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Law360 (February 25, 2021, 8:44 PM EST) -- Designer Shoe Warehouse's owner slammed its insurer with an Illinois court suit for $50 million in business income coverage, saying the insurer wrongfully denied coverage for losses caused by the coronavirus pandemic and government shutdown orders affecting more than 500 of the company's retail stores.
Zurich American Insurance Co. can't rely on a contamination exclusion to avoid coverage, according to Monday's complaint, because COVID-19 is not a "solid, liquid, gaseous, thermal or other irritant."
Designer Brands Inc., which had some stores stay shuttered until as late as September 2020, alleged the presence of the coronavirus, with 450 confirmed COVID-19 cases reported at DSW stores, and the government's shutdown orders constituted a direct physical loss or damage to property under Zurich's policy.
DBI alleged breach of contract, saying the policy's time element coverage was triggered when it closed its stores in accordance with government orders starting in March 2020. This coverage includes the insured's earnings losses and its costs to meet sanitization and protective measures, DBI said.
Zurich, which has been hit with COVID-19 coverage suits across the country, prevailed in three separate suits this month. An Ohio federal judge tossed a bar and grill's suit against the insurer, finding the Buckeye State eatery hadn't experienced a direct physical loss that would trigger coverage. A New Jersey federal judge said Zurich's virus exclusion barred coverage to a group of car dealerships. Zurich was freed by a Florida federal judge from having to cover COVID-19-related losses for a chain's more than 400 brunch locations, holding the owner failed to allege property loss.
However, an Ohio federal judge in January ruled against Zurich, finding its policy for a dozen steak and seafood restaurants can reasonably be interpreted to cover the loss of use of property.
In Monday's complaint, DBI challenged the contamination exclusion, saying it doesn't apply to these types of public health crisis orders. DBI also pushed back against exclusions for economic loss or inability to use its property as well as for losses resulting from complying with a government ordinance.
"DBI incurred direct physical loss of and damage to its Insured Locations, because many of its stores were closed as non-essential businesses and/or required to implement occupancy restrictions mandated by government orders," the insured said, citing to the Zurich policy's civil or military authority coverage.
Counsel for DBI and representatives for Zurich didn't immediately respond to messages seeking comment.
DBI is represented by Selena J. Linde, Vivek Chopra, Peter L. Tracey, Bradley H. Dlatt and Molly E. Mitchell of Perkins Coie LLP.
Counsel information for Zurich was not immediately available.
The case is Designer Brands Inc. v. Zurich American Insurance Co., case number 2021CH00844, in the Circuit Court of Cook County.
--Additional reporting by Hailey Konnath, Bill Wichert, Daphne Zhang and Jeff Sistrunk. Editing by Jill Coffey.
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