By Lauraann Wood

Law360 (August 3, 2020, 5:34 PM EDT ) Employers Preferred Insurance Co. has claimed in Illinois state court that it had no duty to cover a former McDonald's franchise owner's fight against a group of Chicago workers who launched a bid for better coronavirus safety protections.

Employers claimed Thursday that Lexi Management LLC, which sold its Chicago McDonald's franchise in the middle of preliminary injunction proceedings over management's allegedly subpar COVID-19 workplace safety response, incorrectly asked its insurer to cover its defense and costs in those underlying proceedings.

The insurance company asked the court to declare that it had no duty to defend Lexi in the underlying case or indemnify it for any fees, costs or other expenses accrued in connection to it, arguing that the insurance policy Lexi purchased is triggered only by claims for damages.

To the extent that the McDonald's employees are seeking damages in their suit, "such damages are the ordinary costs of operating a business" and aren't the result of bodily injury, which Lexi's policy covers, Employers argued.

Even if the court disagrees and finds that the McDonald's employees have suffered bodily injuries, Lexi canceled its insurance agreement ahead of selling the restaurant in June, Employers told the court.

Since the workers who sued Lexi are current employees at the franchise, Lexi's policy wouldn't cover their alleged injuries because they were exposed to the restaurant's allegedly harmful conditions after the policy's effective period, the insurer claimed. 

Other policy exclusions apply that also preclude coverage for Lexi's defense in the underlying suit, Employers claimed. Those include a policy exclusion for obligations imposed by any workers compensation, occupational disease unemployment compensation or similar law, as well as an exclusion for damages arising out of "coercion, criticism … or any personnel practices, policies, acts or omissions," the insurer said.

Before selling the franchise at issue, Lexi was one of several companies defending claims that McDonald's Corp. and several franchisees had caused a "public nuisance" by mismanaging coronavirus safety protocols in four Chicago restaurants. The employees who worked at the former Lexi-owned restaurant dropped their injunction bid against the company a day after the court learned about the mid-June sale.

Lexi canceled its insurance policy June 3, effective June 15, according to Employers' lawsuit. About a week later, the court ordered the remaining McDonald's defendants to provide their workers with more adequate social distancing training and stricter mask enforcement practices.

The workers testified during injunction proceedings that the nature of their job duties makes it nearly impossible to maintain a safe distance from their coworkers. They also testified that they've seen coworkers failing to wear their face masks properly without managers' correction, and that they haven't seen much signage posted around their restaurants explaining how to stay safe at work or what to do if they feel unwell.

McDonald's fought those contentions by presenting managers of the stores at issue, who testified that they've continuously held both personal and huddle coronavirus safety talks with workers and required them to sign a paper acknowledging they happened. The managers also testified that workers have enough protective gear to use as they need, and training on how to consistently use it properly is a "constant" conversation.

Representatives for Employers didn't immediately respond Monday to a request for comment.

Counsel and contact information for Lexi Management couldn't immediately be determined Monday.

Employers is represented by Michael Marick and Timothy Wright of Skarzynski Marick & Black LLP.

The case is Employers Preferred Insurance Co. v. Lexi Management LLC et al., case number 2020-CH-05203, in the Circuit Court of Cook County, Illinois.

--Editing by Kelly Duncan.

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