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Restaurants, taverns, and movie theaters in the greater Chicago area have filed a lawsuit against their insurer, Society Insurance Inc., saying that the company has wrongfully denied coverage for losses related to mandatory COVID-19 closures.
The Society Insurance COVID-19 coverage lawsuit was filed by several Chicago-based businesses including: Big Onion Tavern Group LLC, Machine 1846 LLC, the New 400 LLC, Harper Theatre LLC, Welcome Back LLC, Legacy Hospitality LLC, McBrides Aurora Inc., McBride’s Pub Inc., McBride’s on 52 Inc., HomeSlyce Is Where The Heart Is LLC, 3458 Norclark Restaurant LLC, Happy Camper Pizzeria LLC, and 1913 Northco LLC.
All of the involved businesses say that they have insurance through Society Insurance Inc. and that they reasonably believed the company would cover losses related to the COVID-19 outbreak and subsequent business closures.
According to the businesses, nothing in their insurance agreements indicated that pandemic losses would not be covered. The plaintiffs state that Society Insurance’s own policies promise to cover losses incurred when the government forces businesses to close.
However, the insurance company allegedly wrongly denied coverage for COVID-19 losses despite the fact that the businesses had already paid premiums for coverage. The plaintiffs explain that on, March 15, the governor of Illinois ordered the closure of restaurants, movie theaters, and bars. Then, on March 20, all businesses deemed “non-essential” were were required to close.
Have you made a claim with Society Insurance or another provider only to be denied business interruption coverage? Get legal help here.
The businesses say that Society Insurance sent a notice to agency partners saying that the insurance company would likely not cover COVID-19 losses, even before many policyholders had even had a chance to file benefits claims. This stance was reportedly maintained when coronavirus claims started to roll in.
According to the lawsuit, Society Insurance sent out a notice to policyholders telling them that COVID-19-related losses would likely not be covered, sometimes within hours of receiving benefits claims. The businesses argue that their claims were denied before the insurer had conducted any “meaningful coverage investigation” particularly one based on all available information, as Illinois law requires.
Allegedly, Society Insurance based their denial of coverage in part on their argument that businesses had not suffered a physical loss as a result of COVID-19 closures. The provider reportedly determined that, because there was no physical loss, the coronavirus consequences were not covered.
In contrast, the businesses argue that viruses do indeed result in physical losses, including the fact that the employers and workers are not able to access their workplaces because they are forced to close.
They note that many of the businesses in the Illinois COVID-19 closure insurance lawsuit were forced to lay off or furlough employees.
The businesses estimate that they will lose around $10 million total because of the coronavirus pandemic.
Pointing to all of these losses, the businesses say that they have suffered physical losses.
The plaintiffs also claim that, though Society Insurance argues that the COVID-19 pandemic is not causing physical losses, this is not the case.
If a viral outbreak cannot cause physical losses, the clauses that other insurance companies use to exclude coverage from virus outbreaks would not be needed at all, the businesses argue. Allegedly, the fact that other insurers specifically saw fit to exclude viruses from their coverage indicates that it is a loss that could be covered.
The businesses also stress that Illinois courts have repeatedly determined that the presence of a dangerous substance on a property does qualify as a “physical loss or damage.” According to the Society Insurance lawsuit, a virus constitutes a dangerous substance – meaning it qualifies as a physical loss.
According to the businesses, they were financially injured by the COVID-19 closures through no fault of their own, and were further financially injured by Society Insurance Inc.’s refusal to pay benefits related to these losses. As a result, each businesses seeks up to $60,000 from Society Insurance to cover losses for which they claim that they should have received benefits.
Allegedly, the businesses chose to purchase an insurance plan through Society Insurance Inc. at least in part because they believed that it would cover losses related to viruses and pandemics. They argue that the company’s refusal to pay for COVID-19 losses is unlawful and against the terms of its plan.
According to the businesses, the insurance provider could have included clauses that excluded pandemic and virus closures, as other insurance providers have done. However, because Society Insurance did not choose to include such a clause, their refusal to pay for these losses is allegedly against the terms found in its own plans.
The businesses are represented by Patrick M. Collins, Christopher J. O’Malley, Shelby S. Gilbert Jr. and Jospeh M. Englert of King & Spalding LLP.
The Society Insurance COVID-19 Benefit Denial Lawsuit is Big Onion Tavern Group LLC, et al. v. Society Insurance Inc., Case No. 1:20-cv-02005, in the U.S. District Court for the Northern District of Illinois.
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