Lee v. State Farm Fire & Cas. Co.
| Docket Number | 1-21-0105 |
| Decision Date | 21 March 2022 |
| Citation | 2022 IL App (1st) 210105,205 N.E.3d 915,461 Ill.Dec. 827 |
| Parties | Jaewook LEE, d/b/a Evanston Grill, Individually and on Behalf of a Class of Similarly Situated Individuals, Plaintiff-Appellant, v. STATE FARM FIRE AND CASUALTY COMPANY, Defendant-Appellee. |
| Court | United States Appellate Court of Illinois |
Alexander N. Loftus and David Eisenberg, of Loftus & Eisenberg, Ltd., of Chicago, for appellant.
Bradley J. Andreozzi and Sulema Medrano Novak, of Faegre Drinker Biddle & Reath LLP, of Chicago, for appellee.
Matthew Thomas Dattilo, of Simpson Dattilo, LLC, 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.
¶ 1 As a result of the business closure orders due to the coronavirus disease 2019 (COVID-19), many businesses across the country filed claims for business interruption coverage with their insurance carriers, which were denied. In fact, "[a]s of the week ending June 28, 2021, a total of 1,937 business interruption lawsuits ha[d] been filed."1 This is one such lawsuit.
¶ 2 In this insurance coverage dispute, plaintiff Jaewook Lee, doing business as Evanston Grill (Evanston Grill), individually and on behalf of similarly situated individuals, appeals the dismissal of its complaint pursuant to section 2-615 of the Code of Civil Procedure (Code) ( 735 ILCS 5/2-615 (West 2020) ), seeking a declaratory judgment that its business interruption claim was a "covered cause of loss" under the businessowners policy issued by defendant State Farm Fire and Casualty Company (State Farm). Evanston Grill also seeks reversal of the circuit court's dismissal of its breach of contract count and bad faith denial of insurance in violation of section 155 of the Illinois Insurance Code ( 215 ILCS 5/155 (West 2020) ) count, both stemming from the same denial of coverage. We affirm.
¶ 4 Hyun Lee and his father, Jaewook Lee, owned and operated Evanston Grill, which is a restaurant located in Evanston, Illinois. State Farm is an insurance company engaged in the business of insuring properties and "is authorized to write, sell, and issue insurance policies providing property and business income coverage." State Farm sold and issued "property coverage to Evanston Grill" (policy No. 93-KH-H688-5) for the policy period of August 15, 2019, to August 15, 2020 (policy).
¶ 5 On March 16, 2020, Illinois Governor J. B. Pritzker issued Executive Order 2020-07 in response to "the ongoing spread of COVID-19 and the danger the virus poses to the public's health and wellness," ordering that "Beginning March 16, 2020 at 9 p.m. through March 30, 2020, all businesses in the State of Illinois that offer food or beverages for on-premises consumption—including restaurants, bars, grocery stores, and food halls—must suspend service for and may not permit on-premises consumption." Exec. Order No. 2020-07, 44 Ill. Reg. 5536 (Mar. 16, 2020), https://www2.illinois.gov/Documents/ExecOrders/2020/ExecutiveOrder-2020-07.pdf [https://perma.cc/6AQN-FBAS]. On March 20, 2020, Governor Pritzker issued Executive Order 2020-10, directing that "Non-essential business and operations must cease" and "all individuals *** are ordered to stay at home or at their place of residence except as allowed in this Executive Order." (Emphasis omitted.) Exec. Order No. 2020-10, 44 Ill. Reg. 5857 (Mar. 20, 2020), https://www2.illinois.gov/Documents/ExecOrders/2020/ExecutiveOrder-2020-10.pdf [https://perma.cc/3GXY-UM64].
¶ 6 Evanston Grill complied with the executive orders (hereinafter referred to collectively as the "closure orders") but "suffered business income losses and incurred extra expense" from the business interruption. Evanston Grill claimed that it "suffered a loss of revenue in excess of $100,000 in the month of April 2020, as compared to April 2019—a decrease attributable to the Closure Orders." Therefore, Evanston Grill submitted a claim to State Farm requesting coverage for the "business interruption losses." State Farm denied the claim the same day, finding no "covered cause of loss" because "there was no accidental direct physical loss to Covered Property to trigger coverage." State Farm also asserted that "the policy specifically exclude[d] loss caused by enforcement of ordinance or law, virus, consequential losses, and acts or decisions."
¶ 7 The "Loss of Income and Extra Expense" endorsement (Form CMP-4705) to the "Businessowners Coverage Form," which Evanston Grill filed its claim under, states in relevant part:
"Section I—Covered Causes of Loss" (standard form CMP 4100) states Under the policy's "exclusions," State Farm does "not insure under any coverage for any loss" because of any "[v]irus, bacteria or other microorganism that induces or is capable of inducing physical distress, illness or disease."
¶ 8 Following State Farm's denial of coverage, Evanston Grill filed a three-count complaint, including one count for a declaratory judgment that the "past and future business income loss(es) and extra expense from the closure orders" were "covered losses" under the policy, one count for breach of contract relating to the denial of coverage, and one count for the bad faith denial of coverage.
¶ 9 State Farm moved to dismiss under section 2-615 of the Code ( 735 ILCS 5/2-615 (West 2020) ), arguing that "the clear language of the policy and its endorsement" "requires ‘accidental direct physical loss to’ Covered Property," but Evanston Grill's "alleged loss is an economic loss, not a physical injury to covered property." State Farm also argued that the "presence or suspected presence of a virus" did not constitute an " ‘accidental direct physical loss to’ Covered Property."
¶ 10 The circuit court dismissed Evanston Grill's complaint with prejudice under section 2-615 of the Code (id. ), finding that Evanston Grill's "alleged economic losses do not constitute ‘accidental direct physical loss to’ Covered Property." The circuit court noted that its "inquiry need not proceed any further," but found "that even if Plaintiffs had met their initial burden, their claims would not succeed under the Virus Exclusion of the Policy." The circuit court also dismissed the breach of contract and bad-faith denial of coverage counts on the basis that coverage under the policy was not triggered.
¶ 11 The Restaurant Law Center and Illinois Restaurant Association filed amici curiae brief in support of reversing the circuit court's dismissal of Evanston Grill's complaint, and American Property Casualty Insurance Association and National Association of Mutual Insurance Companies filed amici curiae brief in support of affirming dismissal of the complaint.
¶ 13 Evanston Grill claims that the circuit court erred in dismissing its complaint with prejudice, arguing that the "loss of use of its property is a direct physical loss to covered property" because the closure orders "physically prohibited customers from entering" the property. Evanston Grill also argues that its "all-risk" insurance policy2 is "intended to provide broad protection," and "[a]n average, ordinary, and reasonable person would interpret the meaning of ‘direct physical loss of *** covered property’ to include the sudden inability to use property that was previously usable."
¶ 14 A section 2-615 motion to dismiss attacks the legal sufficiency of a complaint by alleging defects apparent on the face of the complaint. Khan v. Deutsche Bank AG , 2012 IL 112219, ¶ 47, 365 Ill.Dec. 517, 978 N.E.2d 1020. The critical inquiry raised by a section 2-615 motion to dismiss is "whether the allegations of the complaint, when construed in the light most favorable to the plaintiff, are sufficient to establish a cause of action upon which relief may be granted." Cochran v. Securitas Security Services USA, Inc. , 2017 IL 121200, ¶ 11, 419 Ill.Dec. 374, 93 N.E.3d 493. All well-pleaded facts in the complaint are accepted as true, as well as any reasonable inferences arising from those facts. Id. A section 2-615 motion to dismiss should not be granted "unless it is clearly apparent from the pleadings that no set of facts can be proven that would entitle the plaintiff to recover." Id. We review a section 2-615 dismissal de novo. Id.
¶ 15 In this case, we must interpret the policy's plain and ordinary language to determine whether Evanston Grill's business interruption claim triggered coverage under the policy as a "covered cause of loss." Although the phrase "covered cause of loss" is defined in the policy to include a "direct physical loss" to covered property unless the loss is "excluded," the term "physical loss" is undefined. The "rules applicable to contract interpretation govern the interpretation of an insurance policy." Sproull v. State Farm Fire & Casualty Co. , 2021 IL 126446, ¶ 19, 451 Ill.Dec. 616, 184 N.E.3d 203. The primary objective of the court "when construing an insurance policy is to ascertain and give effect to the intention of the parties, as expressed in the policy language." Id. "Undefined terms will be given their plain, ordinary, and popular meaning; i.e. , they will be construed with reference to the average, ordinary, normal,...
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