7th Circ. Dismissed four insurance cases against loss of business earnings linked to COVID-19 shutdown

On December 9, 2021, the Seventh Circuit Court of Appeals awarded insurers a huge victory by issuing four decisions dismissing lawsuits seeking business income coverage for losses suffered as a result of the closure orders. COVID-19. The Seventh Circuit, which sits in Chicago and has appellate jurisdiction in the federal courts of Illinois, Indiana, and Wisconsin, joined the Sixth, Eighth, Ninth, and Eleventh Circuits in arguing that the term “loss or damage direct physical ”requires physical alteration of property for coverage to be triggered under“ all risk ”property policies. The Seventh Circuit also found that the exclusions relating to microorganisms and prescriptions or the law prohibited coverage.

The four coordinated decisions are:

  • Bradley Hotel Corp v. Aspen Specialty Ins. Co., Case n ° 21-1173 (7th Cir. 9 December 2021)

  • Owner of the Crescent Plaza Hotel, LP c. Zurich American. Ins. Co., Case n ° 21-1316 (7th Cir. 9 December 2021)

  • Mashallah, Inc. v. West Bend Mutual Ins. Co., Case n ° 21-1507 (7th Cir. 9 December 2021)

  • Sandy Point Dental, PC v. The Cincinnati Ins. Co., case n ° 21-1186 (7th Cir. 9 December 2021).

All cases have arisen from businesses that suffered economic losses when forced to shut down or limit their services after government officials issued various “shutdown” orders in an attempt to curb the spread. of COVID-19. The policies provided coverage for loss of earnings suffered as a result of “direct physical loss or damage” to company properties. Policyholders argued that the presence of the virus that caused COVID-19 or the shutdown orders constituted “direct physical loss” because the term includes loss of enjoyment even when not accompanied by physical alteration. The Seventh Circuit rejected the argument, arguing that the policies provide coverage for losses incurred during a “restoration period”, which is limited to the date the property is “repaired, rebuilt or replaced”. The Seventh Circuit ruled that without a physical modification of the property, there would be nothing to repair, rebuild or replace.

the machallah The court also found that the virus exclusions barred coverage, thereby dismissing the insured’s claim that the losses were suffered due to government directives instead of the virus.

In Crescent Square, the Court of Appeal found that the virus that causes COVID-19 was a microorganism, and therefore coverage was prohibited under the microorganism exclusion, despite policyholders’ assertion that certain definitions of the term do not include viruses because they are not technically alive.

Opposing a less used exclusion, the Bradley Hotel The court also ruled that the exclusion from the ordinance or law, which excludes losses resulting from any ordinance or law governing the construction or use of property, excluded coverage because the governor’s decrees of the Illinois, JB Pritzker, had the force of law.

The decisions reflect the Seventh Circuit’s clear position that most comprehensive insurance policies will not cover the massive losses suffered by businesses during pandemic shutdowns.

© 2021 Wilson ElserRevue nationale de droit, volume XI, number 349

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