(May 29, 2020) - Society Insurance is asking an Illinois federal judge for a quick ruling that the operators of the popular Chicago-area Billy Goat Tavern restaurant chain are owed no coverage for their loss of business income during the coronavirus pandemic.
Billy Goat Tavern I Inc. et al. v. Society Insurance, No. 20-cv-2068, motion for summary judgment filed, 2020 WL 2755329 (N.D. Ill. May 27, 2020).
Coverage to the restaurant operators was rightly denied because they did not suffer a “direct physical loss” due to Illinois Gov. J.B. Pritzker’s mandatory shutdown orders aimed at curbing the spread of COVID-19, the insurer says in a May 27 summary judgment motion filed in the U.S. District Court for the Northern District of Illinois.
The governor’s orders “have nothing to do with damage or loss to property,” the motion says. “The point is to keep people away from one another, not away from damaged property or buildings.”
Billy Goat Tavern I Inc. and related entities, which operate seven restaurants in Chicago and another in the nearby suburb of Lombard, sued Society March 31, alleging the insurer acted in breach of contract by denying coverage for their losses under their “all-risk” insurance policy.
The plaintiffs, represented by Duncan Law Group, seek to represent all Illinois businesses that offer food or beverages for on-premises consumption, have lost business due to COVID-19 and have been denied coverage by Society.
The original Billy Goat Tavern in Chicago achieved national recognition by serving as the inspiration for the “Olympia Café” sketch on Saturday Night Live in 1978.
In response to the COVID-19 outbreak, on March 16 Pritzker issued an order directing all restaurants, bars, grocery stores and food halls in the state to cease offering on-premise dining.
According to the lawsuit, the order permitted such businesses to offer carry-out and curbside pick-up services but mandated that they operate in an environment where patrons purchasing food or beverages “maintain adequate social distancing.”
The plaintiffs say they filed a claim for lost business income with Society on March 16.
Their policy’s business owners special property coverage form provides coverage for any “direct physical loss of or damage to covered property” that is caused by any “covered cause of loss.” The form does not define the term “direct physical loss,” according to the suit.
The form also states that the insurer will pay for the actual loss of business income stemming from the necessary suspension of the insureds’ operations during a “period of restoration,” the suit says.
Society denied the plaintiffs’ insurance claim four days later, it says.
The plaintiffs allege the coverage denial is unlawful because COVID-19 rendered their covered properties “unsafe and inaccessible for dine-in customers.”
The suit seeks a declaration that the plaintiffs sustained a “direct physical loss” at their properties.
It also seeks an order requiring Society to reimburse the plaintiffs for the business income they lost as a result of COVID-19 and the shutdown order, plus unspecified compensatory and punitive damages.
”Intangible’ economic losses
Society, represented by Purcell & Wardrope Chtd., argues in its summary judgment motion that the plaintiffs are owed no payout because their properties are physically unchanged and undamaged.
According to the defendant’s motion, “physical” loss or damage under Illinois law means a change to the structure, composition or form of a tangible property.
This standard is not met here, where businesses like the plaintiffs’ restaurants have suffered only “intangible” economic losses, Society says.
”The appearance, shape, structural integrity, nor any other physical characteristic of the property have changed,” the insurer says.
In fact, it says, many of the plaintiffs’ properties are still in use as they prepare and serve food for pickup or delivery.
The plaintiffs are not owed coverage under the policy’s period-of-restoration clause, according to Society, because there is nothing on the plaintiffs’ premises that need to be repaired, rebuilt or replaced.