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Law360 (May 10, 2021, 1:58 PM EDT) -- A Chicago pastry shop and a salon can't tap into coverage with Westfield National Insurance Co. for more than $700,000 in pandemic losses, an Illinois federal judge ruled, saying a virus exclusion bars business income loss indirectly caused by the coronavirus.
U.S. District Judge Matthew F. Kennelly on Friday tossed the putative class suit against Westfield for losses to the owners of Bittersweet, a pastry shop and cafe, and Blowtique, a hair salon, caused by government shutdown orders meant to curb the spread of the coronavirus.
"The plaintiffs' argument that the closure orders, not the coronavirus, caused their loss of business income, lacks merit: The closure orders were issued because of the coronavirus pandemic," the judge wrote. "Thus the loss of income was an indirect result of the coronavirus and is therefore excluded from coverage."
The owners of Bittersweet and Blowtique filed the suit in October, alleging they are owed business income and civil authority coverage from Westfield, an Ohio-based insurer, for having to close under Illinois government orders to suspend nonessential businesses because of the pandemic.
The owners brought claims for breach of contract and bad faith as well as putative class claims for unjust enrichment and violations of the Illinois Consumer Fraud and Deceptive Business Practices Act.
In Friday's ruling, Judge Kennelly said Westfield's virus exclusion unambiguously precludes the pastry shop and salon's claims for the loss of business income indirectly caused by the coronavirus.
Judge Kennelly said Westfield's virus exclusion was similar to the one in his ruling last week in which he held that a virus exclusion barred a dental practice's claims against its insurer for loss or damage caused by or resulting from any virus. That decision also held that the orders, in response to a virus, caused the losses.
In this case, the virus exclusion in the policies issued to Bittersweet and Blowtique undercut their claims that Westfield unreasonably denied coverage for the pandemic-related losses, Judge Kennelly said.
John Haggerty of Fox Rothschild LLP, counsel for Westfield, told Law360 on Monday that his client "is sympathetic" to the policyholders' circumstances during the pandemic but pleased with the decision.
"Judge Kennelly thoughtfully affirmed the view adopted by the overwhelming majority of courts around the country that the virus exclusion unambiguously bars claims for business income losses associated with COVID-19-related closures," Haggerty said, referring to the respiratory disease caused by the virus.
William E. Meyer Jr. of Fuksa Khorshid LLC, counsel for the policyholders, told Law360 on Monday, "We are reviewing the court's opinion on behalf of our clients and will be deciding what our next steps will be in advocating their important interests in this matter."
The pastry shop and salon are represented by William E. Meyer Jr., Lucas M. Fuksa, Lema A. Khorshid, Vincent P. Formica and Molly F. Hunsinger of Fuksa Khorshid LLC.
Westfield is represented by John J. Haggerty of Fox Rothschild LLP.
The case is M&E Bakery Holdings LLC et al v. Westfield National Insurance Co., case number 1:20-cv-05849, in the U.S. District Court for the Northern District of Illinois.
--Editing by Vincent Sherry.
For a reprint of this article, please contact reprints@law360.com.
