Ragan Consulting Grp. v. Cont'l Cas. Co.
| Decision Date | 22 February 2023 |
| Docket Number | 1-22-0905 |
| Citation | 2023 IL App (1st) 220905 U |
| Parties | RAGAN CONSULTING GROUP LLC, Plaintiff-Appellant, v. CONTINENTAL CASUALTY COMPANY, Defendant-Appellee. |
| Court | United States Appellate Court of Illinois |
This order was filed under Supreme Court Rule 23 and is not precedent except in the limited circumstances allowed under Rule 23(e)(1).
Appeal from the Circuit Court of Cook County No. 21 CH 3823 Honorable Thaddeus L. Wilson, Judge presiding.
ORDER
¶ 1 Held: We affirm the circuit court's grant of defendant's motion to dismiss where plaintiffs alleged business income losses and necessary extra expenses resulting from the COVID-19 Virus and related government orders were not covered by the commercial property insurance policy issued by defendant.
¶ 2 After plaintiff Ragan Consulting Group LLC, a management consulting firm, incurred various alleged business income losses and necessary extra expenses due to the COVID-19 Virus and related government orders, it sought coverage under its commercial property insurance policy issued by defendant Continental Casualty Company.[1] Continental denied coverage under the policy, and as a result, Ragan filed a complaint for declaratory relief and breach of contract. On Continental's motion, the circuit court dismissed Ragan's complaint with prejudice. Ragan now appeals that dismissal and contends that the insurance policy covered its alleged business income losses and necessary extra expenses due to the COVID-19 Virus and related government orders. Ragan therefore argues that the circuit court erred by granting Continental's motion to dismiss. For the reasons that follow, we affirm the circuit court's judgment.
¶ 5 Ragan is a Chicago-based company that provides management consulting to various entities. Ragan purchased a commercial property insurance policy for its business from Continental that became effective on February 24, 2020, and ended on March 4, 2021. The policy contained various coverages for business income losses and necessary extra expenses to Ragan's property located at its office in downtown Chicago. Under one part of the policy, the "Business Income Coverage" provision, Continental agreed to:
A "period of restoration" was defined as "the period of time that *** [b]egins with the date of direct physical loss or damage caused by or resulting from any Covered Cause of Loss at the described premises," and ends the earlier of when the lost or damaged property "should be repaired, rebuilt or replaced with reasonable speed and similar quality" or "when business is resumed at a new permanent location." Under the policy a "Covered Cause of Loss" included "risks of direct physical loss" unless a limitation or exclusion applied. Additionally, under another part of the policy, the "Extra Expense Coverage" provision, Ragan could recover "reasonable and necessary expenses [it] incur [red] during the 'period of restoration' that [it] would not have incurred if there had been no direct physical loss of or damage to property caused by or resulting from a Covered Cause of Loss." Lastly, as relevant to this appeal, the policy contained "Civil Authority Coverage," which covered the:
¶ 7 In late January 2020, the World Health Organization declared the COVID-19 Virus a public health emergency of international concern. See Statement on the Second Meeting of the International Health Regulations (2005) Emergency Committee Regarding the Outbreak of Novel Coronavirus (2019-nCoV) https://www.who.int/news/item/30-01-2020-statement-on-the- second-meeting-of-the-international-health-regulations-(2005)-emergency-committee-regarding- the-outbreak-of-novel-coronavirus-(2019-ncov). Two months later, as the COVID-19 Virus began to spread in Illinois, Governor JB Pritzker issued various executive orders and proclamations in an effort to curb the spread of the virus. Initially, Governor Pritzker declared the entire state of Illinois a disaster area. Proclamation No. 2020-38, 44 Ill. Reg. 4744 (Mar. 9, 2020), https://www2.illinois.gov/sites/gov/Documents/CoronavirusDisasterProc-3-12-2020.pdf. Subsequent to this disaster proclamation, Governor Pritzker issued an executive order that closed all public and private schools in Illinois serving pre-kindergarten through 12th grade, another executive order that prohibited large gatherings in private or public settings, another executive order that included a stay-at-home order for all nonessential activities and ordered all nonessential businesses to temporarily cease operation, as well as other executive orders having similar effects. See Exec. Order No. 2020-4, 44 Ill. Reg. 5531 (Mar. 13, 2020), https://www.illinois.gov/government/executive-orders/executive-order.executive-order-number-5.2020.html; Exec. Order No. 2020-5, 44 Ill. Reg. 5533 (Mar. 13, 2020), https://www.illinois.gov/government/executive-orders/executive-order.executive-order-number-5.2020.html; 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; 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.
¶ 8 Due to the above-referenced executive orders and others, Ragan closed its business on March 13, 2020. Ragan's business subsequently suffered due to the COVID-19 pandemic and related orders. In April 2020, because Ragan allegedly sustained a significant loss of business income and incurred various necessary extra expenses due to the COVID-19 pandemic and various government orders, Ragan provided notice to Continental of a claim under its commercial property insurance policy. The following month, Continental responded to Ragan's notice of claim and noted that, despite Ragan's assertions, Ragan had not reported any direct physical loss of, or damage to, its property. As a result, Continental denied coverage under the policy.
¶ 9 In August 2021, as a result of this denial, Ragan filed the instant complaint against Continental in the circuit court seeking declaratory relief and damages for breach of contract. In the complaint, Ragan highlighted that the policy did not define the phrase" 'direct physical loss of or damage.'" But Ragan asserted that direct physical loss of, or damage to, property occurred when a covered cause of loss threatened or rendered property unusable or unsuitable for its intended purpose or unsafe for ordinary human occupancy or continued use. And based on this definition, Ragan posited that the shutdown orders caused direct physical loss of, or damage to, its property to invoke coverage under the Business Income Coverage and Extra Expense Coverage provisions of the policy as well as to other properties to invoke coverage under the Civil Authority Coverage provision of the policy. Alternatively, Ragan posited that the ubiquitous nature of the COVID-19 Virus caused direct physical loss of, or damage to, its property to invoke coverage under the Business Income Coverage and Extra Expense Coverage provisions of the policy as well as to other properties to invoke coverage under the Civil Authority Coverage provision of the policy. Based on these assertions, in Count I of its complaint, Ragan sought a declaration that there was coverage for its alleged business income losses and necessary extra expenses under the policy. And in Count II, Ragan asserted that Continental breached the policy by denying coverage, which caused it to suffer significant damages.
¶ 10 After Continental's attorneys filed an appearance on its behalf, the company moved to dismiss Ragan's complaint pursuant to section 2-615 of the Code of Civil Procedure (Code) (735 ILCS 5/2-615 (West 2020)). First, Continental observed that, under Illinois law, Ragan's alleged business income losses and necessary extra expenses had to be caused by direct physical loss of, or damage to, to its property, meaning the property was tangibly altered in some material dimension. However, despite this requirement, Continental argued that Ragan failed to make any such allegations. Second, Continental posited that Ragan had not alleged, nor could they adequately allege, any of the prerequisites to invoke the Civil Authority Coverage because that provision applied when a civil authority prohibited access to an insured's premises. Continental asserted that Ragan failed to sufficiently allege that it had been prohibited from accessing its property, as required by the policy. Given these reasons, Continental contended that Ragan's complaint for declaratory judgment and breach of contract must be dismissed with prejudice.
¶ 11 In May 2022, after Ragan filed a response in opposition of Continental's motion to dismiss, the circuit court...
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