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Law360 (May 3, 2021, 3:29 PM EDT) -- An Illinois federal judge ruled dental practices can't tap into business income or civil authority coverages for pandemic-related losses, saying a virus exclusion applies, but the dental offices were given a chance to pursue more than $500,000 in disease contamination coverage.
On Saturday, U.S. District Judge Matthew F. Kennelly dismissed with prejudice breach-of-contract and bad-faith claims against Massachusetts Bay Insurance Co. regarding the insurer's denial of losses to the dental practices for nonessential business closures under pandemic-related government orders.
"The court concludes that the virus exclusion is plain and unambiguous: It excludes loss or damage 'caused by or resulting from any virus,'" he said. "Given the 'resulting from' language, dental experts' argument — that the shutdown orders, not the virus, caused loss of business income — lacks merit."
But Judge Kennelly gave the dental practices another chance to allege their insurer acted in bad faith regarding the policy's disease contamination coverage. The practices operate 64 offices in the District of Columbia, Illinois, Maryland, Massachusetts, Michigan, Pennsylvania, South Carolina and Texas.
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Dental Experts LLC and other affiliated dental practices were all forced to stop nonessential operations under various government orders connected to the coronavirus pandemic, according to the suit, which Massachusetts Bay removed to the Northern District of Illinois last October.
The dental practices said they were covered under the business income and civil authority coverages. Massachusetts Bay was also responsible for more than $500,000 and not $25,000 in disease contamination coverage, according to the practices. Massachusetts Bay asked the court to dismiss the suit.
In Saturday's ruling, Judge Kennelly held that the virus exclusion precludes coverage for business income and civil authority coverage. The dental practices' economic losses from the government shutdown orders are barred because these orders were issued in direct response to the coronavirus pandemic, the judge said.
Although the Seventh Circuit hasn't weighed in on the virus exclusion's application to pandemic-related claims, Judge Kennelly said several of his colleagues in this district have ruled in similar suits involving a Chicago food vendor and a mattress company that the virus exclusion precludes coverage.
Judge Kennelly ruled the dental practices couldn't save their claims under the business income and civil authority coverages by amending their allegations as the virus exclusion undercuts these claims.
Judge Kennelly also said the suit "falls short" alleging the insurer was wrong to pay a single check of $25,000 under the disease contamination coverage. But the judge said the dental practices could amend the claims under which they say multiple checks of $25,000 should have been sent for each office.
Representatives of the insurer declined to comment Monday.
Counsel for the dental practices didn't respond to requests for comment.
The dental practices are represented by David B. Goodman, Carrie E. Davenport and Kalli K. Nies of Goodman Law Group.
Massachusetts Bay is represented by Todd S. Schenk, Jennifer L. Smith and Zachary R. Greening of Tressler LLP.
The case is Dental Experts LLC et al. v. Massachusetts Bay Insurance Co., case number 1:20-cv-05887, in the U.S. District Court for the Northern District of Illinois.
--Additional reporting by Daphne Zhang and Lauraann Wood. Editing by Vincent Sherry.
For a reprint of this article, please contact reprints@law360.com.
