CHICAGO – U.S. District Judge David Dugan correctly denied insurance coverage for lockdown losses at 4204 West Main Brewing Company in Belleville, according to Seventh Circuit appellate judges.
On Dec. 9, they affirmed his decision that Cincinnati Insurance’s coverage for “direct physical loss” didn’t apply to the lockdown.
Circuit Judge Diane Wood wrote that 4204 West Main Brewing Company alleged only a reduced use of its property.
“It did not describe either a physical alteration to property nor a physical dispossession, literal or approximate, and so it has failed adequately to allege a direct physical loss,” Wood wrote.
The opinion also affirmed Northern District of Illinois judges Robert Gettleman and Elaine Bucklo, who ruled in Cincinnati’s favor.
Ted Gianaris of John Simmons’s firm in Alton sued Cincinnati for 4204 West Main Brewing Company owner Todd Kennedy in August 2020.
At a hearing this January, Cincinnati counsel Brian Reid of Chicago said the complaint only sought economic loss.
“It probably happened but it’s not direct physical loss to property,” Reid said.
Attorney Jason Barnes of the Simmons firm said the virus had a material existence.
He said it spread through respiratory droplets that travel tens of meters and settle 1.5 meters from the floor.
“That changes the physical nature of the property,” Barnes said at the hearing.
Dugan asked Barnes about a term, “period of restoration,” in the policy.
Barnes said that before the virus, the property had physical characteristics that made dining safe.
He said the property was no longer safe after the virus hit.
“The property will be restored to a sound or healthy state when it’s capable of being used again for a restaurant,” Barnes said.
Dugan said, “When is that?”
Barnes said, “This only happens once in a century…To the question of when it’s going to be safe, I think that’s really a question for experts as we get further into the case.”
Reid responded that the complaint didn’t plead that the virus was present or that it damaged the property.
Dugan dismissed the complaint and West Main Brewing appealed.
At oral argument, according to Wood, Barnes shifted ground to argue that the virus altered the premises and the premises included the air.
Wood found the policy specified coverage for direct physical loss at the premises, not to the premises themselves.
“In any event neither the policy nor the dictionary suggests that the word ‘premises’ includes air,” she wrote.
In September, St. Louis Business Journal reported that Kennedy shuttered his restaurant to focus on brewing and banquets, citing labor shortages.