McDonald's Corp. v. Austin Mut. Ins. Co.
| Decision Date | 22 February 2021 |
| Docket Number | 20 C 5057 |
| Parties | MCDONALD'S CORPORATION, McDonald's USA, LLC, Lexi Management, LLC, and DAK4 LLC, Plaintiffs, v. AUSTIN MUTUAL INSURANCE COMPANY, Defendant. |
| Court | U.S. District Court — Northern District of Illinois |
Angela R. Elbert, Paul R. Walker Bright, Neal Gerber & Eisenberg LLP, Chicago, IL, for Plaintiffs McDonald's Corporation, McDonald's USA, LLC.
Christopher Dean Willis, Edward K. Grasse, Grasse Legal, LLC, Schaumburg, IL, Steven L. Baerson, Arthur Andersen & Company, Ronald David Balfour, SmithAmundsen LLC, Chicago, IL, for Plaintiff Lexi Management, LLC.
Holly A. Harrison, Michael Lyn Rice, Harrison Law, LLC, Jonathan L. Federman, Robert Marc Chemers, William W. Elinski, Pretzel & Stouffer, Chartered, Chicago, IL, for Defendant.
Charles P. Kocoras, United States District Judge Before the Court is Defendant Austin Mutual Insurance Company's ("Austin Mutual") Motion to Dismiss Plaintiffs’ Complaint under Federal Rule of Civil Procedure 12(b)(6). For the following reasons, the Court denies Austin Mutual's Motion.
In this insurance coverage dispute, Plaintiffs McDonald's Corporation, McDonald's USA LLC, and McDonald's franchise owners Lexi Management LLC and DAK4, LLC (collectively, "Plaintiffs") argue that Austin Mutual has a duty to defend Plaintiffs under identical commercial general liability insurance ("CGL") policies (the "Policies").
Plaintiffs argue that Austin Mutual has failed to defend Plaintiffs in the Circuit Court of Cook County case Taynarvis Massey, et al. v. McDonald's Corporation, et al. , Case No. 2020 CH 04247 (the "Massey suit"). The Massey suit alleges that Plaintiffs are liable for public nuisance and negligence in their decision to remain open during the COVID-19 pandemic without enhanced health and safety standards. The Massey plaintiffs specifically seek a mandatory injunction requiring Plaintiffs to, among other things: (1) provide their employees with adequate personal protective equipment; (2) preclude the reuse of face masks; (3) supply hand sanitizer; (4) require that customers wear face masks; (5) monitor employee COVID-19 infections; and (6) provide Plaintiffs’ employees with accurate information about COVID-19.
The Policies defining Austin Mutual's duty provide that Austin Mutual:
will pay those sums that the insured becomes legally obligated to pay as damages because of "bodily injury" ... to which this insurance applies. [Austin Mutual] will have the right and duty to defend the insured against any "suit" seeking those damages. However, [Austin Mutual] will have no duty to defend the insured against any "suit" seeking damages for "bodily injury" ... to which this insurance does not apply.
Dkt. #1-1 at 54; Dkt. #1-2 at 72. (emphasis added). The Policies further provide that the "bodily injury" must be caused by an "occurrence" that takes place in the "coverage territory." Id. The Policies define "bodily injury" as "bodily injury, sickness, disease or mental anguish sustained by a person, including death resulting from any of these at any time." Dkt. #1-1 at 80; Dkt #1-2 at 98. The Policies also define the term "occurrence" as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions." Dkt. #1-1 at 17.
Against this backdrop, Austin Mutual moves to dismiss under Federal Rule of Civil Procedure 12(b)(6) because the Massey suit does not seek (1) "damages" (2) "because of"; (3) "bodily injury." Austin Mutual argues that the nature of Plaintiffs’ expenditure is not to remedy bodily injury to third-persons. Plaintiffs respond that "but for" the Massey plaintiffs contracting COVID-19—an indisputable bodily injury—they would not have to expend money as "damages" to comply with the mandatory injunction in the Massey lawsuit. They also argue that exposure to the SARS-CoV-2 virus (the "Virus") constitutes "bodily injury" and that money spent to comply with the mandatory injunction would constitute "damages" "because of" the exposure to the Virus.
In evaluating this dispute, the Court accepts as true all well pled facts in the Complaint and draws all reasonable inferences in favor of the Plaintiffs. AnchorBank, FSB v. Hofer , 649 F.3d 610, 614 (7th Cir. 2011). To prevail on this motion, Plaintiffs’ Complaint must state a "short and plain statement of the claim showing that [they are] entitled to relief." Fed. R. Civ. P. 8(a)(2).
Here, the Federated Mut. Ins. Co. v. Coyle Mech. Supply Inc. , 983 F.3d 307, 314 (7th Cir. 2020) ().
This case raises an admittedly novel question of whether costs incurred to comply with a mandatory injunction due to COVID-19 and the Virus constitute "damages" "because of" "bodily injury." Kenneth S. Abraham, a Professor at the University of Virginia School of Law and a leading national insurance scholar, observes that the phrase "because of bodily injury" is usually subject to "only one reasonable interpretation." Kenneth S. Abraham, Plain Meaning, Extrinsic Evidence, and Ambiguity: Myth and Reality in Insurance Policy Interpretation , 25 Conn. Ins. L.J. 329, 349-50 (2019). "However, when a claim for coverage of an unconventional form of liability arises - for example, when the party seeking to recover damages from the policyholder that are the consequence of bodily injury is not the same party who suffered bodily injury - then the courts must become more explicit what these words mean." Id. at 350.
In line with Professor Abraham's suggestion that we be as explicit as possible about each part of the phrase, the Court will now address the terms "damages," "because of," and "bodily injury" in turn. While this case is a very close call in the ivory tower of academia, it is much less close as a purely legal matter because Plaintiffs’ at this stage only need to allege facts "potentially" within the Policies’ coverage. See Federated Mut. Ins. Co. , 983 F.3d at 314. Under this approach, Austin Mutual can only win if the underlying Complaint precludes "any possibility" of coverage. Id. Part of the reasoning for this standard is that "the question of coverage should not hinge on the draftsmanship skills or whims of the plaintiff in the underlying action." Int'l Ins. Co. v. Rollprint Packaging Prod., Inc. , 312 Ill. App. 3d 998, 1007, 245 Ill.Dec. 598, 728 N.E.2d 680 (2000). Another reason is that the Cincinnati Companies v. W. Am. Ins. Co. , 183 Ill. 2d 317, 329, 233 Ill.Dec. 649, 701 N.E.2d 499 (1998). In line with these principles and for the following reasons, the Court concludes that the Complaint potentially gives rise to coverage, which requires Austin Mutual to defend Plaintiffs.
In assessing whether the phrase "because of bodily injury" applies here, the Court finds Judge Hart's thorough opinion in Ace Am. Ins. Co. v. RC2 Corp. persuasive. There too, was a duty-to-defend case about the phrase "damages" "because of" "bodily injury." 568 F. Supp. 2d 946, 949 (N.D. Ill. 2008) (emphasis added), rev'd and remanded on other grounds , 600 F.3d 763 (7th Cir. 2010).1 Instead of exposure to the Virus, the dispute there dealt with lead exposure.
In RC2 , Judge Hart concluded that the term "damages" in Illinois does not just mean money but can also include the cost to comply with a mandatory injunction. Id. According to Judge Hart, the term is given a "broad, nontechnical meaning that is not limited to compensatory damages and can include equitable relief." Id. at 955. Judge Hart's analysis was spot-on because not one, but two, Illinois Supreme Court decisions confirm that the cost to comply with a mandatory injunction is a "damage" for the purpose of an insurance policy like this one. See Cent. Ill. Light Co. v. Home Ins. Co. , 213 Ill. 2d 141, 160, 290 Ill.Dec. 155, 821 N.E.2d 206 (2004) ; Outboard Marine Corp. v. Liberty Mut. Ins. Co. , 154 Ill. 2d 90, 116, 180 Ill.Dec. 691, 607 N.E.2d 1204 (1992). Applying these cases, Judge Hart concluded that where the underlying lawsuit sought medical monitoring costs related to lead exposure, those costs were "damages" because the Defendant was required to expend "funds to remediate bodily injury in the form of exposure to lead." RC2 , 568 F. Supp. 2d at 956 (emphasis added).
Applying Judge Hart's reasoning here, the mandatory injunction sought by the Massey plaintiffs is also a "damage" because it would require Plaintiffs to expend money to remediate the continuous and ongoing exposure to the Virus.
Having concluded that the Massey lawsuit involves "damages," we turn to whether the damages are "because of" "bodily injury." Like the word "damages," Illinois law in this context also accords the phrase "because of" a broad, non-technical meaning. See Travelers Ins. Companies v. Penda Corp. , 974 F.2d 823, 830-831 (7th Cir. 1992). The Policies do not say "proximately because of"—they merely say "because of," so simple "but for" causation is enough. See Auto-Owners Ins. Co. v. Se. Car Wash Sys. , 184 F. Supp. 3d 625, 631 n.5 (E.D. Tenn. 2016). As applied...
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