Sweet Berry Café, Inc. v. Soc'y Ins., Inc.

Decision Date15 March 2022
Docket Number2-21-0088
Parties SWEET BERRY CAFÉ, INC., Plaintiff and Counterdefendant-Appellant, v. SOCIETY INSURANCE, INC., Defendant and Counterplaintiff-Appellee.
CourtUnited States Appellate Court of Illinois

Michael W. Rathsack, and Antonio M. Romanucci, Gina A. Deboni, and David A. Neiman, of Romanucci & Blandin, LLC, both of Chicago, and Robert P. Rutter and Robert A. Rutter, of Rutter & Russin, LLC, and Nicholas A. DiCello, Dennis R. Lansdowne, and Jeremy A. Tor, of Spangenberg, Shibley & Liber, LLP, both of Cleveland, Ohio, for appellant.

Michael D. Sanders, Michelle A. Miner, and Amy E. Frantz, of Purcell & Wardrope, Chtrd., of Chicago, for appellee.

John H. Mathias Jr., David M. Kroeger, Megan B. Poetzel, Gabriel K. Gillett, and Sara M. Stappert, of Jenner & Block LLP, of Chicago, for amici curiae Restaurant Law Center et al.

Michael R. Enright, of Robinson & Cole LLP, of Hartford, Connecticut, for amici curiae American Property Casualty Insurance Association et al.

JUSTICE JORGENSEN delivered the judgment of the court, with opinion.

¶ 1 In this insurance coverage case, plaintiff, Sweet Berry Café, Inc. (Café), sought a declaration that its commercial property insurance policy with defendant, Society Insurance, Inc. (Society), covered business income losses it suffered due to the COVID-19 pandemic and the Governor's executive orders, which restricted in-person dining, but not carryout or delivery services, at restaurants and similar establishments. The trial court entered judgment on the pleadings (735 ILCS 5/615(e) (West 2020)) in Society's favor. Café appeals, arguing that (1) the policy's coverage under the "Business Income" and "Extra Expense" provisions for "direct physical loss of or damage to Covered Property" includes losses due to the pandemic and the orders and (2) the "Ordinance or Law" exclusion does not preclude coverage, because it applies in limited situations and, in any event, proclamations or executive orders are neither laws nor ordinances. We hold that neither the presence of the virus at Café’s premises nor the pandemic-triggered executive orders that barred in-person dining at restaurants constitute "direct physical loss of or damage to" Café’s property. Given that we conclude that there was no coverage, we need not reach Café’s argument concerning the ordinance or law exclusion. Affirmed.

¶ 3 A. Complaint Allegations

¶ 4 On May 27, 2020, Café, located in South Elgin, filed a declaratory-judgment complaint ( 735 ILCS 5/2-701 (West 2020) ), seeking coverage, under a "Businessowners Policy" it purchased from Society, for losses resulting from restricted operations during the pandemic. In a September 18, 2020, first amended complaint, Café sought coverage under the policy's "Business Income" "Extra Expense", and "Civil Authority" provisions. Café alleged that it sustained "direct physical loss of or damage to" property at its premises resulting from the SARS-CoV-2 virus and/or the pandemic and that the virus and the pandemic are "Covered Causes of Loss" under the policy. Further, it alleged that it incurred covered losses resulting from the Governor's orders.

¶ 5 The complaint noted that, after the World Health Organization characterized the COVID-19 outbreak as a pandemic, the Governor, Jay Robert Pritzker, issued Executive Order 2020-7 on March 16, 2020, whose goal was to slow the spread of the virus by minimizing in-person interaction in an environment with "frequently used services in public settings, including bars and restaurants," stating that the reduction of on-premises consumption of food and beverages was warranted. Exec. Order No. 2020-7, 44 Ill. Reg. 5536 (Mar. 16, 2020), https://www.illinois.gov/government/executive-orders/executive-order.executive-order-number-7.2020.html [https://perma.cc/A4AF-T8TT].1 On March 20, 2020, the Governor issued a closure order (Executive Order 2020-10, the stay-at-home order), requiring Illinois residents to stay at home, except for essential travel for essential work, supplies, and outdoor activities through April 7, 2020. Exec. Order No. 2020-10, 44 Ill. Reg. 5857 (Mar. 20, 2020), https://www.illinois.gov/government/executive-orders/executive-order.executive-order-number-10.2020.html [https://perma.cc/AL3B-TXGW]. The order also reduced the allowable public and private gathering size to no more than 10 people.2 Id. The stay-at-home order was subsequently extended to May 29, 2020. Exec. Order No. 2020-33, 44 Ill. Reg. 8425 (Apr. 30, 2020), https://www.illinois.gov/government/executive-orders/executive-order.executive-order-number-33.2020.html [https://perma.cc/D337-TNHC]. The requirements of the March 20, 2020, order, including the classification as essential businesses of restaurants and establishments engaged in the retail sale of alcohol, were renewed. Exec. Order No. 2020-32, 44 Ill. Reg. 8409 (Apr. 30, 2020), https://www.illinois.gov/government/executive-orders/executive-order.executive-order-number-32.2020.html [https://perma.cc/5PW8-5DLT].

¶ 6 Café asserted that it sustained losses due to the orders addressing the virus and the pandemic. It was required to cease and/or significantly reduce operations at its locations. The orders, it alleged, prohibited access to its premises and continued orders required Café to cease and/or significantly reduce operations at, and prohibited access to, its premises. Café also alleged that it sustained losses due to the virus's physical presence "at, in, on, and/or around" its premises and due to its presence and spread in the community. It also asserted that the virus can be transmitted by way of human contact with surfaces, human-to-human contact at the premises, and human contact with airborne particles emitted into the air at the premises. The virus, Café argued, rendered items of physical property unsafe and impaired its value and function and physically altered the air.

¶ 7 B. Society's Policy

¶ 8 Society's policy (No. BP18040353-5, for the policy period from December 31, 2019, through December 31, 2020) includes forms published by Insurance Services Office, Inc. (ISO), and used in the insurance industry. The policy does not include the ISO standard virus exclusion form or otherwise reference the word "virus," other than in reference to a computer virus, and it contains no reference to "pandemic."

¶ 9 In the "Business Owners Special Property Coverage Form," the policy states:

"A. Coverage
We will pay for direct physical loss of or damage to Covered Property at the premises described in the Declarations caused by or resulting from any Covered Cause of loss.
* * *
3. Covered Causes of Loss
Direct Physical Loss[3] unless the loss is excluded or limited under this coverage form." (Emphases added.)

¶ 10 The policy also contains certain "Additional Coverages," which are the focus of this appeal, including for "Business Income":

"5. Additional Coverages
* * *
g. Business Income
(1) Business Income
(a) We will pay for the actual loss of Business Income you sustain due to the necessary suspension of your ‘operations’ during the ‘period of restoration[.’] The suspension must be caused by direct physical loss of or damage to covered property at the described premises. The loss or damage must be caused by or result from a Covered Cause of Loss
* * *
(b) We will only pay for loss of Business Income that you sustain during the ‘period of restoration’ and that occurs within 12 consecutive months after the date of direct physical loss or damage." (Emphasis added.)

¶ 11 Another additional coverage is for "Extra Expense":

"h. Extra Expense
(1) We will pay necessary Extra Expense you incur during the ‘period of restoration’ that you would not have incurred if there had been no direct physical loss or damage to covered property at the described premises. The loss or damage must be caused by or result from a Covered Cause of Loss." (Emphasis added.)

¶ 12 The "Exclusions" section of the property coverage form contains the "Ordinance or Law" exclusion:

"B. Exclusions
1. We will not pay for loss or damage caused directly or indirectly by any of the following. Such loss or damage is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss. These exclusions apply whether or not the loss event results in widespread damage or affects a substantial area.
a. Ordinance or Law
The enforcement of or compliance with any ordinance or law :
(1) Regulating the construction, use or repair of any property ; or
(2) Requiring the tearing down of any property, including the cost of removing its debris.
This exclusion, Ordinance Or Law, applies whether the loss results from:
(1) An ordinance or law that is enforced even if the property has not been damaged; or
(2) The increased costs incurred to comply with an ordinance or law in the course of construction, repair, renovation, remodeling or demolition of property or removal of its debris, following a physical loss to that property." (Emphasis added.)

¶ 13 Finally, the "Property Definitions" section states:

"H. Property Definitions
* * *
12. ‘Period of restoration’ means the period of time that:
a. Begins immediately after the time of direct physical loss or damage for Business Income or Extra Expense coverage caused by or resulting from any covered Cause of Loss at the described premises; and
b. Ends on the earlier of:
(1) The date when the property at the described premises should be repaired, rebuilt or replaced with reasonable speed and similar quality; or
(2) The date when business is resumed at a new permanent location. ‘Period of restoration’ includes any increased period required to repair or reconstruct the property to comply with the minimum standard of, or compliance with any ordinance or law, in force at the time of loss, that regulates the construction or repair, or requires the tearing down of property.
The expiration date of this policy will not cut short the ‘period of restoration[.’]"

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