Seventh Circuit Affirms Judgment On The Pleadings For Insurer In Covid-19 Business Interruption Claim By Shopping Mall Food Court Restaurant

• Published date: 20 June 2022
• Subject Matter: Insurance, Food, Drugs, Healthcare, Life Sciences, Coronavirus (COVID-19), Insurance Laws and Products, Food and Drugs Law, Insurance Claims
• Law Firm: Butler Weihmuller Katz Craig LLP
• Author: Mr K. Clark Schirle and Jonathan Barger

Butler Weihmuller Katz Craig LLP attorneys Clark Schirle and Jon Barger obtained a victory for their client in the case of Melcorp, Inc. v. West American Ins. Co., No. 21-2448 (7th Cir. June 8, 2022). The Seventh Circuit affirmed yet another trial court decision in favor of an insurer on a COVID-19 business interruption claim.

In Melcorp, the insured was a restaurant in a shopping mall food court in Illinois that alleged it had suffered a business interruption loss as a result of the COVID-19 pandemic and resulting governmental orders. In response to the governmental orders, the mall temporarily closed for a couple of weeks. Since the insured's restaurant was in the interior food court, the insured argued that the mall's closure meant that its food stall was "completely inaccessible to the public and effectively rendered it useless." The insured did not allege, however, that the virus was present in the mall or the food court, or that there was any physical alteration of the property.

The insured argued its case was different than other cases where courts, including the Seventh Circuit, had held that there was no coverage.

First, the insured argued that because it was in the interior of the mall, and the mall completely shut down, unlike other cases involving restaurants, it completely lost the use of its restaurant.

The Court, relying on its prior opinions, including Sandy Point Dental v. Cincinnati Ins. Co., 20 F.4th 327 (7th Cir. 2021) and Crescent Plaza Hotel Owner v. Zurich American Ins. Co., 20 F.4th 303 (7th Cir. 2021), rejected the insured's loss of use argument. The Court recognized it left open the possibility that a claim could be asserted upon a showing of an access-deprivation or use-deprivation so substantial as to constitute a complete physical dispossession, such as where a property is rendered completely uninhabitable by gas infiltration. Sandy Point, 20 F.4th at 334. However, here, the insured did not allege or argue a complete dispossession of its property. It only alleged a temporary restriction on the use of the property, but it was able to access the property during the mall's closure and to use the refrigeration and freezers on the premises. As the Court explained: "[a]s was the case for all of the businesses in the cases that we have considered, Melcorp was clearly deprived of its intended use of the property at least temporarily, but it does not allege physical dispossession or physical...