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Law360 (March 22, 2021, 6:55 PM EDT ) Owners Insurance Co. asked an Illinois federal judge Friday to throw out a suit brought by two banquet halls seeking coverage for coronavirus-related losses, saying the governor's orders in response to the pandemic didn't cause damage to their premises.
Owners says it rightfully denied the business interruption claims made by Carlisle Banquets Inc. and New Meridian Banquets Inc. based on the lack of any "direct physical loss" and argues their theories of liability have been "flatly rejected repeatedly" in a series of cases in Illinois state and federal courts.
"Plaintiffs have been clear that their losses do not arise from the presence of COVID-19 on their premises but solely as a result of the governor's orders that "prohibited the public from accessing" their restaurants," Owners said. "But coverage under the policies is only triggered where there is a 'direct physical loss of or damage to the covered property.'"
That's supported by surrounding language in the policies, which provide for coverage for lost business income sustained during the "period of restoration," or the period of time between when the "direct physical loss or damage" occurs and "the date when the property at the described premises should be repaired, rebuilt, or replaced," Owners argued.
"Thus, the remedy for lost property is for it to be rebuilt or replaced, indicating the policies only cover a 'direct physical loss' of property that is physically, tangibly harmed, destroyed, or missing," the insurer said.
And physical alterations made to the banquet halls' premises in response to COVID-19 doesn't count, Owners contends, saying there's no coverage for a loss where the premises need only to be cleaned.
"Indeed, all public places must be cleaned," Owners said. "The necessity to do so does not constitute grounds to file an insurance claim."
Illinois Gov. J.B. Pritzker's orders may have restricted on-site dining, but restaurants are allowed to prepare food for delivery, drive-through, or curbside pickup, so coverage wouldn't apply, Owners said.
And even if the banquet halls could establish property damage, several exclusions would apply, including a virus exclusion, a "loss-of-use" and "loss-of-market" exclusion, and the governmental acts or decisions exclusion, according to the dismissal motion.
The virus exclusion bars coverage for loss or damage caused directly or indirectly "by or resulting from virus, bacterium or other microorganism that induces or is capable of inducing physical distress, illness or disease," and that language "could not be clearer," Owners said.
The banquet halls first filed the coverage suit in Cook County in January, and the case was later removed to Illinois federal court. They say the governor's executive orders prohibited them from serving food and beverages on their premises and forced them to cease operations, lose income, furlough workers and potentially close their doors.
Representatives of the parties could not be immediately reached for comment on Monday.
The insurer is represented by Lori McAllister and Harry N. Arger of Dykema Gossett PLLC.
The banquet halls are represented by George G. Argionis and Evan J. Finneke of Argionis & Associates LLC.
The case is Carlisle Banquets Inc. et al. v. Owners Insurance Co., case number 1:21-cv-00517, in the U.S. District Court for the Northern District of Illinois.
--Editing by Ellen Johnson.
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