EAST ST. LOUIS – Badger Mutual Insurance doesn’t have to cover lockdown losses of Big Daddy’s bar in Belleville, U.S. District Judge David Dugan ruled on March 22.
Dugan dismissed a suit seeking to certify Big Daddy’s as representative for a class of Illinois restaurants with Badger Mutual policies.
He found that Big Daddy’s failed to state a claim and that the failure wasn’t tied to a pleading deficiency that an amended complaint could correct.
“As such, the court will not grant leave to amend,” Dugan wrote.
Big Daddy’s policy stated that Badger Mutual would pay for actual loss of income due to necessary suspension of operations during a period of restoration.
“The suspension must be caused by direct physical loss of or damage to property at the described premises,” the policy stated.
It also stated that Badger Mutual would not pay for loss resulting from or relating to any virus, bacterium, or other microorganism, and stated that Badger Mutual wouldn’t cover loss caused by order of civil authority including seizure, confiscation, destruction, or quarantine.
Big Daddy’s reported a loss of income when the lockdown began last March.
Badger Mutual denied coverage in May.
David Cates of Swansea filed suit for Big Daddy’s in October, in St. Clair County circuit court.
He claimed the presence of the virus in the community caused direct physical loss.
He filed the suit in association with Richard Shevitz, Lynn Toops, and Amina Thomas, all of Indianapolis, and Gerard Stranch of Nashville, Tenn.
Badger Mutual counsel Scott Helfand of Chicago removed it to district court on the basis of diverse citizenship as a Wisconsin corporation.
He moved to dismiss it in December, writing that the bar couldn’t plausibly allege direct physical loss or damage within the meaning of the policy.
“Plaintiff seeks coverage for purely economic losses stemming from the governmental closure orders, with no connection to any physical loss or damage,” Helfand wrote.
He wrote that the bar paid premiums to cover certain risks but didn’t pay for a guarantee of income.
In January, Cates responded that direct physical loss “is not synonymous with physical damage but may occur when a property is uninhabitable or unusable for its intended purpose.”
He claimed the virus exclusion didn’t apply because measures taken by the state caused the losses, not the virus.
He claimed the civil authority exclusion didn’t apply because the state didn’t seize, confiscate, destroy, or quarantine Big Daddy’s.
Dugan found the exclusions didn’t matter because no direct physical loss occurred.
He cited three decisions from the Northern District of Illinois reaching the same conclusion.
He cited his own decision from January, dismissing a lockdown suit that 4202 Main Street Brewing Company of Belleville brought against Cincinnati Insurance.
The brewing company has petitioned the Seventh Circuit to review the order.