By Celeste Bott

Law360 (March 16, 2021, 4:04 PM EDT) -- Pyrex and Instant Pot maker Corelle Brands LLC has told an Illinois state court that Zurich American Insurance Co. wrongfully denied it coverage for losses stemming from the "necessary suspension of its business operations" during the coronavirus pandemic.

Its policy with Zurich defines a "covered cause of loss" as "all risks of direct physical loss of or damage from any cause unless excluded," Corelle said in its suit, filed in Cook County Circuit Court on Thursday. The insurer therefore owes it coverage because its use of its property was diminished or restricted to prevent the spread of COVID-19, Corelle said.

"Corelle was as a result deprived of physical use of its premises," the kitchenware giant said. "Even if Corelle's properties did not suffer physical 'damage,' the policy still provides coverage for the risk of Corelle's physical 'loss of' its property."

Zurich has refused to reimburse Corelle for its losses, claiming the policy hasn't been triggered because Corelle's losses have not resulted from "loss of" or "damage to" its covered property, according to the complaint. But Corelle argues that words and phrases such as "loss of," "damage" and "risks of direct physical loss of or damage" aren't defined in the policy, and Zurich can't escape its obligations by pointing to a contaminant exclusion.

"When the undefined phrases 'direct physical loss of or damage to' and 'risks of direct physical loss of or damage to' are susceptible to more than one reasonable interpretation, it should be construed against the drafter (which, here, is Zurich)," Corelle said.

Beginning in mid-March of last year, Corelle was forced to suspend or reduce its business operations, including manufacturing at certain covered premises, it said. The company says it unsuccessfully appealed to the state of New York for its Corning location to be designated as an essential business, and was forced to completely shut down production save for a 65-employee skeleton crew to "keep its furnaces running" until it was allowed to gradually reopen in the summer.

"The actual and/or threatened presence of coronavirus particles at Corelle's covered premises has rendered physical property within the premises damaged, unusable, uninhabitable, unfit for intended function, dangerous, and unsafe," the company said.

Other manufacturing facilities in Pennsylvania and Mississippi were allowed to remain open, but to prevent the spread of the coronavirus, fewer employees were permitted on site at a time, leading to a loss in productivity, Corelle said. That, combined with suspended production, led to substantial losses of revenue, the company said.

"Corelle was unable to fulfill outstanding purchase orders for Corelle products, and was also forced to reject new purchase orders, resulting in Corelle suffering substantial lost profits," it said. "In addition, Corelle's inability to deliver existing orders resulted in additional losses due to contractual penalties as set forth in its purchase orders with its retailer customers."

Corelle is suing for breach of contract and bad faith claims handling, saying the insurer refused to pay its claimed losses without a reasonable explanation for its denials and without a reasonable investigation of the claims. It asks a Cook County judge to declare that Zurich owes a duty to cover its losses caused by the coronavirus pandemic.

Representatives of the parties could not be immediately reached for comment on Tuesday.

Corelle Brands is represented by William J. Dorsey, Lisa M. Campisi and Linda Kornfeld of Blank Rome LLP.

Counsel information for Zurich American Insurance Co. could not be immediately determined on Tuesday.

The case is Corelle Brands LLC v. Zurich American Insurance Co., case number 2021CH01177, in the Circuit Court of Cook County.

--Editing by Ellen Johnson.

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