Court Opinion

ID: 6350228
Source: CourtListenerOpinion
Date Created: 2022-06-15 20:03:07.437298+00
Date Added: 2024-06-11T09:16:13.999498
License: Public Domain

2022 IL App (1st) 211147-U

                                                                            THIRD DIVISION
                                                                            June 15, 2022

                                 No. 1-21-1147
_____________________________________________________________________________

                    IN THE APPELLATE COURT OF ILLINOIS
                           FIRST JUDICIAL DISTRICT
______________________________________________________________________________
ARK RESTAURANTS CORPORATION,                                  )         Appeal from
                                                              )         the Circuit Court
     Plaintiff-Appellant,                                     )         of Cook County
                                                              )
        v.                                                    )         2020-CH-001240
                                                              )
ZURICH AMERICAN INSURANCE COMPANY,                            )         Honorable
                                                              )         Raymond W. Mitchell,
     Defendant-Appellee                                       )         Judge Presiding

        JUSTICE McBRIDE delivered the judgment of the court.
        Presiding Justice Gordon and Justice Burke concurred in the judgment.

                                           ORDER

¶1      Held: Insured did not suffer “direct physical loss of or damage to property” within the
        meaning of its commercial property insurance policy when the insured suspended or
        scaled back restaurant operations in early 2020 as required by government-imposed
        restrictions intended to curb COVID-19 pandemic.

¶2      Ark Restaurants Corporation (Ark Restaurants) brought claims of declaratory judgment,

breach of contract, and bad faith against its commercial property insurer, Zurich American

Insurance Company (Zurich). The complaint was based on Zurich’s denial of business income

and extra expense claims that Ark Restaurants made after suspending or curtailing its restaurant,

bar, and catering operations in compliance with state orders during the COVID-19 pandemic.

This appeal is from a circuit court order granting Zurich’s motion to dismiss. The court ruled that

Ark Restaurants alleged the mere loss of use rather than the “direct physical loss of or damage to
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property” that would trigger coverage. Ark Restaurants argues that the policy does not require

structural or tangible change to property and that an insured “physical loss” occurred when the

government restrictions “physically impaired the access, occupancy or use of property.” As an

alternative, Ark Restaurants asks for a remand because leave to amend its complaint is

“indisputably required under Illinois law in response to a motion to dismiss.”

¶3     The complaint indicates that Ark Restaurants is a New York corporation that leases,

owns, or operates several dozen restaurants, bars, and catering facilities in Alabama,

Connecticut, District of Colombia, Florida, Nevada, New Jersey, and New York. These states

issued executive orders in March and April 2020 (the early days of the pandemic) that were

intended to control the outbreak of COVID-19 by requiring the temporary closure of businesses

whose services were nonessential. As early as March 20, 2020, Ark Restaurants was “forced to

suspend, limit or otherwise modify business operations for all of its properties.” As a result of the

government orders, the insured premises “could no longer be physically accessed, used or

operated as intended.” Ark Restaurants purchased the policy after there were public reports of a

“mysterious form of pneumonia.” The coverage subsequently took effect on February 17, 2020.

Zurich is a New York corporation whose primary place of business is in Schaumburg, Illinois. 1

Counts I through III of the complaint were about “business interruption” and extra expense

coverage. Ark Restaurants sought declaratory judgment of coverage, compensatory damages for

breach of contract, and compensatory and punitive damages for bad faith in claims handling. In

1
  The policy was issued in New York, however, Illinois law was applied in the circuit court and will be
applied here because (1) Illinois courts apply the law of the forum by default, and (2) it is undisputed
that the relevant laws of the two states do not conflict and that “a choice-of-law determination is
required only when the moving party has established an actual conflict between state laws” which
would make a difference in the outcome. Bridgeview Health Care Center, Ltd. v. State Farm Fire &
Casualty Co., 2014 IL 116389, ¶ 25.

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the next three counts, which were about “contingent business interruption” and extra expense

coverage, Ark Restaurants set out claims for declaratory judgment, breach of contract, and bad

faith. Counts VII through IX were about ingress/egress coverage. And the final three counts,

Counts X through XII, were about civil authority coverage.

¶4     The various forms of coverage at issue include the phrase “direct physical loss of or

damage.” For instance, in section 7.11 of the commercial property policy, a “Covered Cause of

Loss” is defined as “[a]ll risks of direct physical loss of or damage from any cause unless

excluded.” (Emphasis added.)

¶5     The “Time Element” (business interruption and extra expense) coverage provision in

section 4.01.01 of the contract states:

       “The Company will pay for the actual Time Element loss the Insured sustains, as

       provided in the Time Element Coverages, during the Period of Liability. The Time

       Element loss must result from the necessary Suspension of the Insured’s business

       activities at an Insured Location. The Suspension must be due to direct physical loss of or

       damage to Property (of the type insurable under this Policy other than Finished Stock)

       caused by a Covered Cause of Loss at the Location[.]” (Emphasis added.)

¶6     The “Extra Expense” coverage clause in section 4.02.03 states:

       “The Company will pay for the reasonable and necessary Extra Expenses incurred by the

       Insured, during the Period of Liability, to resume and continue as nearly as practicable

       the Insured’s normal business activities that otherwise would be necessarily suspended,

       due to direct physical loss of or damage caused by a Covered Cause of Loss to Property

       of the type insurable under this policy at a Location.” (Emphasis added.)

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¶7     Also, according to section 4.03.01 of the policy, if coverage is implicated, it extends to

the losses sustained during the “Period of Liability,” and section 4.03.01.01 of the policy defines

the “Period of Liability” for the insured’s “building and equipment” as:

       “The period starting from the time of physical loss or damage of the type insured against

       and ending when with due diligence and dispatch the building and equipment could be

       repaired or replaced, and made ready for operations under the same or equivalent

       physical and operating conditions that existed prior to the damage. The expiration of this

       Policy will not limit the Period of Liability.” (Emphasis added.)

¶8     Section 5.02.03’s “Civil or Military Authority” coverage applies to Time Element

(business interruption) losses that are attributable to property loss or damage that occurs not at

the insured property, but at property within a five-mile radius of the insured property that affects

the insured’s access:

       “The Company will pay for the actual Time Element loss sustained by the Insured, as

       provided by this Policy, resulting from the necessary Suspension of the Insured’s

       business activities at an Insured Location if the Suspension is caused by order of civil or

       military authority that prohibits access to the Location. That order must result from a civil

       authority’s response to direct physical loss of or damage caused by a Covered Cause of

       Loss to property not owned, occupied, leased or rented by the Insured or insured under

       this Policy and located within the distance of the Insured’s Location as stated in the

       Declarations.”

¶9     Two exclusions are relevant here. Section 3.03.02.01 of the policy excludes coverage for

any “[l]oss or damage arising from delay, loss of market, or loss of use.” (Emphasis added.) The

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coverage exclusion for “Contamination” that is set out in sections 3.03.01 and 3.03.01 precludes

coverage for loss or damage caused by and “any cost due to” “Contamination,” including the

“inability to use or occupy property or any cost of making property safe or suitable for use or

occupancy. “Contamination” is defined in section 7.09 as “[a]ny condition of property due to the

actual presence of any *** pathogen or pathogenic organism, bacteria, virus, disease causing or

illness causing agent[.]” (Emphasis added.)

¶ 10   Ark Restaurants is appealing from an order granting Zurich’s motion to dismiss pursuant

to section 2-615 of the Code of Civil Procedure. 735 ILCS 5/2-615 (West 2020). The appellant

contends that the circuit court erroneously relied on Traveler’s Insurance Co. v. Eljer

Manufacturing, Inc., 197 Ill. 2d 278, 301 (2001), to determine the meaning of the word

“physical” as it appears in the repeated contract phrase “direct physical loss of or damage to

property.” Neither nor the word nor the phrase are defined in the policy. In Eljer, 192 Ill. 2d at

301-02, the Illinois supreme court held that the term “physical injury” connotes “damage to

tangible property causing an alteration in appearance, shape, color or in other material

dimension” and does not include intangible damage to property, such as economic loss.

Applying Eljer and reading “physical” to modify both “loss” and “damage” in the Zurich policy

phrase, the circuit court remarked that Ark Restaurants had not alleged that its property “was in

any way altered in appearance, shape, color or in other material dimension.” Rather, the “only

loss alleged is solely the loss of use of its business premises,” and “the policy cannot be

interpreted to cover mere loss of use that is intangible and economic in nature.”

¶ 11   A motion to dismiss pursuant to section 2-615 attacks the legal sufficiency of a complaint

based on defects apparent on its face. Lee v. State Farm Fire & Casualty Co., 2022 IL App (1st)

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210105, ¶ 14. In an appeal from a section 2-615 dismissal, the question posed is whether, taking

all the well-pled facts as true, and construing the allegations in the complaint in a light most

favorable to the plaintiff, the plaintiff stated a cause of action upon which relief may be

granted. Jane Doe-3 v. McLean County Unit District No. 5 Board of Directors, 2012 IL 112479,

¶ 16. Our review is de novo. Eljer, 197 Ill. 2d at 292 (the construction of the provisions of an

insurance policy is a question of law, subject to de novo review).

¶ 12   An insurance policy is a contract and the general rules that govern the interpretation of

contracts also govern the interpretation of insurance policies. Sproull v. State Farm Fire &

Casualty Co., 2021 IL 126446, ¶ 19. The courts’ primary objective is to ascertain and give effect

to the intention of the parties, as expressed in the policy’s language. Sproull, 2021 IL 126446,

¶ 19. “The construction should be a natural and reasonable one.” Sproull, 2021 IL 126446, ¶ 19.

            [There is] a general rule that an integrated contract, unless it is ambiguous or

       controlled by some rule of law establishing a definite meaning, is to be given the meaning

       which would be attached to the contract by a reasonably intelligent person acquainted

       with all the operative usages and knowing all of the circumstances existing prior to and at

       the time of the contract, other than oral statements by the parties of what they intended it

       to mean.” 2 Couch on Insurance § 22:38 (Steven Plitt et al eds., 3d ed. Dec. 2021

       update).

¶ 13   Accordingly, unambiguous, undefined terms will be given their “plain, ordinary, and

popular meaning; i.e., they will be construed with reference to the average, ordinary, normal,

reasonable person.” Sproull, 2021 IL 126446, ¶ 19; Outboard Marine Corp. v. Liberty Mutual

Insurance Co., 154 Ill. 2d 90, 108 (1992) (if the words in a policy are clear and unambiguous,

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courts read them with their plain, ordinary and popular meaning). “A policy term is not

ambiguous because the term is not defined within the policy or because the parties can suggest

creative possibilities for its meaning.” State Farm Mutual Automobile Insurance Co. v. Elmore,

2020 IL 125441, ¶ 21. “[P]rovisions should be applied as written, and the parties should be

bound to the agreement [that] they made.” Elmore, 2020 IL 125441, ¶ 21.

¶ 14   Oftentimes, courts will consult a dictionary to determine the commonly understood

meaning of a word. See e.g., Outboard Marine, 154 Ill. 2d at 115 (consulting Webster’s

Dictionary); Eljer, 197 Ill. 2d at 301 (consulting general language and legal dictionaries). In this

instance, however, the commonly understood meaning of the word “physical” in the context of

property coverage was previously litigated in Eljer, in which the Illinois supreme court consulted

both Webster’s Dictionary and Black’s Law Dictionary before coming to the conclusions which

we quoted above. Eljer, 197 Ill. 2d at 301-02. The suit was about whether a certain type of

residential plumbing system that was manufactured between 1979 and 1990 and might have a

high failure rate caused “property damage” at the moment of installation or when it first actually

leaked. Eljer, 197 Ill. 2d at 291. One group of Eljer comprehensive general liability (CGL)

policies defined covered “property damage” as “injury to or destruction of tangible property” and

another group of Eljer CGL policies defined covered “property damage” as “physical injury to

*** tangible property.” (Emphasis added.) Eljer, 197 Ill. 2d at 294, 298. In other words, the first

group of policies did not include the word “physical” and the second group of policies did

include the word. The supreme court found that the first phrase may include diminution in home

value due to the mere installation of the unreliable plumbing system. Eljer, 197 Ill. 2d at 294-95.

To interpret the second type of policy, the supreme court went to general language and legal

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dictionaries to look up the plain, ordinary and popular meaning of the word “physical.” Eljer,

197 Ill. 2d at 301. The court found that inclusion of the word “physical” in the second phrase

meant covered injury did not occur until there was an “alter[ation] in appearance, shape, color or

other material dimension” of the property. Eljer, 197 Ill. 2d at 301. The supreme court also noted

that “to the average mind, tangible property does not experience ‘physical’ injury if that property

suffers intangible damage, such as diminution in value[.]” Eljer, 197 Ill. 2d at 301-302.

¶ 15   Ark Restaurant argues that Eljer is not controlling because all of the Eljer policies

included the word “tangible,” and the Zurich policy does not include that word. This argument,

however, only draws attention to the fact that the supreme court was addressing the meaning of

the word “physical,” not some other word. As the circuit court recognized, Eljer’s focus on the

meaning of the word “physical” makes Eljer the definitive statement in Illinois insurance law on

the meaning of the Zurich policy phrase “direct physical loss of or damage to property.”

(Emphasis added.)

¶ 16   Ark Restaurants also argues Eljer is distinguishable because the word “physical” in the

Eljer policies modified the word “injury,” not the words “loss” or “damage” like in the Zurich

policy. The Illinois Supreme Court did not address the precise policy language before us, but we

disagree with Ark Restaurants because Eljer’s analysis was about the meaning of the very word

“physical,” not the words that this adjective modified. We also point out that in a recent case,

Lee, the same argument was rejected by a panel of this appellate court that was addressing

another insurance company’s coverage for “physical loss to property.” Lee, 2022 IL App (1st)

210105, ¶ 19 (“Evanston Grill argues that [Eljer] is not directly on point because the relevant

policy language there implicated an interpretation of ‘physical injury’ and not ‘physical loss,’ but

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we find any such distinction irrelevant.”). It is our opinion that the circuit court correctly adhered

to Eljer in construing the meaning of “physical” as a modifier of “loss” and “damage” in the

Zurich policy and concluding that Ark Restaurants’ loss of its intended use of property was not

“physical” loss or damage to property.

¶ 17   Furthermore, the circuit court is not the only court to rely on Eljer in this context. Eljer’s

definition has been employed in other COVID-19 loss cases including ABW Development, LLC

v. Continental Casualty Co., 2022 IL App (1st) 210930, ¶ 30 (“We find no reason to depart from

the definition [of ‘physical’] used by our supreme court in Eljer, and accordingly we conclude

that the policy [held by the plaintiff medical imaging clinics in Illinois and Indiana] ***

unambiguously requires that the covered loss or damage be physical in nature, meaning that

property has been ‘alter[ed] in appearance, shape, color or in other material dimension.’ ”). Eljer

was also referenced in Sweet Berry Café, Inc. v. Society Insurance, Inc., 2022 IL App (2d)

210088, ¶ 40 (Eljer’s “interpretation of the term ‘physical injury to tangible property,’ is

consistent with the dictionary definition of ‘physical’ upon which we rely” to reject appeal of

South Elgin restaurant regarding business income and extra expense coverage).

¶ 18   In addition, federal courts applying Illinois law have cited Eljer in litigation brought by

other commercial property policyholders that were suffering financial losses due to the COVID-

19 pandemic. In Sandy Point Dental, the United States Court of Appeals for the Seventh Circuit

concluded that under Eljer, “ ‘direct physical loss’ *** requires a physical alteration to

property.” Sandy Point Sandy Point Dental, P.C. v. Cincinnati Insurance Co., 20 F. 4th 327, 333

(7th Cir. 2021). The plaintiff, a private dental group that suspended 95% of its business in

compliance with the State’s orders, argued, as Ark Restaurants argues, that “loss” means

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something different from “damage.” The Seventh Circuit had “no quarrel with the idea.” Sandy

Point Dental, 20 F. 4th at 332. But the court reasoned that the “proposed distinction is neither the

only possible reading nor a likely one.” Sandy Point Dental, 20 F. 4th at 332. “The words ‘direct

physical’ are most sensibly read as modifying both ‘loss’ and ‘damage’ ” because “[a]ny other

interpretation would commit the same sin against which the [insureds] caution us–namely

making surplusage out of the word ‘physical.’ Whatever ‘loss’ means, it must be physical in

nature.” Sandy Point Dental, 20 F.4th at 332. Applying this reasoning, the Seventh Circuit

concluded that the dental group did not and could not allege that the shutdown orders physically

altered their property because it “needed to allege more than a partial loss of [the] preferred use

of the insured premises.” Sandy Point Dental, 20 F. 4th at 336-37. See State Bank of Cherry v.

CGB Enterprises, Inc., 2013 IL 113836, ¶ 51 (federal district and circuit cases, particularly cases

from the Seventh Circuit, are persuasive authority in Illinois state court).

¶ 19   Similarly, in Image Dental, the District Court for the Northern District of Illinois,

applying Illinois law, discussed why “[l]oss and loss of use do not mean the same thing:”

       “By way of illustration, the loss of a car does not mean the same thing as the loss

       of use of a car. Ask any grounded teenager.

            Sometimes a loss of use can come from a physical loss. For example, an insured

       could suffer a loss of use of a car if it is totaled in a car accident, or if someone steals it.

       But there are times when a loss of use could come from something else, too. For

       example, a driver could drop his keys in Lake Michigan. That’s a loss of the keys, but

       only a loss of use of the car. Under the policy in question, a physical loss is a sine qua

       non [(indispensable requirement)] of coverage. A loss of use without a physical loss

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       doesn’t count.” Image Dental, 543 F. Supp. 3d at 590-91.

¶ 20   Stated another way, “[t]he nature of the loss must be physical, not intangible, immaterial,

economic, or regulatory.” Image Dental, 543 F. Supp. 3d at 590. See 10A Couch on Insurance §

148:46 (Steven Plitt et al eds., 3d ed. Dec. 2021 update) (“The requirement that the loss be

‘physical,’ given the ordinary definition of that term, is widely held to exclude alleged losses that

are intangible or incorporeal and, thereby, to preclude any claim *** when the insured merely

suffers a detrimental economic impact unaccompanied by a distinct, demonstrable, physical

alteration of the property.”). Accordingly, the district court explained, when courts have

interpretated the same or substantially similar policy language, “Courts in this district [and across

the nation] have concluded that comparable property damage policies do not cover purely

economic losses caused by the shutdown during the pandemic. *** [T]here is no loss of use

without physical loss.” Image Dental, 543 F. Supp. 3d at 591 (collecting cases).

¶ 21   In fact, there has been a spate of similar, unsuccessful claims in the federal appellate

circuits regarding economic losses during the pandemic. E.g., 10012 Holdings, Inc. v. Sentinel

Insurance Co., Ltd., 21 F. 4th 216, 221 (2d Cir. 2021) (stating that since the start of the COVID-

19 pandemic, New York courts applying New York law have denied coverage “where the

insured property itself was not alleged or shown to have suffered direct physical loss or physical

damage”); Uncork & Create LLC v. Cincinnati Insurance Co., 27 F. 4th 926 (4th Cir. 2022)

(West Virginia art studios’ inability to operate as intended due to closure order and COVID-19

pandemic did not qualify as “physical loss” or “physical damage” to covered property as

required for business income loss coverage); Terry Black’s Barbecue, L.L.C. v. State Automobile

Mutual Insurance Co., 22 F.4th 450, 456 (5th Cir. 2022) (“Considering the plain meaning of

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‘physical loss,’ we conclude [the Texas barbeque restaurants’] claim is not covered by the

[business income and extra expense] provision. *** Nothing physical or tangible happened to

[the] restaurants at all. In fact, [the claimant] had ownership of, access to, and ability to use all

physical parts of its restaurants at all times. And importantly, the prohibition on dine-in services

did nothing to physically deprive [it] of any property at its restaurants.”); Estes v. Cincinnati

Insurance Co., 23 F. 4th 695 (6th Cir. 2022) (Kentucky dental offices’ losses as a result of

shutdown orders and COVID-19 pandemic did not qualify as “direct physical loss” within

meaning of business income and extra expense coverage of commercial property insurance

policy); Oral Surgeons, P.C. v. Cincinnati Insurance Co., 2 F. 4th 1141, 1144 (8th Cir. 2021)

(policy held by Iowa oral surgery clinic “clearly requires direct ‘physical loss’ or ‘physical

damage’ to trigger business interruption and extra expense coverage. Accordingly, there must be

some physicality to the loss or damage of property—e.g., a physical alteration, physical

contamination, or physical destruction.”); Mudpie, Inc. v. Travelers Casualty Insurance Co. of

America, 15 F. 4th 885 (9th Cir. 2021) (California children’s store did not suffer “direct physical

loss of or damage to property,” from shelter-in-place orders as required for insured to recover

loss of business income or extra expense, under comprehensive commercial property policy);

Goodwill Industries of Central Oklahoma, Inc. v. Philadelphia Indemnity Insurance Co., 21

F.4th 704, 711 (10th Cir. 2021) (Oklahoma non-profit retailer’s “temporary inability to use its

property for its intended purpose was not a ‘direct physical loss.’ To conclude otherwise would

ignore the word ‘physical’ and violate the requirement that every part of a policy be given

meaning”); Gilreath Family & Cosmetic Dentistry, Inc. v. Cincinnati Insurance Co., 21-11046,

2021 WL 3870697, at *2 (11th Cir. Aug. 31, 2021) (Georgia dental practice “alleged nothing

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that could qualify, to a layman or anyone else, as physical loss or damage. Here, the shelter-in-

place order that [it] cites did not damage or change the property in a way that required its repair

or precluded its future use for dental procedures. In fact, though the practice postponed routine

and elective procedures, [the plaintiff] still used the office to perform emergency procedures.”)

¶ 22   Furthermore, consideration of other sections of the policy confirms that coverage for

“direct physical loss of or damage to property” does not include temporary restrictions on Ark

Restaurants’ commercial use of its space. We look to those other sections because courts

construe insurance contracts “as a whole, giving effect to every provision, if possible, because

*** every provision was intended to serve a purpose.” Valley Forge Insurance Co. v. Swiderski

Electronics, Inc., 223 Ill. 2d 352, 362 (2006); Eljer, 197 Ill. 2d at 292 (same). In addition,

“insurance policies often use overlapping provisions to provide greater certainty on the scope of

coverages and exclusions.” Crescent Plaza Hotel Owner, L.P. v. Zurich America Insurance Co.,

20 F.4th 303, 311 (7th Cir. 2021); Certain Interested Underwriters at Lloyd’s, London v.

Stolberg, 680 F.3d 61, 68 (1st Cir. 2012) (“insurance policies are notorious for their

simultaneous use of both belts and suspenders, and some overlap is to be expected”).

¶ 23   Section 4.03.01.01 defines the “Period of Liability,” during which an insured may

recover in the event of direct physical loss of or damage to property, as:

            “The period starting from the time of physical loss or damage of the type insured

       against and ending when with due diligence and dispatch the building and

       equipment could be repaired or replaced, and made ready for operations under the same

       or equivalent physical and operating conditions that existed prior to the damage.”

       (Emphasis added.)

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¶ 24   That Ark Restaurants is insured until its property can be “repaired or replaced”

harmonizes with the meaning of “physical damage” and “physical loss.” When property is

physically damaged, it must be repaired; when property is physically lost, it must be replaced.

“Without a physical alteration to property, there would be nothing to repair, rebuild, or

replace.” Sandy Point, 20 F. 4th at 333. Ark Restaurants’ insurance claim cannot be reconciled

with the definition of “Period of Liability” because the claim does not come within the policy.

¶ 25   We have also considered the fact that section 3.03.02.01 contains an exclusion for “Loss

or damage arising from delay, loss of market, or loss of use.” (Emphasis added.) In Bradley

Hotel, the Seventh Circuit addressed a business property insurance dispute stemming from the

partial closure of a hotel in Bradley, Illinois during the COVID-19 pandemic. Bradley Hotel

Corp. v. Aspen Specialty Insurance Co., 19 F. 4th 1002, 1005 (7th Cir. 2021). The insured

property, which had guest rooms, a restaurant, bar, and general event space, hoped to recoup the

financial losses it experienced after it stopped all in-person dining and cancelled weddings and

meetings in compliance with state orders that suspended in-person dining and prohibited

gatherings of 50 or more people. Bradley Hotel., 19 F. 4th at 1005. Applying Illinois law, the

Seventh Circuit affirmed that this exclusion bars coverage for losses caused by use limitations

that were implemented in compliance with COVID-19 government orders: “The hotel was not

physically harmed or damaged in any way. Instead, [the insured] was prohibited from using it for

functions such as in-person dining, weddings, or large meetings. This loss of use fell squarely

within the terms of the exclusion [for loss or damage caused by or resulting from *** loss of

use].” Bradley Hotel, 19 F. 4th at 1007.

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¶ 26   The coverage provisions and the exclusion language all indicate that Ark Restaurants’

claims for coverage fail.

¶ 27   Ark Restaurants, nevertheless, cites In re Society Insurance Co. COVID-19 Business

Interruption Protection Insurance Litigation, 521 F. Supp. 3d 729, 741 (N.D. Ill. 2021), for the

proposition that “physical loss of” might cover something different from “physical damage.” Ark

Restaurants then argues that the dictionary definitions of “physical,” and “loss” do not

necessarily require structural alteration. It also argues that the phrase “physical loss of” can

include “impaired *** access, occupancy or use of property.” This argument is unpersuasive in

part because the district court’s decision was issued before the Seventh Circuit effectively

overruled that decision in Sandy Point Dental, by concluding, “Without any physical alteration

to accompany it, this partial loss of use does not amount to a ‘direct physical loss.’ ” Sandy Point

Dental, 20 F. 4th at 334. We reiterate that the Seventh Circuit determined that the dental group

did not and could not allege that the shutdown orders physically altered its property because it

“needed to allege more than a partial loss of [the] preferred use of the insured premises.” Sandy

Point Dental, 20 F. 4th at 336-37. Thus, the concepts that Ark Restaurants cites from In re

Society, 521 F. Supp. 3d 729, are no longer good law. This argument is unpersuasive for the

additional reason that Ark Restaurants cobbles together various dictionary definitions that are

quite different from the definition employed in Eljer, and, without saying as much, Ark

Restaurants is asking us to overrule Eljer. Ark Restaurants relies on In re Society, 521 F. Supp.

3d 729, for the additional idea that government orders being lifted is a “repair” of the insured

property. But the Seventh Circuit rejected that reasoning as well in Sandy Point Dental, 20 F. 4th

at 333, when it ruled, “Without a physical alteration to property, there would be nothing to

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repair, rebuild, or replace.”

¶ 28    Ark Restaurants next contends that “before the spread of the COVID-19 pandemic, five

states’ highest courts and seven other states’ intermediate appellate courts held that the phrase

‘physical loss’ and its variants include property that is rendered unusable even without tangible

or structural changes.” We would expect Ark Restaurants to discuss and analogize the facts of

these cases with its own predicament, but instead it tucks these case citations into footnotes with

very brief parenthetical descriptions about the issues addressed. An appellant is required by the

rules regarding appellate briefs to provide reasoned argument and citation to relevant authority.

Ill. S.Ct. R. 341(h)(7) (eff. Oct. 1, 2020). A reviewing court is entitled to have issues “clearly

defined with pertinent authority cited and a cohesive legal argument presented” and the appellant

may not foist the burden of argument and research onto the court. (Internal quotations omitted.)

Express Valet, Inc. v. City of Chicago, 373 Ill. App. 3d 838, 855 ( 2007). An issue that is not

clearly defined and sufficiently presented fails to satisfy the requirements of Rule 341(h)(7) and

is waived. Express Valet, 373 Ill. App. 3d at 855. The presentation here borders on waiver. In

any event, even in the appellant’s own words, none of those earlier cases concerned the COVID-

19 virus. As examples, Ark Restaurants contends that Western Fire Insurance Co. v. First

Presbyterian Church, 437 P.2d 52, 53 (Colo. 1968) is a pre-pandemic case about “gasoline

fumes;” Sentinel Management Co. v. Aetna Casualty & Surety Co., 615 N.W.2d 819 (Minn.

2000), is a pre-pandemic case about “asbestos [fibers];” Mellin v. Northern Security Insurance

Co, 167 N.H. 544, 115 A.3d 799 (2015), is a pre-pandemic case about “urine odor;” and Dundee

Mutual Insurance Co. v. Marifjeren, 1998 ND 222, 587 N.W.2d 191 (1998) is a pre-pandemic

case about a “power outage.” Suffice to say, the cursory presentation does not compel us to

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disregard (1) an Illinois Supreme Court decision which determined the meaning of a key word in

the Zurich coverage at issue and (2) a whole array of federal cases which addressed the same or

substantially the same policy language and its application to businesses substantially similar to

Ark Restaurants that struggled under the same COVID-19 restrictions. The same sentiment holds

true for the Illinois cases that Ark Restaurants cites as the “majority rule”—albeit not any

majority rule with respect to COVID-19 era losses. See Elco Industries, Inc. v. Liberty Mutual

Insurance Co., 414 N.E.2d 41, 45 (1980) (regarding coverage for damages allegedly incurred

when defect in governor regulating pins was not discovered until after installation into buyer’s

engines); Pittway Corp. v. American Motorist Insurance Co., 370 N.E.2d 1271, 1274 (1977)

(regarding coverage for damages claimed after defective valve assemblies were incorporated into

aerosol cans). Ark Restaurants comes to the conclusion, “As these decisions illustrate, the

[circuit court’s] interpretation not only expanded Eljer far beyond its limits to something

approaching a bright-line rule, but also substituted a skewed and inaccurate selection of national

decisions for well[-]settled Illinois precedent.” Ark Restaurants’ skeletal presentation has not led

us to the same conclusion.

¶ 29   Even if Ark Restaurants had persuaded us to disagree with Eljer and the on-point federal

authority discussed above, Ark Restaurants still would not prevail on appeal. Its claims fail for

the independent reason that they are not the result of a “Covered Cause of Loss.” Section 7.11 of

the policy defines “Covered Cause of Loss” as “[a]ll risks of direct physical loss of or damage to

property from any cause unless excluded.” (Emphasis added.) The policy’s Contamination

Exclusion in sections 3.03.01 and 3.03.01.01 excludes “Contamination, and any cost due to

Contamination including the inability to use or occupy property or any cost of making property

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safe or suitable for use or occupancy[.]” (Emphasis added.) Section 7.09 defines

“Contamination” as “Any condition of property due to the actual presence of any foreign

substance, impurity, pollutant, hazardous material, poison, toxin, pathogen or pathogenic

organism, bacteria, virus, disease causing or illness causing agent[.]” Thus, the Contamination

Exclusion excludes coverage for claims caused by any condition of property due to the actual

presence of a virus or disease or illness-causing agent, including the inability to use or occupy

property or any cost of making property safe or suitable for use or occupancy. The policy

removes a virus, the COVID-19 virus, as a potential “Covered Cause of Loss.”

¶ 30   Ark Restaurants alleged in paragraphs 20 and 22 of its complaint that COVID-19 is

caused by the SARS-CoV-2 virus and has been present in every state in the country. In

paragraphs 33-41 and 46, Ark Restaurants further alleges that COVID-19 caused various

government entities to issue orders requiring the suspension of business at Ark’s properties.

Then, as a result of these orders, Ark argues that it “suffer[ed] suspension, limitation, and

alteration of its normal business operations” which is compensable under the policy. In short,

Ark seeks coverage for restrictions on its use of property caused by the COVID-19 virus, and

these restrictions fall squarely within the unambiguous Contamination Exclusion.

¶ 31   Ark Restaurants argues that the government orders, not the COVID-19 virus, are what

caused its claimed losses. However, courts have consistently recognized that the COVID-19

virus is what precipitated the government orders and the type of business losses at issue. E.g.,

Mashallah, Inc. v. West Bend Mutual Insurance Co., 20 F. 4th 311, 321 (7th Cir. 2021) (“The

complaint’s attempt to decouple the government COVID-19 orders from the COVID-19 virus

itself are untenable” and “there can be no honest dispute that the coronavirus was the reason

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these orders were promulgated.”); Franklin EWC, Inc. v. Hartford Financial Services Group,

Inc., 488 F. Supp. 3d 904, 908 (N.D. Cal. 2020) (“[U]nder Plaintiffs’ theory, the loss is created

by the Closure Orders rather than the virus, and therefore the Virus Exclusion does not apply.

Nonsense.”).

¶ 32   Ark Restaurants argues that it is entitled to “Civil Authority” coverage because there was

“physical contamination of neighboring properties with the COVID-19 virus thus prompting the

issuance of the government shutdown orders.” “Civil Authority” coverage, which was pled in

three counts of the complaint, is unavailable because, as discussed above, (1) the presence of

COVID-19 virus on property, whether that property was Ark Restaurants’ property or

neighboring property, does not cause “direct physical loss of or damage to property,” and (2)

even if COVID-19 did cause loss or damage, it would not be covered loss or damage because of

the Contamination Exclusion.

¶ 33    The 12-count complaint included six counts about the policy’s “Contingent Time

Element” and “Ingress/Egress” coverages. These claims fail for the same two reasons that “Civil

Authority” coverage fails.

¶ 34   Furthermore, Ark Restaurants does not address “Contingent Time Element” coverage in

its opening appellate brief, and it barely mentioned “Ingress/Egress” coverage, but it did not

include any argument about it. More specifically, Ark Restaurants mentions Ingress/Egress

coverage twice in its brief. In the first sentence of the argument section of its brief (on pages 8

and 9), Ark Restaurants states: “Taken as true, the facts of the Complaint demonstrate that Ark

has suffered direct physical loss of covered property at its premises resulting in the suspension of

business operations and covered losses, including lost Business Income and Extra Expense and

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ingress/egress coverage.” The next instance is listed in a subheading (on page 26): “II. THE

CHANCERY COURT LIKEWISE ERRED IN FINDING THAT ARK DID NOT STATE A

PLAUSIBLE CLAIM FOR CIVIL AUTHORITY AND INGRESS/EGRESS COVERAGE.”

Despite the subheading, the ensuing argument is about Civil Authority coverage only.

Ingress/Egress coverage differs from Time Element, Extra Expense, and Civil Authority

coverages addressed above, in part because Ingress/Egress coverage is applicable when access to

an insured location is prevented by a “physical obstruction.” Ark Restaurants’ failure to include

argument about Contingent Time Element and Ingress/Egress coverage means it has forfeited the

appeal of these claims. Express Valet, 373 Ill. App. 3d at 855.

¶ 35   All of Ark Restaurants’ bad faith claims fail because these types of claims fail when there

is no coverage or there is a “bona fide dispute” over coverage. Illinois Founders Insurance Co. v.

Williams, 2015 IL App (1st) 122481, ¶ 32 (indicating that when a bona fide dispute concerning

coverage exists, costs and sanctions pursuant to section 155 of the Illinois Insurance Code, 215

ILCS 5/155 (West 2020) are “inappropriate”). A bona fide dispute is one that is “ ‘[r]eal, actual,

genuine, and not feigned.’ ” Illinois Founders, 2015 IL App (1st) 122481, ¶ 32 (quoting McGee

v. State Farm Fire & Casualty Co., 315 Ill. App. 3d 673, 683 (2000) (quoting Black’s Law

Dictionary 177 (6th ed. 1990)). For the two reasons stated above regarding coverage, there is no

coverage available, and, in any event, there has been a bona fide dispute over coverage.

¶ 36   Finally, Ark Restaurants wants an opportunity to cure its factual allegations and faults the

circuit court for not even considering amendment. We review the ruling for an abuse of

discretion. Loyola Academy v. S&S Roof Maintenance, Inc., 146 Ill. 2d 263, 273-74 (1992). It is

never an abuse of discretion to deny leave to when the proposed amendment would be futile.

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Butler v. BRG Sports, LLC, 2019 IL App (1st) 180362, ¶ 71. The argument, however, reveals

that amendment would be futile. Ark Restaurants contends that it would allege that it “was

forced to make physical changes, modifications, revisions and refurbishments of its insured

premises in order to comply with the government shutdown orders.” It adds that these

modifications “are exactly the type of alteration in ‘appearance, shape, color, or in other material

dimension’ required under the Chancery Court’s narrow interpretation [of the law].” In other

words, Ark Restaurants is contending that voluntarily making “physical” modifications to its

premises in response to government orders is “direct physical loss of or damage to” covered

property. This is not a sound argument. See Crescent Plaza Hotel, 20 F.4th at 307 (Dallas hotel

owner did not allege direct physical loss or damage to its property when it indicated it was

required to incur expenses to install plexiglass partitions and hand sanitizer stations, to display

signs throughout the hotel, and to move furniture to permit social distancing); Cafe La Trova

LLC v. Aspen Specialty Ins. Co., 519 F. Supp. 3d 1167, 1182 (S.D. Fla. 2021) (for an insured to

argue that “moving furniture and installing partitions is sufficient to trigger coverage for its

business income losses” is “nonsensical” and circular because it would mean that activity was

both the cause and repair of damage). Because the claims Ark Restaurants proposes to raise via

amendment would have been futile, the circuit court did not abuse its discretion in

denying leave to amend.

¶ 37   Summarizing, coverage would be triggered by “direct physical loss of or damage to” Ark

Restaurants’ restaurants, bars, or catering facility properties, but shutdown orders issued because

of COVID-19 did not physically alter the appearance, shape, color, structure, or other material

dimension of the covered property. Consequently, Ark Restaurants did not plead an insured loss,

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nor did it show that amending its pleading would have changed the outcome. The circuit court’s

dismissal order with prejudice is affirmed.

¶ 38   Affirmed.

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