Insurers accused of wrongfully denying ShopOne’s business interruption claim as a result of the COVID-19 restrictions argue that the case should be dismissed or transferred to Cook County, where a declaratory judgment action involving the same parties is pending.
On June 24, Madison County Circuit Judge Chris Threlkeld continued a hearing on the motion to dismiss or transfer filed by defendants Zurich American Insurance Company and American Guarantee & Liability Insurance Company (AGLIC). The hearing had previously been set for July 2 but was continued to an unspecified day in August.
The defendants filed a motion to dismiss, or in the alternative, to transfer venue and consolidate on May 17 through attorney Michael Nester of Donovan Rose Nester PC in Belleville.
The defendants argue that AGLIC, which issued the insurance policy referenced in plaintiff ShopOne’s lawsuit, sought declaratory judgment in Cook County on May 14. It asked for a declaration that the policy does not cover ShopOne’s claim “under the time element coverages for gross earnings, extra expense, and leasehold interest and the civil or military authority coverage.”
The motion states that ShopOne’s Madison County complaint and AGLIC’s complaint for declaratory judgment in Cook County are between the same parties for the same cause.
The defendants argue that the Madison County action should be dismissed to “avoid duplicative litigation, as there is another cause of action pending between the same parties for the same cause, the matter will be more efficiently resolved in the declaratory judgment action pending in Cook County, and this venue has no interest in the resolution of the dispute by a foreign plaintiff regarding economic damages it alleges it suffered at locations outside Madison County.”
“In contrast, defendants’ principal place of business is in Schaumburg, Illinois, which is in Cook County, thereby making Cook County the more appropriate forum for adjudication of the dispute over whether coverage exists for plaintiff’s claim under the policy,” the motion states.
If the court determines that dismissal is not warranted, the insurers ask to transfer ShopOne’s case to Cook County.
“Plaintiff has no contact with this forum,” the motion states. “It is a Maryland corporation with its principal place of business in Ohio. None of its insured locations are in Madison County. ShopOne is a foreign party to Madison County and the action giving rise to plaintiff’s cause of action did not occur in Madison County. Plaintiff’s choice of forum, therefore, is entitled to little or no weight or deference.”
In their memorandum in support of their motion to dismiss or transfer, the defendants argue that ShopOne’s decision to file its case in Madison County “must be seen as an attempt to harass defendants” because there is no relationship with Madison County.
ShopOne filed its complaint in Madison County on March 31 through attorney Kevin Green of Goldenberg Heller & Antognoli PC in Edwardsville.
According to the complaint, ShopOne is a Maryland corporation doing business in Ohio, Michigan, Florida, Georgia, California, New Jersey, Maryland, New York, Pennsylvania and Nevada. The insurers are New York property and casualty stock companies with principal places of business in Illinois.
ShopOne argues that Madison County is an appropriate venue because the defendants “conduct their usual and customary business within Madison County, including by soliciting business in Madison County to Madison County residents, selling their products through agents at multiple office locations in Madison County, and servicing customers in Madison County.” Because the defendants serve customers in Madison County, the plaintiff argues they are therefore residents of Madison County.
ShopOne seeks insurance coverage for the “devastating impact” on its business resulting from the COVID-19 pandemic. The plaintiff buys, sells, owns and operates commercial real estate, including shopping centers, salons, restaurants, bars, education and medical operators, dry cleaners, retail, logistical companies and fitness centers. When the COVID-19 pandemic was declared a national emergency in March 2020, restrictions were put in place at varying levels in each state.
“Access to all of plaintiff’s shopping centers was prohibited, restricted, and/or limited at certain points during the pandemic,” the suit states.
ShopOne claims it experienced a slowdown or cessation of its business activities. Tenants were unable to pay rent because their businesses were closed or restricted. The plaintiff was forced to either accept reduced rent or no rent at all during this time. As a result, ShopOne claims it had to borrow on a line of credit and restructure certain deals.
ShopOne alleges it suffered damages for payments for renewals, reductions in management fees, interest payments, canceled leasing deals, legal fees, office rent, reduced rent payments from tenants, and reduced sales prices of assets.
“Plaintiff has incurred extra expenses during the pandemic that were necessary to resume and continue as nearly as practicable its normal business activities that otherwise would be necessarily suspended due to the loss of its properties caused by COVID-19/the pandemic,” the suit states.
ShopOne adds that it continues to be adversely affected due to the pandemic.
According to the complaint, ShopOne holds an EDGE policy with Zurich, which offers “broader coverage and greater flexibility.” In exchange for an annual premium of $543,500, the defendants allegedly guaranteed coverage of $300 million for its policy ending in December 2020. Additionally, in exchange for an annual premium of $466,630, the defendants allegedly guaranteed coverage of $300 million for its policy ending in December 2021.
ShopOne claims its policy covered losses as a result of covered causes, including business interruptions.
“The policy defines covered cause of loss as ‘all risks of direct physical loss of or damage from any cause unless excluded,’” the suit states.
ShopOne alleges its policy does not limit coverage to just property damage, does not restrict coverage to physical injury or destruction of property and does not define the terms of direct physical loss or damage.
The suit states that by Dec. 1, 2020, there were more than 1,400 cases filed against insurance companies across the country involving business interruption claims caused by the COVID-19 pandemic.
“By December 2020, courts across the country had ruled both in favor of and against insurance companies in these cases based on their interpretations of ‘direct’ ‘physical’ ‘loss’ and/or ‘damage,’” the suit states.
ShopOne alleges its business losses related to the COVID-19 pandemic are included in its coverage because it represents “‘risks of direct physical loss of or damage’ and are not excluded by the policy.” The shutdown orders imposed limitations on the use of ShopOne’s physical space, constituting a physical loss of property that resulted in a suspension of business.
ShopOne allegedly filed an insurance claim for business losses on Sept. 15, 2020, which was denied by the defendants on March 4. The defendants argued that the COVID-19 pandemic does not constitution direct physical loss or damage to property, the plaintiff alleges.
The defendants allegedly concluded that the claims are barred under the “contamination” exclusion in the policy.
“Here, the contamination exclusion is not applicable because, to plaintiff’s knowledge, the suspension and direct physical loss of property was not caused by the actual presence of the virus that causes COVID-19 in any of its insured locations,” the suit states.
ShopOne adds that even if its losses were caused by the actual presence of COVID-19, the contamination exclusion is inapplicable because it wouldn’t apply to pre-December 2020 losses.
“Furthermore, even if the contamination exclusion covered viruses anywhere (rather than the ‘actual presence’ of viruses in the premises) and was applicable to the losses of plaintiff, under the principles of regulatory estoppel and general public policy, defendants should be estopped from enforcing it or deemed to have waived reliance on it because its enforcement would be unjust, inequitable and unconscionable,” the suit states.
ShopOne alleges the defendants failed to provide insurance coverage when it knew the plaintiff was entitled to relief, failed to objectively evaluate the claim, interrupted the provisions of the insurance policy and the factual circumstances, misrepresented policy provisions, failed to provide a reasonable explanation of the basis for denial, failed to conduct a fair investigation, failed to consider evidence supporting coverage, failed to investigate proximate causes of the alleged losses, failed to consider the interests of the plaintiff and forced the plaintiff to file suit.
ShopOne seeks judicial determination of whether the policy provides coverage for its COVID-19 related losses. The plaintiff also seeks unspecified damages, pre- and post-judgment interest, court costs and attorneys’ fees.
Madison County Circuit Court case number 21-L-408