The government orders required Bradley Hotel Corp. to cease non-essential operations at the hotel's restaurant and convention center, and caused guests to cancel reservations, Aspen said. But the policy's loss of use and ordinance exclusions bar any coverage for these losses, the insurer argued.
"Forcing insurers to shoulder the enormous costs of the global pandemic would not only imperil the insurance industry but would also prevent insurers from fulfilling their obligations to policyholders for losses that are covered," Aspen said in Friday's appellee brief.
Bradley Hotel filed its proposed class action in the Northern District of Illinois, saying Aspen is responsible for its business interruption losses. But U.S. District Judge Charles P. Kocoras dismissed the case in December, finding that the hotel couldn't show any actual harm to its property.
Bradley Hotel's inability to use the restaurant and banquet hall under government orders wasn't enough to trigger coverage under Aspen's policy, Judge Kocoras said. But the owner told the Seventh Circuit in its March opening brief that the government orders caused physical loss and damage to the hotel.
In Friday's brief, Aspen argued that Judge Kocoras was correct to find the policy didn't cover the hotel owner's temporary inability to use its property under government orders. These temporary restrictions didn't require repair, rebuilding or replacement to the property necessary to trigger coverage, the insurer said.
Aspen also invoked the National Association of Insurance Commissioners' position that these types of policies aren't designed or priced to cover communicable diseases like the coronavirus. Rather, the policies are meant to cover losses from wind, hail, fire, theft and vandalism, the insurer said.
"Pandemics are highly correlated risks and very difficult to insure without government intervention or participation in the market. The premiums charged for property insurance were not valued to address the world-wide correlated losses caused by the global pandemic," Aspen added.
The Seventh Circuit is currently hearing an appeal by an Illinois dental office, which is arguing its pandemic-related losses are covered because its closure was to curb COVID-19, a physical condition. A steakhouse and brewery operator also said to the Seventh Circuit that the coronavirus is a physical presence causing loss or damage.
Representatives for Bradley Hotel declined to comment on Monday.
Representatives for Aspen didn't respond to requests for comment.
Bradley Hotel is represented by Mario M. Iveljic and Steven Mikuzis of Mag Mile Law LLC, and Robert R. Duncan and James H. Podolny of Duncan Law Group LLC.
Aspen is represented by Yvette Ostolaza, Yolanda C. Garcia, Mitchell B. Alleluia-Feinberg, Virginia A. Seitz and Mark B. Blocker of Sidley Austin LLP.
The case is Bradley Hotel Corp. v. Aspen Specialty Insurance Co., case number 21-1173, in the U.S. Court of Appeals for the Seventh Circuit.
--Additional reporting by Daphne Zhang. Editing by Regan Estes.
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