IN THE UNITED STATES DISTRICT COURT 

FOR THE NORTHERN DISTRICT OF ILLINOIS 

EASTERN DIVISION 

The Bend Hotel Development 

Company, LLC, 

Plaintiff, 

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 v. ) No. 20 C 4636 

The Cincinnati Insurance 

Company 

Defendant. 

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Memorandum Opinion and Order 

 The complaint in this case recites what has unfortunately 

become a familiar fact pattern. Plaintiff, a hotel located in East 

Moline, Illinois, saw its business plummet in the wake of Governor 

Pritzker’s March 2020 public health orders requiring the closure 

of all non-essential businesses in an effort to control the spread 

of Covid-19 (the “Closure Orders”). Plaintiff sought coverage for 

losses from defendant Cincinnati, from whom it had purchased an 

“all risk” insurance policy. Defendant denied coverage, and this 

lawsuit followed. 

Plaintiff claims that defendant’s denial of coverage amounts 

to a breach of the parties’ insurance contract, and it seeks 

damages and a declaratory judgment that defendant has a duty to 

cover the losses it claims. Plaintiff also asserts a claim for bad 

Case: 1:20-cv-04636 Document #: 19 Filed: 01/27/21 Page 1 of 8 PageID #:820
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faith denial of insurance coverage under ILCS 5/155 and seeks 

additional damages available under that statute, as well as an 

award of attorneys’ fees and costs. Defendant moves to dismiss the 

complaint pursuant to Fed. R. Civ. P. 12(b)(6). The motion is 

granted. 

All appear to agree that Illinois law governs the parties’ 

dispute. In Illinois, the construction of an insurance policy is 

a question of law. Country Mut. Ins. Co. v. Livorsi Marine, Inc., 

856 N.E.2d 338, 342 (2006). “If the words used in the policy are 

clear and unambiguous, they must be given their plain, ordinary, 

and popular meaning.” Cent. Ill. Light Co. v. Home Ins. Co., 821 

N.E.2d 206, 213 (2004). While ambiguous terms—that is, terms that 

are susceptible to more than one reasonable interpretation—must be 

construed in favor of coverage, Outboard Marine Corp. v. Liberty 

Mut. Ins. Co., 607 N.E.2d 1204, 1212 (1992), “[a] policy provision 

is not rendered ambiguous simply because the parties disagree as 

to its meaning,” Founders Ins. Co. v. Munoz, 930 N.E.2d 999, 1004 

(2010). 

The policy provisions at issue are the following: 

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

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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 

2) Minimize the “suspension” of business if you 

cannot continue “operations”. 

(c) We will also pay expenses to: 

1) Repair or replace property; or 

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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. 

(3) Civil Authority 

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 

(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: 

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1) 30 consecutive days after the time of that 

action; or 

2) When your “Business Income” coverage ends; 

whichever is later. 

SECTION G. DEFINITIONS 

* * * 

8. “Loss” means accidental physical loss or accidental 

physical damage. 

(Policy at 3, 18-19, 38.) 

Plaintiff concedes that by its terms, the policy “ostensibly 

covers only damages related to the physical building.” Resp. at 4. 

But plaintiff argues that by expressly excluding “intangibles” 

such as “damage to computer networks, and damage caused by smog, 

pollutants, radiation, criminal acts like fraud, animal waste, and 

fungi,” the policy implicitly included coverage for other 

“condition[s] that render the property unusable,” including “a 

physical intrusion into the property” of a virus such as the novel 

coronavirus that causes Covid-19. Id. at 4-5. This argument has 

several flaws. 

First, plaintiff does not allege losses caused by an 

“intrusion” of coronavirus into the physical property; it alleges 

loss of business resulting from the Closure Orders. In this 

respect, plaintiff’s allegations differ from those in Studio 417, 

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Inc. v. Cincinnati Ins. Co., No. 20-CV-03127-SRB, 2020 WL 4692385, 

at *4 (W.D. Mo. Aug. 12, 2020), where the complaint alleged that 

“COVID-19 allegedly attached to” the plaintiff’s property, making 

it “unsafe and unusable.” The court held that these allegations 

were sufficient to allege a “direct physical loss” which, the court 

explained, “is not synonymous with physical damage” under Missouri 

law. Id. 2020 WL 4692385, at *5. 

Second, even if plaintiff had alleged the presence of the 

coronavirus on the premises, every court in this district that has 

interpreted similar provisions under Illinois law has concluded 

that the virus does not cause “direct physical loss or damage” to 

property. See Bradley Hotel Corp. v. Aspen Specialty Ins. Co., No. 

20 C 4249, 2020 WL 7889047, at *3 (N.D. Ill. Dec. 22, 2020); T & 

E Chicago LLC v. Cincinnati Ins. Co., No. 20 C 4001, 2020 WL 

6801845, at *4 (N.D. Ill. Nov. 19, 2020) (collecting cases); Sandy 

Point Dental, PC v. Cincinnati Ins. Co., No. 20 CV 2160, 2020 WL 

5630465, at *2 (N.D. Ill. Sept. 21, 2020), reconsideration denied, 

No. 20 CV 2160, 2021 WL 83758 (N.D. Ill. Jan. 10, 2021). 

In Sandy Point—a case on all fours with this one as it raised 

the same claims based on the same policy provisions in a contract 

issued by the same insurer and was litigated by the same attorneys—

the court explained: 

The critical policy language here—“direct physical 

loss”—unambiguously requires some form of actual, 

physical damage to the insured premises to trigger 

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coverage. The words “direct” and “physical,” which 

modify the word “loss,” ordinarily connote actual, 

demonstrable harm of some form to the premises itself, 

rather than forced closure of the premises for reasons 

extraneous to the premises themselves, or adverse 

business consequences that flow from such closure. 

Id., 2020 WL 5630465, at *2. As in that case, plaintiff has not 

alleged any physical alteration or structural degradation to the 

premises, nor the need to “repair,” “replace,” or “restore” any 

physical element of the property in order to reopen for business. 

Yet, business interruptions necessitated by such activities 

“during the ‘period of restoration’” are the types of losses 

covered by the Business Income and Extra Expense provisions, both 

of which are incorporated into the Civil Authority provisions and 

must, in any event, be caused by “direct loss” or “damage” to 

property. 

For these reasons, it does not change the analysis that 

defendant could have, but did not, explicitly disclaim losses 

caused by viral or bacterial contamination, as plaintiff observes. 

See Resp. at 13-14. Plaintiff does not allege losses caused by 

viral contamination; and even if it did, the absence of such an 

exclusion does not inject ambiguity into the plain language of 

policy’s express terms, which require direct physical loss or 

damage to the covered property. 

The coronavirus has undeniably wreaked havoc not only on the 

physical health of millions of Americans, but also on the economic 

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health of the country and of businesses such as plaintiff. While 

I am sympathetic to plaintiff’s difficult situation, I am 

constrained by the unambiguous terms of the policy to conclude 

that the losses it claims as a result of the Closure Orders are 

not covered. Accordingly, the motion to dismiss is granted. 

ENTER ORDER:

_____________________________ 

 Elaine E. Bucklo

 United States District Judge 

Dated: January 27, 2021 

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