A Belleville, Illinois restaurant claims Badger Mutual Insurance Company has wrongfully denied its claim for business losses incurred amid the coronavirus pandemic.
According to a proposed class action recently removed to Illinois’ Southern District Court, insurers such as Badger Mutual are “categorically denying” coverage claims filed by restaurants in the state “with little or no investigation and without due regard for the interests of insureds.”
Per the complaint, the plaintiff restaurant purchased a comprehensive insurance policy from Badger Mutual with the expectation of receiving coverage for business interruptions yet was denied coverage “based on an unreasonable reading of its policy.”
The lawsuit charges that Badger’s interpretation of coverage language “gets insurance law exactly backwards” and has harmed thousands of insureds who faithfully paid premiums to cover business interruptions such as those caused by the COVID-19 crisis.
“[The plaintiff] and other Illinois restaurants reasonably believed they had comprehensive coverage that would apply to business interruptions under circumstances like these, where they have done everything right to protect their business and the public,” the complaint reads. “But insurance companies like Badger Mutual are cutting those lifelines—despite having pocketed significant premiums for their policies.”
According to the suit, the plaintiff restaurant and bar suffered “serious financial harm” after Illinois Governor J.B. Pritzker issued a series of March 2020 executive orders that mandated the closure of restaurants for dine-in services and urged the state’s residents to stay at home. Per the complaint, compliance with the closure orders and the presence of the virus in the community has caused “direct physical loss” of the plaintiff’s property in that the restaurant “has been made unavailable, inoperable, useless and/or uninhabitable” while its functionality has been “severely reduced if not completely or nearly eliminated.”
The plaintiff says its Badger Mutual policy includes business income and extra expense coverage “to insure against risks the business might face.” Although the policy contains an exclusion for civil authority, the case argues the exclusion is not applicable given the plaintiff’s property was not “seized, confiscated, destructed, or quarantined.”
Moreover, the complaint argues the virus or bacteria exclusion endorsement is similarly not applicable to the plaintiff’s claim given the restaurant’s losses were caused by government measures taken to prevent the spread of COVID-19, and not the presence of the virus itself on the plaintiff’s property.
The lawsuit alleges that while the plaintiff reported a loss of business income under its policy in March, the defendant nevertheless denied the restaurant’s claim, stating in a May 2020 “cursory denial letter” that the policy does not pay for losses “caused by order of any civil authority, including seizure, confiscation, destruction, or quarantine of property” or “loss, cost, or expense . . . caused by, resulting from, or relating to any virus, bacterium, or other microorganism.”
According to the suit, Badger Mutual offered no written explanation of the factual or legal basis for its decision to deny coverage and instead issued a form letter in response to any restaurant that has filed a claim under its comprehensive commercial insurance policy for losses related to the Illinois closure orders.
The lawsuit alleges Badger Mutual’s coverage denial contradicts the terms and conditions of its insurance policies and applicable law, “which gives effect to plain language, construes coverage agreements broadly, narrowly construes exclusions, and construes ambiguity in favor of coverage.”