IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

T & E CHICAGO LLC, 

individually, and on behalf

of all others similarly 

situated,

 Plaintiff,

v.

THE CINCINNATI INSURANCE

COMPANY,

 Defendant.

Case No. 20 C 4001

Judge Harry D. Leinenweber

MEMORANDUM OPINION AND ORDER

For the reasons stated herein, the Court grants Defendant’s 

Motion to Dismiss Plaintiff’s Complaint. (Dkt. No. 11.)

I. BACKGROUND

Plaintiff T & E Chicago, LLC is the owner-operator of a tavern 

located in the Logan Square neighborhood of Chicago, Illinois.

(Compl. ¶ 1, Dkt. No. 1.) On March 15, 2020, due to the COVID-19

global pandemic, Illinois Governor J. B. Pritzker issued an order 

closing all “non-essential businesses” to the public. (Id. ¶ 10.) 

This order has been extended several times. (Id.) As a result of 

these closure orders, Plaintiff, a non-essential business, was 

forced to close and lost substantial revenue. (Id. ¶ 11.)

On or about July 20, 2019, Plaintiff obtained “business 

interruption insurance” from Defendant and paid the required 

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premium. (Id. ¶¶ 13 & 15, see also Policy, Compl., Ex. A, Dkt. No. 

1-1.) The coverage extended one year, until July 20, 2020. (Compl. 

¶ 13.) Plaintiff alleges the business interruption insurance was 

part of an “all risks” policy, providing coverage for any risk 

except those that are specifically excluded. (Id. ¶ 15.) As a 

result of its business interruption and the resulting loss of 

income caused by the COVID-19 closure orders, Plaintiff filed a 

claim with Defendant. (See id. ¶ 16.)

After receiving Plaintiff’s claim, Defendant issued a blanket 

denial for any losses resulting from the COVID-19 pandemic and the 

Governor’s closure orders. (Id.) Its denial letter asserted that 

Plaintiff’s losses were not covered because the reason preventing

Plaintiff from operating its business did not result from “direct 

physical damage” or “direct physical loss” to Plaintiff’s 

property. (Id. ¶ 17; see also 4/15/20 Letter, Compl., Ex. B, Dkt. 

No. 1-2.) 

“All risks” policies differ from policies that cover only 

specified risks, like hurricanes or earthquakes. (Compl. ¶¶ 65–

66.) Despite referring to its policy as an “all risks” policy, 

Plaintiff acknowledges that the policy does not actually cover 

“all risks.” (Id. ¶ 67.) Indeed, the policy provides for specific 

exclusions. (Id.) Thus, if an exclusion does not apply the risk is 

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covered and if an exclusion applies then the risk is not covered.

(Id.) 

The specific provisions involved are:

SECTION A. COVERAGE.

We will pay for direct “loss” to Covered Property at the 

“premises” caused by or resulting from any Covered Cause 

of Loss. 

* * *

(1) Business Income 

We will pay for the actual loss of “Business Income” and 

“Rental Value” you sustain due to the necessary 

“suspension” of your “operations” during the “period of 

restoration”. The “suspension” must be caused by direct 

“loss” to property at a “premises” caused by or resulting 

from any Covered Cause of Loss. With respect to “loss”

to personal property in the open or personal property in 

a vehicle or portable storage unit, the “premises”

include the area within 1,000 feet of the building or 

1,000 feet of the “premises”, whichever is greater. 

* * *

(2) Extra Expense 

(a) We will pay Extra Expense you sustain during the 

“period of restoration”. Extra Expense means necessary 

expenses you sustain (as described in Paragraphs (2)

(b), (c) and (d)) during the “period of restoration”

that you would not have sustained if there had been no 

direct “loss” to property caused by or resulting from a 

Covered Cause of Loss. 

(b) If these expenses reduce the otherwise payable 

“Business Income” “loss”, we will pay expenses (other 

than the expense to repair or replace property as 

described in Paragraph (2)(c)) to: 

1) Avoid or minimize the “suspension” of business 

and to continue “operations” either: 

a) At the “premises”; or 

b) At replacement “premises” or temporary

locations, including relocation expenses and costs to

equip and operate the replacement location or temporary 

location; or 

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2) Minimize the “suspension” of business if you 

cannot continue “operations”. 

(c) We will also pay expenses to: 

1) Repair or replace property; or 

2) Research, replace or restore the lost

information on damaged “valuable papers and 

records”; 

but only to the extent this payment reduces the

otherwise payable “Business Income” “loss”. If any 

property obtained for temporary use during the 

“period of restoration” remains after the 

resumption of normal “operations”, the amount we 

will pay under this Coverage will be reduced by the 

salvage value of that property.

(d) Extra Expense does not apply to “loss” to Covered 

Property as described in the BUILDING AND PERSONAL 

PROPERTY COVERAGE FORM. 

(Policy at 31 & 46–47.) The Illinois Business Income endorsement

also provides additional separate Business Income and Extra 

Expense coverage grants, utilizing the same language. (See id. at 

91–99.) 

The policy’s definitions section defines the term loss as

“accidental physical loss or accidental physical damage.” (Id. at 

66.) The policy also contains a provision covering loss caused by 

civil authority as follows:

When a Covered Cause of Loss causes damage to property 

other than Covered Property at a "premises", we will pay 

for the actual loss of "Business Income" and necessary

Extra Expense you sustain caused by action of civil

authority that prohibits access to the "premises", 

provided that both of the following apply:

(a) Access to the area immediately surrounding the 

damaged property is prohibited by civil authority as a 

result of the damage; and 

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(b) 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.

This Civil Authority coverage for "Business Income" will 

begin immediately after the time of that action and will 

apply for a period of up to 30 days from the date of

that action.

This Civil Authority coverage for Extra Expense will 

begin immediately after the time of that action and will 

end:

1) 30 consecutive days after the time of that action; or

2) When your "Business Income" coverage ends;

whichever is later.

(Id. at 47.) Further, the Illinois Business Income 

endorsement provides additional, separate civil authority 

coverage as follows:

b. Civil Authority

When a Covered Cause of Loss causes direct damage to 

property other than Covered Property at the “premises”, 

we will pay for the actual loss of “Business Income” you 

sustain and necessary Extra Expense you sustain caused 

by action of civil authority that prohibits access to 

the “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 

(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. 

Civil Authority coverage for “Business Income” will 

begin immediately after the time of the first action of 

civil authority that prohibits access to the “premises”

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and will apply for a period of up to 30 consecutive days 

from the date on which such coverage began. 

Civil Authority coverage for Extra Expense will begin 

immediately after the time of the first action of civil 

authority that prohibits access to the “premises” and 

will end 30 consecutive days after the date of that 

action; or when your Civil Authority coverage for 

“Business income” coverage ends, whichever is later. 

(Id. at 92.)

After Defendant’s denial letter, Plaintiff filed a four-count 

putative class action complaint. Count One seeks a declaratory 

judgment, Count Two alleges breach of contract, Count Three

alleges breach of the duty of good faith and fair dealing, and 

Count Four alleges bad faith denial of insurance under Illinois 

state law. Defendant now moves to dismiss the Complaint pursuant 

to FED. R. CIV. P. 12(b)(6).

II. LEGAL STANDARD

A Rule 12(b)(6) motion challenges the legal sufficiency of 

the complaint. To survive a Rule 12(b)(6) motion, the allegations 

in the complaint must meet a standard of “plausibility.” Bell Atl. 

Corp. v. Twombly, 550 U.S. 544, 564 (2007). A claim is facially 

plausible “when the plaintiff pleads factual content that allows 

the court to draw the reasonable inference that the defendant is 

liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 

662, 678 (2009). The Court will accept all well-pleaded factual 

allegations as true and construes all reasonable inferences in the 

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plaintiff's favor. Marshall-Mosby v. Corp. Receivables, Inc., 205 

F.3d 323, 326 (7th Cir. 2000). “If it is possible to hypothesize 

a set of facts, consistent with the complaint, that would entitle 

the plaintiff to relief, dismissal under Rule 12(b)(6) is 

inappropriate.” Alper v. Altheimer & Gray, 257 F.3d 680, 684 (7th 

Cir. 2001) (citations omitted). 

III. DISCUSSION

The parties agree that in this diversity case the choice of 

law favors Illinois. See Lapham-Hickey Steel Corp. v. Prot. Mut.

Ins. Co., 655 N.E.2d 842, 844–45 (Ill. 1995). The proper 

construction of the policy is a question of law and the primary 

objective is to ascertain and give effect to the intentions of the 

parties as expressed in the policy. Am. States Ins. Co. v. Koloms, 

687 N.E.2d 72, 75 (Ill. 1997). If a policy term is susceptible to 

more than one reasonable interpretation, it is ambiguous and will 

be construed in favor of the insured. Outboard Marine Corp. v. 

Liberty Mut. Ins. Co., 607 N.E.2d 1204, 1212 (Ill. 1992). However,

a policy provision is not ambiguous solely because the parties 

disagree about its interpretation. Founders Ins. Co. v. Munoz, 930 

N.E.2d 999, 1004 (Ill. 2010). 

On this motion, Defendant argues the Court should dismiss the 

Complaint because the Plaintiff has not alleged a direct physical 

loss or damage to property. Defendant contends the policy

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indemnifies against loss or damage to property while an infectious 

disease like COVID-19 damages people. The Business Income, Extra 

Expense, and Civil Authority coverages likewise apply only to

income losses tied to physical loss or damage to property and not

losses incurred to protect the public from disease. Thus, without 

direct physical loss or damage to property, Defendant argues that

coverage is not available.

Plaintiff responds, arguing that the policy covers both 

physical loss and physical damage, which Defendant incorrectly 

treats as synonymous. The policy does not define either term, and 

to equate the two would render one or the other superfluous. See 

11 Williston on Contracts § 32:5 (4th ed.) (“An interpretation 

which gives effect to all provisions of the contract is preferred 

to one which renders part of the writing superfluous, useless or 

inexplicable.”). 

Next, Plaintiff argues that an average person would interpret 

the phrase “accidental physical loss” to include a sudden inability

by the insured to use the property that was previously useable.

Plaintiff claims that it is entitled to coverage under the Civil 

Authority provision for the same reason: it has lost the physical 

use of its property. Plaintiff also points out that Defendant did 

not avail itself of an “Exclusion for Loss Due to Virus or 

Bacteria” endorsement developed in 2006 by the Insurance Services 

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Office, a nonprofit corporation composed of insurance companies.

(Resp. at 9, Dkt. No. 19 (citing ISO Form CP 01 40 07 06).) Finally, 

Plaintiff argues that, at worst, the policy provision is ambiguous 

and must be construed in favor of the insured, thus providing 

coverage. 

In reply the Defendant points out that the policy clearly 

applies only to situations where there is “direct physical loss or 

damage to property” and not to “purely financial losses.” (Reply 

at 2, Dkt. No. 20.) Additionally, there are a multitude of cases, 

including two from Illinois, that have since been decided to

interpret policy provisions like these as not providing coverage

for COVID-19-related losses.

Defendant is correct—this issue has been the subject of

numerous decisions issued by various state and federal courts in

the United States, including Illinois. As Defendant points out,

most of these decisions, including the two from Illinois, have 

found for the insurance companies. These decisions found no 

coverage for business closures resulting from civil authority 

closure orders. For example, a case in this District—Sandy Point 

Dental, PC v. Cincinnati Insurance Company, 20CV2160, 2020 WL 

5630465 (N.D. Ill. Sept 21, 2020)—was decided in favor of the 

defendant insurance carrier. Plaintiff acknowledges this decision,

but argues that it was “wrongfully decided.” (Resp. at 19.) 

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Similarly, in a recent Illinois state court decision, the court

interpreted the language “loss to” to require a physical loss to 

the property itself, not including the loss of use of the property 

to the insured. It’s Nice, Inc. v. State Farm Fire and Cas. Co.,

No. 2020L000547 (Ill. Cir. Ct. Sept. 29, 2010). 

There are other cases deciding against coverage for losses 

resulting from closure orders under similar policy provisions. 

See, e.g., Diesel Barbershop, LLC, et al. v. State Farm Lloyds,

No. 5:20-CV-461-DAE, 2020 WL 4724305 (W.D. Tex. Aug. 13, 2020); 

Gavrilides Mgmt. Co. v. Mich. Ins Co., No 20-258-CB, 2020 WL 

4561979 (Mich. Cir. Ct. July 21, 2020); Rose’s 1, LLC v. Erie Ins. 

Exch., No. 2020 CA 002424 B., 2020 WL 4589206 (D.C. Super. Ct. 

Aug. 6, 2020); Hillcrest Optical, Inc. v. Cont’l Cas. Co., l:20-

CV-275-JB-B, 2020 WL 6163142 (S.D. Ala. Oct. 21, 2020); UnCork and 

Create LLC v. Cincinnati Ins. Co., 2:20-cv-00401, 2020 WL 6436948 

(S.D. W.Va. Nov 2, 2020); Raymond H. Nahmad, DDS PA v. Hartford 

Cas. Ins. Co., No. 1:20-cv-22833-BLOOM/Louis, 2020 WL 6392841

(S.D. Fla. Nov. 2, 2020). True, there have been decisions to the 

contrary, including those cited by Plaintiff. See, e.g., North 

State Deli, LLC v. Cincinnati Ins. Co., No. 20-CVS-02569, 2020 WL 

6281507 (N.C. Super. Ct. Oct. 9, 2020); Studio 417, Inc. v. 

Cincinnati Ins. Co., 20-cv-03127-SRB, 2020 WL 4692385 (W.D. Mo., 

Aug 12, 2020). The Court notes though that the Central District of 

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California explicitly declined to follow Studio 417 in West Coast 

Hotel Mgmt., LLC v Berkshire Hathaway Guard Ins. Co., 2:20-cv05663-VAP-DFMx, 2020 WL 6440037, at *4 n.4 (C.D. Cal. Oct. 27, 

2020), and interpreted the insurance policy at issue in favor of 

the insurance company.

The Court sympathizes with Plaintiff. Nevertheless, the 

policy’s phrasing requires the Court to find in Defendant’s favor. 

The Court agrees with the courts that have found that loss of use 

of property without any physical change to that property cannot 

constitute direct physical loss or damage to the property. The 

policy’s use of “loss to” versus “loss of” phrasing supports this 

conclusion. (See Policy at 46 (covering “direct ‘loss’ to 

property”).) In addition, the provision of coverage for a “period 

of restoration,” see id., clearly implies a requirement of loss to 

property rather than loss of property. Defendant’s interpretation 

is the correct one. 

There being no coverage under the policy, the Court must 

dismiss Count One. Because the remaining counts, Counts Two, Three, 

and Four, rely on an interpretation of Defendant’s policy that the 

Court cannot accept, the Court also dismisses Counts Two, Three 

and Four. 

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IV. CONCLUSION

For the foregoing reasons, the Court grants Defendant’s 

Motion to Dismiss Plaintiff’s Complaint. (Dkt. No. 11.)

IT IS SO ORDERED.

Harry D. Leinenweber, Judge

United States District Court

Dated: 11/19/2020

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