Society Insurance Company unsuccessfully sought to dismiss plaintiff restaurant group's claims for business interruption after shut-down orders followed the onset of COVID-19. In re Soc'y Ins. Co. COVID-19 Business Interruption Protection Insurance Litigation, 2021 U.S. Dist. LEXIS 32351 (N,.D. Ill Feb. 22, 2021).      The multi-district litigation addressed Society Insurance's denial of business- interruption coverage for several restaurants based in several states whose operations were impacted by the COVID-19 pandemic Society sought dismissal of three cases.     All plaintiffs were forced to modify their normal business operations due to the pandemic. They had to suspend in-person dining and relied only on take-out orders. Plaintiffs alleged that the presence of the coronavirus created a dangerous condition and rendered their premises unsafe and unfit for their intended use, causing physical property damage or loss under Society's policies. Society argued that a slowdown in business due to the public's fear of the coronavirus or a suspension of business due to governmental authority ordering businesses to close was not a direct physical loss. Further, the actual or alleged presence of the coronavirus was not a Covered Cause of Loss.     Notably, none of the policies at issue contained a specific exclusion of coverage for losses due to a virus or pandemic.      Society first argued that the plaintiffs' businesses were interrupted by the various state and local shutdown orders - not by the coronavirus itself. But Society's characterization of the cause of the business interruptions was not supported by the governing law of the pertinent states, none of which imposed such a strict causation requirement. With proximate cause as the governing causation standard, a reasonable jury could find that the novel coronavirus and the resulting pandemic proximately caused the business interruptions. Even if the government shutdown orders (and not the pandemic itself) played a causal role in the plaintiffs' losses, and even if those orders could no be construed as a "direct physical loss,' the shutdown orders were proximately caused by the pandemic.      The court next pondered whether there was a "direct physical loss." The policies required "direct physical loss of or damage to covered property." The disjunctive "or" meant that "physical loss" must cover something different from "physical damage." Therefore, plaintiffs did not need to plead or show a change to the property's physical characteristics.     But did the restrictions imposed on plaintiffs' property count as "physical loss"? Most of the restaurants were able to use their kitchens and thus continue to operate on a take-out and delivery basis. But plaintiffs were not able to use their premises as they did for indoor, sit-down service before the pandemic. A reasonable jury could find that the plaintiffs did suffer s direct physical loss of property on their premises. In the light most favorable to the plaintiffs, the pandemic-caused shutdown orders imposed a physical limit; the restaurants were limited from using much of their physical space.      Here, the scope of the term "direct physical loss" was genuinely in dispute. A reasonable jury could find for either side based on the competing arguments. Therefore, Society's motion was denied as to the policies' business-interruption coverage.      Society's motion was granted, however, on civi authority coverage. Even if the general public was prohibited from congregating in the covered premises, there was no allegation that employees were prohibited from accessing the premises. For some plaintiffs, take-out customers or in-room dining guests could access the premises (and the immediately surrounding areas).      Finally, the plaintiffs' claims for bad faith survived the motion to dismiss. A more factual-based record needed to be developed before dismissal would be appropriate,. 

from Insurance Law Hawaii https://ift.tt/3qxObBC