Restaurants, Theaters Want Coverage For COVID-19 Shutdown

By Mike Curley
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Law360 (March 30, 2020, 2:39 PM EDT) -- A group of Chicago movie theater and restaurant owners are taking their insurance carrier to court, alleging the insurer has wrongfully denied them coverage for work interruptions resulting from a state-mandated shutdown of their businesses to help slow the spread of COVID-19.

The business owners, led by Big Onion Tavern Group LLC, told an Illinois federal court in a complaint Friday that Society Insurance Inc. has denied them coverage without even undertaking required inspections and investigations, sometimes only hours after they've made claims.

According to Big Onion, when Society Insurance has given a reason, the insurer has said the policies do not cover COVID-19-related closures because they are not a direct physical loss.

"If Society Insurance had wanted to exclude pandemic-related losses under the plaintiffs' policies — as many other insurers have done in other policies — it easily could have attempted to do so on the front-end with an express exclusion," the companies said. "Instead, Society Insurance waited until after it collected plaintiffs' premiums, and after a pandemic and the resulting closure orders caused catastrophic business losses to plaintiffs, to try to limit its exposure on the backend through its erroneous assertion that the presence of the coronavirus is not 'physical loss' and therefore is not a covered cause of loss under its policies."

The governor of Illinois ordered all restaurants, bars and movie theaters to close March 15, with an additional order to close all nonessential businesses five days later, according to the complaint.

The closures were through no fault of the businesses, Big Onion argues, adding that the companies obtained their policies through Society Insurance to cover this kind of work interruption. But before many of them even submitted claims, the insurer's CEO issued a memorandum to agency partners saying the policies would likely not cover such stoppages, the suit says.

According to the complaint, policies from other companies do contain exclusions for virus- and pandemic-related issues. If a virus could never create a direct physical loss, such an exclusion would not be needed, the companies argue.

The business owners further argue that Illinois courts have held that the presence of a dangerous substance in a property constitutes a physical loss under insurance policies.

In addition, Society Insurance's policies include "civil authority" coverage, where the insurer promises to pay for the loss of income and other expenses the companies sustain as a result of the authorities prohibiting access to their premises, which Big Onion says includes the COVID-19 shutdown orders.

According to the complaint, many of the companies have had to lay off or furlough employees as they've closed their doors, and the group expects to see losses of as much as $10 million by the end of the national pandemic. Some of them may have to close down permanently, the complaint says. In the suit, the companies are seeking up to $60,000 each from the insurer.

Representatives for the companies and for Society Insurance could not immediately be reached for comment Monday.

The companies are represented by Patrick M. Collins, Christopher J. O'Malley, Shelby S. Guilbert Jr. and Joseph M. Englert of King & Spalding LLP.

Counsel information for Society Insurance was not available Monday.

The case is Big Onion Tavern Group LLC et al v. Society Insurance Inc., case number 1:20-cv-02005, in the U.S. District Court for the Northern District of Illinois.

--Editing by Abbie Sarfo.

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Case Information

Case Title

Big Onion Tavern Group, LLC et al v. Society Insurance, Inc.

Case Number



Illinois Northern

Nature of Suit

110(Contract: Insurance)


Honorable Edmond E. Chang

Date Filed

March 27, 2020

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