In the

United States Court of Appeals 

For the Seventh Circuit ____________________ 

No. 21-1865 

AFM MATTRESS COMPANY, LLC

Plaintiff-Appellant, 

v.

MOTORISTS COMMERCIAL MUTUAL INSURANCE COMPANY, 

Defendant-Appellee. 

____________________ 

Appeal from the United States District Court for the

Northern District of Illinois, Eastern Division.

No. 20 CV 3556 — Manish S. Shah, Judge. 

____________________ 

ARGUED NOVEMBER 10, 2021 — DECIDED JUNE 16, 2022 

____________________ 

Before MANION, ROVNER, and WOOD, Circuit Judges. 

MANION, Circuit Judge. Motorists Insurance issued a policy 

to AFM Mattress with a broad and unambiguous Virus Exclusion. In March 2020 and following, AFM Mattress allegedly 

suffered losses when it had to close its stores under government orders due to the COVID-19 pandemic. AFM Mattress 

sued Motorists Insurance for a declaration of coverage. The 

judge dismissed the case for failure to state a claim. We affirm.
2 No. 21-1865 

I. Bed bugs?

AFM Mattress Company ran 52 mattress stores in Indiana 

and Illinois. Motorists Commercial Mutual Insurance Company insured AFM with a policy covering loss of Business Income, Extra Expense, and loss due to actions of a Civil Authority.

The Business Income provision states:

We will pay for the actual loss of Business Income you sustain due to the necessary “suspension” of your “operations” during the “period 

of restoration”. The “suspension” must be 

caused by direct physical loss of or damage to 

property at premises which are described in the 

Declarations and for which a Business Income 

Limit Of Insurance is shown in the Declarations. 

The loss or damage must be caused by or result 

from a Covered Cause of Loss.

The Extra Expense provision states:

We will pay Extra Expense (other than the expense to repair or replace property) to:

(1) Avoid or minimize the “suspension” of busness and to continue operations at the described premises or at replacement premises or temporary locations, including relocation expenses and costs to equip and operate the replacement location or temporary 

location.

(2) Minimize the “suspension” of business if 

you cannot continue “operations”.
No. 21-1865 3

The Civil Authority provision states:

In this Additional Coverage, Civil Authority, 

the described premises are premises to which 

this Coverage Form applies, as shown in the 

Declarations.

When a Covered Cause of Loss causes damage 

to property other than property at the described 

premises, we will pay for the actual loss of Business Income you sustain and necessary Extra 

Expense caused by action of civil authority that 

prohibits access to the described premises, provided that both of the following apply:

(1) Access to the area immediately surrounding the damaged property is prohibited by 

civil authority as a result of the damage, 

and the described premises are within that 

area but are not more than one mile from 

the damaged property; and

(2) The action of civil authority is taken in response to dangerous physical conditions resulting from the damage or continuation of 

the Covered Cause of Loss that caused the 

damage, or the action is taken to enable a 

civil authority to have unimpeded access to 

the damaged property. 

But the policy also contained a Virus Exclusion: 

A. The exclusion set forth in Paragraph B. applies to all coverage under all forms and endorsements that comprise this Coverage 

Part or Policy, including but not limited to 
4 No. 21-1865 

forms or endorsements that cover property 

damage to buildings or personal property 

and forms or endorsements that cover business income, extra expense or action of civil 

authority.

B. We will not pay for loss or damage caused 

by or resulting from any virus, bacterium or 

other microorganism that induces or is capable of inducing physical distress, illness 

or disease.

AFM puts the occurrence this way: “When the COVID-19 

pandemic hit in early 2020 and the governors of Illinois and 

Indiana ordered the closure of business throughout their respective states, AFM was forced to cease business activities at 

all 52 of its stores.” (Appellant’s Br. at 5.) AFM submitted a 

claim for coverage. Motorists denied it.

II. Procedural posture

AFM sought a declaratory judgment in Illinois state court. 

Motorists removed the action to district court and then moved 

to dismiss based on the Virus Exclusion. The judge dismissed 

without prejudice. AFM amended its complaint to add the 

doctrine of regulatory estoppel. Motorists moved for dismissal again. The judge dismissed with prejudice, based on the 

Virus Exclusion.

AFM appeals, arguing that regulatory estoppel should 

prevent the Virus Exclusion from barring AFM’s claims for 

coverage, and arguing that in any event the Virus Exclusion 

does not apply to AFM’s claim for Civil Authority coverage.
No. 21-1865 5

III. Analysis

A. Standards

We review de novo a grant of dismissal for failure to state a 

claim, accepting all well-pleaded facts as true and drawing all 

reasonable inferences in plaintiff’s favor. White v. United Airlines, Inc., 987 F.3d 616, 620 (7th Cir. 2021). 

The parties correctly agree Illinois substantive law applies. 

Under Illinois law, the general rules of contract interpretation 

control interpretation of insurance policies, which are contracts. Scottsdale Ins. Co. v. Columbia Ins. Grp., 972 F.3d 915, 919 

(7th Cir. 2020). Our goal is to “ascertain and give effect to the 

intention of the parties, as expressed in the policy language.” 

Id.

We read all provisions of the policy together, and allow 

meaning to every part of the contract, so no part is mere surplusage. Mkt. St. Bancshares, Inc. v. Fed. Ins. Co., 962 F.3d 947, 

954–55 (7th Cir. 2020). We give effect to the plain and ordinary 

meaning of unambiguous language. Liberty Mut. Fire. Ins. Co. 

v. Clayton, 33 F.4th 442, 447 (7th Cir. 2022). We do not strain to 

find ambiguity where none exists. See Hobbs v. Hartford Ins. 

Co. of the Midwest, 823 N.E.2d 561, 564 (Ill. 2005). 

B. Regulatory estoppel and the specter of pandemic

The language of the Virus Exclusion is broad and clear. 

But AFM seeks to avoid the exclusion by invoking the doctrine of regulatory estoppel.

AFM claims that Motorists, through Insurance Services 

Office, Inc., misrepresented the Virus Exclusion to the Illinois 

Department of Insurance in 2006 or 2007 so that the regulators 

would approve it. ISO made this statement to the regulators: 
6 No. 21-1865 

While property policies have not been a source 

of recovery for losses involving contamination 

by disease-causing agents, the specter of pandemic or hitherto unorthodox transmission of 

infectious material raises the concern that insurers employing such policies may face claims in 

which there are efforts to expand coverage and 

to create sources of recovery for such losses, 

contrary to public intent.

AFM claims this statement is false because property policies 

had historically covered losses caused by severe acute respiratory syndrome, Escherichia coli, and other health-threatening organisms. By mischaracterizing the Virus Exclusion—the 

argument goes—as merely a clarification of existing coverage 

under property policies, as opposed to an additional exclusion, Motorists secured a reduction of coverage without a corresponding reduction in premiums.

The main problem for AFM is that Illinois does not recognize regulatory estoppel. The New Jersey Supreme Court embraced regulatory estoppel some 30 years ago. Morton Int’l, 

Inc. v. Gen. Accident Ins. Co., 134 N.J. 1 (N.J. 1993), cert. denied, 

512 U.S. 1245 (1994). The doctrine’s basic idea is that insurers 

should not get away with saying one thing to an insurance 

regulator to gain approval of a provision but saying a different thing to an insured seeking coverage. But Illinois has not 

adopted the doctrine. See Travelers Ins. Co. v. Eljer Mfg., Inc., 

757 N.E.2d 481, 496 (Ill. 2001) (“Because the words of the policy are unambiguous, it is unnecessary for this court to consider extrinsic evidence of the policy’s purported meaning.”).

AFM points us to no Illinois case adopting the doctrine of 

regulatory estoppel in this context. This is because there are 
No. 21-1865 7

none. Instead, AFM directs us to American States Insurance Co. 

v. Koloms, 687 N.E.2d 72 (Ill. 1997). But as AFM admits, Koloms

never mentions “regulatory estoppel.” This is because Koloms

is not about regulatory estoppel.

In Koloms, a furnace in a two-story commercial building 

began emitting carbon monoxide and other noxious fumes. 

People inhaled the fumes, became ill, and sued the property 

owners. The owners tendered the complaints to their insurer.

The insurer sought a declaration from an Illinois state court 

that it had no duty to defend or indemnify the owners because 

of a pollution exclusion in the policy:

This insurance does not apply to:

... 

‘Bodily injury’ or ‘property damage’ arising out 

of actual, alleged or threatened discharge, dispersal, release or escape of pollutants ... [a]t or 

from premises you own, rent or occupy ... .

Koloms, 687 N.E.2d at 74 (quoting insurance policy). The policy defined “pollutants” as “any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, 

fumes, acids, alkalis, chemicals and waste.” Id. 

Arguing that “pollutants” was unambiguous, the insurer 

maintained that the emission of carbon monoxide fumes constituted the “release” of a gaseous “irritant or contaminant,” 

so the pollution exclusion applied.

The Supreme Court of Illinois expressed concern that a 

“purely literal interpretation” of the exclusion, “without regard to the facts alleged in the underlying complaints,” would 

fail to resolve the issue adequately. Id. at 79. The court said it 
8 No. 21-1865 

was “troubled” by the “overbreadth” of the exclusion’s language and by the “manifestation of an ambiguity which results when the exclusion is applied to cases which have nothing to do with ‘pollution’ in the conventional, or ordinary, 

sense of the word.” Id. The court worried about “potentially 

limitless application” of the exclusion. Id. After all, the insureds argued that without some judicially imposed parameters, “irritants” and “contaminants” could include water and

air. Id. at 77–78. The court decided to restrict the exclusion to 

only hazards traditionally associated with environmental pollution. Id. at 79. 

The court added extra buttresses to its conclusion by considering the exclusion’s drafting history, which, according to 

the court, showed the insurance industry’s intent to limit the 

exclusion to hazards traditionally associated with environmental pollution. In the course of presenting this drafting history, the court relied heavily on Morton. The Koloms court concluded that the history of the pollution exclusion showed that 

the main motivation behind the exclusion’s drafting was 

avoiding enormous exposure from environmental litigation. 

Id. at 81. Morton illuminated parts of this drafting history.

But Koloms did not rely on Morton for the regulatory estoppel doctrine. Koloms concluded that absurdity prevented the 

applicability of the exclusion’s literal language. Koloms turned 

to Morton to elucidate the history of the exclusion to show 

what the drafters meant by it. But Koloms never hinted at relying on some difference between what the insurer said to a 

regulator and what the insurer said to the insured in court.

So Illinois has not recognized regulatory estoppel. And 

AFM Mattress has shown us no compelling reason to think 

Illinois would in this sort of case.
No. 21-1865 9

C. Does the Virus Exclusion apply to Civil Authority coverage?

AFM argues that even if regulatory estoppel does not bar 

reliance on the Virus Exclusion, the terms of this exclusion do 

not apply to AFM’s claims for business losses arising under 

Civil Authority coverage.

We quoted the Civil Authority coverage provision above. 

To paraphrase this provision without nuance: Under the Civil

Authority coverage provision, when a civil authority prohibits access to AFM’s insured property in response to certain 

dangerous physical conditions at different, adjacent property, 

and that access-prohibition causes AFM to lose business income or sustain extra expenses, Motorists will pay for this lost 

business income and extra expenses.

AFM argues that under this provision, it is seeking coverage for damages it suffered from the closure orders issued by 

the governors and is not seeking coverage for damages caused 

by any virus itself. So, AFM argues, the Virus Exclusion does 

not apply to Civil Authority coverage because that exclusion 

pertains only to “loss or damage caused by or resulting from 

any virus, bacterium or other microorganism that induces or 

is capable of inducing physical distress, illness or disease.” In 

other words, AFM argues the Virus Exclusion only applies to 

losses caused by viruses, but AFM’s loss was caused by the 

closure orders, not by the virus.

But we already foreclosed this argument in Mashallah. 

There, two Illinois businesses sought coverage from West 

Bend for damages allegedly sustained during the COVID-19 

pandemic. Mashallah, Inc. v. West Bend Mut. Ins. Co., 20 F.4th 
10 No. 21-1865 

311, 317 (7th Cir. 2021). The two policies contained similar virus exclusions.

One policy said West Bend would “‘not pay for loss or 

damage caused directly or indirectly’” by “‘[a]ny virus ... that 

induces or is capable of inducing physical distress, illness or 

disease.’” Id. at 318 (quoting one policy).

The other policy said West Bend “‘will not pay for loss or 

damage caused by or resulting from any virus ... that induces 

or is capable of inducing physical distress, illness or disease.’” 

Id. (quoting other policy). We found no relevant distinction 

between the exclusions.

We rejected the argument that the coronavirus did not 

cause the alleged damages. Id. at 320–21. We recognized that 

Illinois generally “‘favors the efficient-or-dominant-proximate-cause rule in the absence of contrary language in the 

policy.’” Id. (quoting Bozek v. Erie Ins. Grp., 46 N.E.3d 362, 368–

69 (Ill. App. Ct. 2015)). “A risk is an efficient or dominant cause 

if it ‘sets in motion, in an unbroken causal sequence, the 

events that cause the ultimate loss.’” Id. at 321 (quoting Bozek, 

46 N.E.3d at 368). 

We concluded that “the novel coronavirus causing the 

COVID-19 pandemic led directly to the issuance of the government orders, which the complaint alleges as the cause of 

the losses and expenses.” Id. at 321. As we put it, “the virus 

set in motion an unbroken causal chain via the government 

orders to the purported losses and expenses” and “the coronavirus was the reason these orders were promulgated.” Id.

Here, the Virus Exclusion is nearly identical to those in 

Mashallah. We see no reason to distinguish that case. Even 

though the coverage provisions at issue there were not 
No. 21-1865 11

identical to the Civil Authority coverage provision here, the 

Virus Exclusion controls. The virus directly caused the government orders which directly caused the alleged losses. AFM 

essentially admits this when it says in its amended complaint 

things like: “Illinois Governor J.B. Pritzker issued an executive 

order on March 15, 2020 banning all public and private gatherings of 50 or more people, in an effort to limit infection and 

death resulting from the spread of the virus.” (AFM’s Am. 

Compl. at 3.)1 And: “The March 20th order was again in direct 

response to the continued and increasing presence of the coronavirus on property or around [AFM’s] premises.” (Id. at 12.) 

Moreover, by the policy’s plain language, Civil Authority 

coverage only applies when “a Covered Cause of Loss causes 

damage to property other than property at the described 

premises ... .” (Emphasis added.) The policy defines “Covered Cause of Loss” as “direct physical loss unless the loss is 

excluded or limited in this policy.” So Motorists agreed to 

cover AFM when a Covered Cause of Loss caused damage to 

a nearby property, triggering the civil authority to prohibit 

access to AFM’s stores. But any damage from a virus was not

a Covered Cause of Loss because of the policy’s Virus Exclusion. So Civil Authority coverage does not apply.

If all this were not clear enough, the Virus Exclusion itself 

says it “applies to all coverage under all forms and 

1 “It was towards the close of the fifth or sixth month of his seclusion, 

and while the pestilence raged most furiously abroad, that the Prince Prospero entertained his thousand friends at a masked ball of the most unusual 

magnificence. ... And these—the dreams—writhed in and about taking 

hue from the rooms, and causing the wild music of the orchestra to seem 

as the echo of their steps.” Edgar Allan Poe, The Masque of the Red Death

(1842) (https://archive.org/stream/themasqueofthere01064gut/1064-8.txt).
12 No. 21-1865 

endorsements ... including but not limited to ... forms or endorsements that cover business income, extra expense or action of civil authority.” (Emphasis added.) AFM neglected to 

mention this in its briefs.

IV. Conclusion

The judge did not err in dismissing the amended complaint. We affirm.