Insurance Law

Dist. Ct. did not err in granting defendant-insurance company’s motion to dismiss plaintiffs-insureds’ actions, alleging that defendants wrongfully denied their application for insurance benefits arising out of losses and expenses sustained as result of COVID-19 pandemic and governmental orders issued in response to it. Applicable policies contained exclusion for losses caused by virus, which applied to instant COVID-19-related losses. Also, Dist. Ct. could properly deny plaintiffs alternative claims that defendant acted deceptively and unfairly when it collected full premiums from businesses affected by governmental COVID-19 orders, even though risks justifying those premiums went down when orders scaled back business operations. Dist. Ct. could properly find that no reasonable policyholder could have been deceived about scope of coverage at time of policy renewal, since defendant had already denied plaintiffs’ claims for COVID-19-related coverage. As such, plaintiff could not show that defendant made material omission under Illinois consumer protection statute.

Dist. Ct. did not err in granting defendant-insurance company’s motion to dismiss plaintiff’s lawsuit, alleging that defendant wrongfully denied plaintiff’s application for insurance benefits based on COVID-related losses arising out of closure of certain facilities and imposition of restrictions on dining. While plaintiff insisted that its costs and expenses were covered as “direct physical losses or damage” to its business property, Dist. Ct. could properly find that said claim was not covered, since plaintiff failed to allege that there was any physical alteration caused by COVID-19 virus or orders limiting use of plaintiff’s business property. Also, dismissal was warranted under policy’s microorganism exclusion, where instant COVID-19 virus qualified as “microorganism” for purposes of applying instant exclusion.

Dist. Ct. did not err in granting defendant-insurance company’s motion to dismiss plaintiff-insured’s action, alleging that defendant wrongfully denied plaintiff insurance benefits for COVID-19-related losses arising out of customer cancellations of business services based on executive orders issued by Gov. Pritzker that suspended in-person dining and gatherings of 50 or more people. While policy provided coverage for “direct physical loss” of or damage to property, said coverage did not apply to instant claim, where plaintiff did not allege that COVID-19 virus or instant executive orders physically altered plaintiff’s business properties. Policy also contained loss of use exclusion that applied to plaintiff’s claims, where: (1) policy barred coverage for “loss or damage caused by or resulting from delay, loss of use or loss of market;” and (2) policy indicated that mere loss of use cannot be cause of plaintiff’s losses. Also, policy’s ordinance or law exclusion served to bar coverage, where: (1) instant loss was caused directly or indirectly by enforcement of any ordinance or law; and (2) enforcement of Governor’s executive orders qualified as enforcement of “law.”

Dist. Ct. did not err in dismissing plaintiffs-insureds’ insurance claims for losses incurred by plaintiffs’ businesses arising from either closure or scaling back of said businesses that stemmed from series of executive orders from Gov. Pritzker in effort to curb spread of COVID-19 virus. Instant policies provided coverage for income losses sustained on account of suspension of operations caused by “direct physical loss” to covered property, and Dist. Ct. based dismissals on fact that plaintiffs did not adequately allege that either COVID-19 virus or resulting closure orders caused “direct physical loss” to their business properties. Ct. of Appeals, in affirming instant dismissals, found that loss of use of property that is unaccompanied by any physical alteration to property may not constitute “direct physical loss” for purposes of collecting under instant policies. This is so, Ct. of Appeals reasoned, where plaintiffs failed to allege that presence of virus or closure orders physically altered their properties.

Dist. Ct. did not err in dismissing plaintiff’s action, alleging that defendants-insurance broker and brokerage negligently procured wrong insurance policy, where plaintiff wanted same occupational disability coverage that was included in his original insurance policy that insured his income as orthopedic surgeon, if he were no longer able to be orthopedic surgeon, but was otherwise able to be employed, where defendants did not obtain same coverage in new insurance policy. Dist. Ct. did not err, in applying Indiana choice-of-law principles, in finding that Alabama law applied to case, where: (1) there was material difference between Alabama law and Indiana law when applied to facts of case; and (2) Alabama law applied to facts of case, since plaintiff earned his income in Alabama and sustained his economic losses there. Moreover, plaintiff conceded that if Alabama law applied to case, he would lose his negligent procurement case, since Alabama law recognized that plaintiff’s contributory negligence would preclude his case where plaintiff had failed to read terms of new policy. Also, Dist. Ct. properly entered summary judgment on plaintiff’s breach of contract claim, alleging that defendants failed to pay correct amount of benefits, where plaintiff had failed to submit required written proof of financial losses for each month of lost income.

In action by plaintiff-insurance company seeking declaration that it did not owe coverage in underlying Title IX action by two female students alleging that defendant-insured/School District failed to prevent and inappropriately responded to sexual misconduct by male student, Dist. Ct. erred in granting defendant’s motion for judgment on pleadings, after finding that policy’s errors and omissions provisions provided coverage for underlying lawsuit. Record showed that errors and admissions’ provisions contained sexual misconduct exclusion that Dist. Ct. viewed as ambiguous, and that Dist. Ct. found that exclusion applied only to sexual misconduct by school employees and that it might not bar coverage for defendant’s reactions to student’s sexual misconduct. Ct. of Appeals, though, found that reasonable reading of exclusion indicated that exclusion applied to “any” sexual misconduct or molestation of “any person,” such that it would exclude coverage for claim based directly on male student’s misconduct. Moreover, Ct. of Appeals alternatively noted that if, as Dist. Ct. found, sexual misconduct exclusion barred only coverage for defendant’s employees’ actions, exclusion would still apply to underlying Title IX lawsuit, since: (1) defendant could be liable for discrimination in cases of student-on-student sexual misconduct under Title IX only if defendant had notice of said misconduct and was deliberately indifferent to said misconduct; and (2) liability for violation of Title IX depended on actions of defendant’s employees, and thus exclusion would apply under Dist. Ct.'s reading of sexual misconduct exclusion.