Supp. 3d 360, 376 (E.D. Va. 2020) (the massage parlor plaintiff closed its business due to government closure order; plausible that parlor experienced “direct physical loss” when it was deemed uninhabitable and dangerous to use by the government orders because of its high risk of spreading virus; analogizing to noxious gas case law); Studio 417, Inc. v. Cincinnati Insurance Co., 478 F. Supp. 3d 794, 800-03 (W.D. Mo. 2020) (Missouri law). However, disagreement among courts concerning the interpretation of a policy provision does not, by itself, render the provision ambiguous. See, e.g., Erie Insurance Group v. Sear Corp., 102 F.3d 889, 894 (7th Cir. 1996) (rejecting the argument that an insurance policy term was ambiguous “on the basis of conflicting case law” interpreting the term). Further, we are not persuaded by the analyses in this case law.
¶ 51 For example, in In re Society Insurance Co., the district court denied Society‘s summary-judgment motion as to the policy‘s business income coverage. The disjunctive “or,” the court found, meant that “physical loss” covers something different from “physical damage.” In re Society Insurance Co., 521 F. Supp. 3d at 741. The court determined that a reasonable jury could find that the plaintiffs suffered a “direct physical loss of” property on their premises by the restrictions on onsite dining because (1) the shutdown orders imposed a physical limit (the restaurants were limited from using much of their physical space) and (2) the period-of-restoration provision did not warrant a different finding because it described a time period during which business income losses would be covered, not an explicit definition of coverage, and it included the terms “repaired” and “replaced,” which could reference safety features, such as installation of partitions or a ventilation system. Id. at 742-43.
¶ 52 Similarly, in Studio 417, Inc., the district court denied the insurer‘s motion to dismiss, finding that the plaintiff hair salons and restaurants had adequately alleged a “direct physical loss” under the policies. Studio 417, Inc., 478 F. Supp. 3d at 800. First, it determined that the plаintiffs alleged a causal relationship between the virus and their losses, that the virus is a physical substance and lives on surfaces and is emitted into the air, and that the virus attached to and deprived them of their property, making it ” ‘unsafe and unusable, resulting in direct physical loss to the premises and property.’ ” Id. These allegations, the court found, plausibly alleged “direct physical loss” based on the ordinary meaning of the phrase. Id. Second, the court determined that “physical loss” was different from physical “damage” and that “physical loss” may occur when the property is uninhabitable or unusable for its intended purpose. Id. at 801-03 (citing, among others, an asbestos case and noting that contrary case law was decided at the summary-judgment stage, was factually dissimilar, and/or was not binding). The plaintiffs had alleged physical contamination by the virus, which was likely on their premises and caused them to cease or suspend operations. Id. at 802. Rejecting case law that held that the virus does not cause “direct physical loss,” the district court commented that the presence of the virus on premises “is not a benign condition.” Id. The plaintiffs, it found, plausibly alleged that the virus attached to and damaged their property, which caused the premises to be unsafe and unusable. Id.
¶ 53 We decline to follow these cases, because they ignore the unambiguous,
¶ 54 We are not unsympathetic to the immense challenges facing restaurants and other hospitality-service providers during the present pandemic. However, we must construe the contract into which the parties entered and hold them to their agreement.
¶ 55 In summary, the partial loss of Café‘s use of its premises, without any physical alteration to the рroperty or a deprivation of use or access so substantial as to constitute a physical dispossession, was not sufficient to allege a “direct physical loss of or damage to” its property to trigger coverage under Society‘s business interruption or extra expense additional coverages. Because we conclude that there is no coverage under the additional coverage provisions, we need not, and do not, consider whether any applicable coverage would be excluded under the ordinance or law exclusion.
III. CONCLUSION
¶ 57 For the reasons stated, the judgment of the circuit court of Kane County is affirmed.
¶ 58 Affirmed.
¶ 59 JUSTICE MCLAREN, specially concurring:
¶ 60 I specially concur because I wish to discuss a rule of construction. The Latin phrase expressio unius est exclusio alterius means that “to express or include one thing implies the exclusion of the other or alternative.” Black‘s Law Dictionary 620 (8th ed. 2004) (also termed inclusio unius est exclusio alterius). This familiar maxim has been cited as authority as far back as 1806 by the United States Supreme Court (Manella, Pujals & Co. v. Barry, 7 U.S. (Cranch) 415, 430 (1806)) and 1891 by our supreme court (McWilliams v. Morgan, 61 Ill. 89, 93 (1891)). It applies to the interpretation of statutes (see, e.g., Schultz v. Performance Lighting, Inc., 2013 IL 115738, ¶ 17; In re D.W., 214 Ill. 2d 289, 308 (2005)) and contracts (see, e.g., Lobo IV, LLC v. Land Chicago Canal, LLC, 2019 IL App (1st) 170955, ¶ 83; Krause v. GE Capital Mortgage Services, Inc., 314 Ill. App. 3d 376, 386 (2000)).5
¶ 61 The parties and the majority neither mention nor cite the rule. If Café had cited the rule, it would have compromised its argument regarding coverage because there was only one kind of loss listed. The rule limited coverage to only physical loss and excluded other forms of loss.
¶ 62 Concomitantly, if Society had cited the rule, it would have compromised its claim of exclusion of coverage because the Governor‘s executive orders are neither a law nor an ordinance. Therefore, under the rule of construction, the failure to include an executive order in the exclusion would not have effectuated the exclusion.
¶ 63 The majority does not address the merits of the law or ordinance exclusion but states, “Such losses were excluded, [the trial court] determined, because they resulted from [‘]enforcement or compliance with any ordinance or law.[‘] ” Supra ¶ 33. The majority is not required to address issues not necessary to the review of the judgment to affirm. See West Bend Mutual Insurance Co. v. Krishna Schaumburg Tan, Inc., 2021 IL 125978, ¶ 60 (after affirming on anothеr basis, the court concluded there was no need to address the remaining issue raised by the appellee). However, I specially concur because I wish to emphasize that the rule of construction should be utilized by trial courts regardless of whether the parties cite it.6
Cite as: Sweet Berry Café, Inc. v. Society Insurance, Inc., 2022 IL App (2d) 210088
Decision Under Review: Appeal from the Circuit Court of Kane County, No. 20-CH-266; the Hon. Kevin T. Busch, Judge, presiding.
Attorneys for Appellant: Michael W. Rathsack, and Antonio M. Romanucci, Gina A. Deboni, and David A. Neiman, of Romanucci & Blandin, LLC, both of Chicago, and Robert P. Rutter and Robert A. Rutter, of Rutter & Russin, LLC, and Nicholas A. DiCello, Dennis R. Lansdowne, and Jeremy A. Tor, of Spangenberg, Shibley & Liber, LLP, both of Cleveland, Ohio, for appellant.
Attorneys for Appellee: Michael D. Sanders, Michelle A. Miner, and Amy E. Frantz, of Purcell & Wardrope, Chtrd., of Chicago, for appellee.
Amicus Curiae: John H. Mathias Jr., David M. Kroeger, Megan B. Poetzel, Gabriel K. Gillett, and Sara M. Stappert, of Jenner & Block LLP, of Chicago, for amici curiae Restaurant Law Center et al.
Michael R. Enright, of Robinson & Cole LLP, of Hartford, Connecticut, for amici curiae American Property Casualty Insurance Association et al.