Court Opinion

ID: 9351443
Source: CourtListenerOpinion
Date Created: 2022-12-30 17:02:42.416678+00
Date Added: 2024-06-11T17:00:17.960200
License: Public Domain

2022 IL App (1st) 210979-U
                                            No. 1-21-0979
                                    Order filed December 30, 2022
                                                                                       Sixth Division

 NOTICE: This order was filed under Supreme Court Rule 23 and is not precedent except in the
 limited circumstances allowed under Rule 23(e)(1).
 ______________________________________________________________________________
                                               IN THE
                                  APPELLATE COURT OF ILLINOIS
                                          FIRST DISTRICT
 ______________________________________________________________________________
 MTDB CORPORATION D/B/A STRIKER LANES,                          )   Appeal from the
                                                                )   Circuit Court of
           Plaintiff-Appellant,                                 )   Cook County.
                                                                )
     v.                                                         )   No. 20 CH 5257
                                                                )
 AMERICAN AUTO INSURANCE COMPANY,                               )   Honorable
                                                                )   Raymond W. Mitchell,
           Defendant-Appellee.                                  )   Judge, Presiding.

           JUSTICE ODEN JOHNSON delivered the judgment of the court.
           Presiding Justice Mikva and Justice Tailor concurred in the judgment.

                                              ORDER

¶1        Held: Trial court’s dismissal of plaintiff’s complaint with prejudice was not error where
                plaintiff’s complaint failed to establish that the COVID-19 virus caused a direct
                physical loss of or damage to its property that would trigger coverage.

¶2        Plaintiff MTDB Corporation d/b/a Striker Lanes (MTDB) brought a declaratory judgment

action against defendant, American Auto Insurance Company (AAIC), seeking a declaration that

AAIC owed it coverage for alleged business losses and property damage due to the COVID-19

pandemic. The circuit court subsequently granted AAIC’s section 2-615 (735 ILCS 5/2-615 (West
No. 1-21-0979

2020)) motion to dismiss MTDB’s complaint with prejudice and MTDB has appealed. On appeal,

MTDB contends that the circuit court erred by: (1) interpreting “direct physical loss or damage”

to mean only losses resulting from physical alteration of MTDB’s property; (2) deciding that

MTDB’s allegations that COVID-19 infested the surfaces and air of its property did not constitute

physical alteration of the property; and (3) rejecting MTDB”s allegations that the presence of

COVID-19 on others’ property was sufficient to trigger the civil authority coverage of the policy.

For the following reasons, we affirm.

¶3                                      BACKGROUND

¶4     Briefly stated, MTDB filed a declaratory judgment action seeking a declaration that AAIC

owed it coverage under its commercial business insurance policy for losses incurred as a result of

government closure of its business due to the COVID-19 pandemic during the relevant policy

period. Specifically, MTDB sought coverage under the property coverage and the civil authority

endorsement provisions of the policy.

¶5     The policy at issue provided property, general liability, and automobile coverages for the

policy period of August 19, 2019, to August 19, 20202. The relevant portions of the policy for

purposes of the case at bar concern the property coverage, which is comprised of the property

declarations, the building and personal property coverage form, the commercial property

conditions, the causes of loss form, the business income coverage form (and extra expense) and a

number of endorsements. Section A of the building and personal property coverage form states

that AAIC “will pay for direct physical loss of or damage to covered property at the location

described in the declarations caused by or resulting from any covered cause of loss.” Section A of

the business income coverage form states that:

                                                 -2-
No. 1-21-0979

                “[w]e 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 the premises described

       in the Declarations, including personal property in the open (or in a vehicle) within 100

       feet, caused by or resulting from any Covered Cause of Loss.”

¶6     The policy also included coverage for “extra expense,” defined as necessary expenses you

incur during the period of restoration that you would not have incurred if there had been no direct

physical loss or damage to property caused by or resulting from a Covered Cause of Loss.” The

policy defines the period of restoration as:

                “the period of time that: [b]egins with the date of direct physical loss or damage

       caused by or resulting from any Covered Cause of Loss at the described premises; and

       [e]nds on the date when the property at the described premises should be repaired, rebuilt

       or replaced with reasonable speed and similar quality. Period of restoration does not

       include any increased period required due to the enforcement of any ordinance or law that:

                (1) Regulates the construction, use or repair, or requires the tearing down of any

                property; or

                (2) Requires any insured or others to test for, monitor, clean up, remove, contain,

                treat, detoxify or neutralize, or in any way respond to, or assess the effects of

                pollutants. * * *”

¶7     Section A.3.b. of the Business Income Coverage Form (and Extra Expense) provides up to

four weeks of Civil Authority Coverage, as follows:

                                               -3-
No. 1-21-0979

                “[w]e 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 due to direct physical loss of or damage to property, other than at the described

       premises, caused by or resulting from any Covered Cause of Loss. This coverage will begin

       from the date of the action of Civil Authority and will apply for the number of consecutive

       weeks shown in the Schedule of this Endorsement.”

¶8     The policy designated the covered premises as 6728 16th Street in Berwyn, Illinois. The

policy further defined “Covered Cause of Loss” under the Personal Property Coverage Form and

the Business Income Coverage Form as the “Basic Causes of Loss” enumerated under Section A

of the Causes of Loss Form and “Risks of Direct Physical Loss not covered by the Basic Causes

of Loss unless loss is excluded or limited” as stated under the Special Causes of Loss. Operations

was defined as “[y]our business activities occurring at the described premises.”

¶9     In response to MTDB’s declaratory judgment complaint, AAIC filed a section 2-615 (735

ILCS 5/2-615 (West 2020)) motion to dismiss MTDB’s complaint with prejudice. In support of its

motion, AAIC indicated that it denied coverage under the policy because MTDB did not suffer

direct physical loss or damage to its property as a result of the COVID-19 virus, and further that

the government closure of MTDB’s business did not trigger coverage under the civil authority

endorsement.

¶ 10   The circuit court granted AAIC’s motion to dismiss the complaint in a written order on

July 16, 2021, finding that, based on the allegations in the complaint, MTDB was required to

suspend or significantly reduce its business operations because of executive orders and that the

losses sustained by MTDB were economic and not due to permanent loss of or physical alteration

                                               -4-
No. 1-21-0979

to property. The circuit court relied on the supreme court’s decision in Travelers Insurance Co. v.

Eljer Manufacturing, Inc., 197 Ill. 2d 278 (2001) in holding that the plain and ordinary meaning

of “physical injury” is damage to tangible property that causes an alteration in appearance, shape,

color, or other material dimension, and that MTDB had not alleged that the probable presence of

COVID-19 in, on, or around their property caused any alteration in their property’s appearance or

any other material dimension. The circuit court also noted that neither the presence of COVID-19

on MTDB’s property or the temporary closure of the business due to the Illinois executive orders

have permanently dispossessed MTDB of their property, nor did the presence of COVID-19 cause

an alteration in appearance, shape, color, or any other material dimension in MTDB’s property.

Because there was no direct physical loss or damage, the circuit court concluded that MTDB failed

to allege facts that would give them coverage under the insurance policy.

¶ 11   The circuit court also found that civil authority coverage did not apply to MTDB based on

the facts they alleged because COVID-19 particles could not cause direct physical loss or damage

to property. MTDB’s complaint was dismissed with prejudice and this timely appeal followed.

¶ 12                                         ANALYSIS

¶ 13   On appeal, MTDB contends that the circuit court erred in granting AAIC’s motion to

dismiss by: (1) interpreting “direct physical loss or damage” to mean only losses resulting from

physical alteration of MTDB’s property; (2) deciding that MTDB’s allegations that COVID-19

infested the surfaces and air of its property did not constitute physical alteration of the property;

and (3) rejecting MTDB”s allegations that the presence of COVID-19 on others’ property was

sufficient to trigger the civil authority coverage of the policy.

                                                 -5-
No. 1-21-0979

¶ 14    A section 2-615 motion to dismiss challenges only the legal sufficiency of a complaint and

alleges only defects on the face of the complaint. Neppl v. Murphy, 316 Ill. App. 3d 581, 584

(2000). A motion to dismiss based on section 2-615 admits all well-pleaded facts and attacks the

legal sufficiency of the complaint. Id. In ruling on a section 2-615 motion to dismiss, only those

facts apparent from the face of the pleadings, matters of which the court can take judicial notice,

and judicial admissions in the record may be considered. Pooh-Bah Enterprises, Inc. v. County of

Cook, 232 Ill. 2d 463, 473 (2009). The court must accept as true all well-pled facts in the complaint

and all reasonable inferences that can be drawn therefrom. Neppl, 316 Ill. App. 3d at 584. Our

standard of review on a motion to dismiss is de novo. Id.

¶ 15   When an insured sues its insurer over a denial of coverage, the existence of coverage is an

essential element of the insured’s case, and the insured has the burden of proving that his loss falls

within the terms of his policy. St. Michael’s Orthodox Catholic Church v. Preferred Risk Mutual

Insurance Co., 146 Ill. App. 3d 107, 109 (1986). An insurance policy is a contract, and the general

rules governing the interpretation of contracts also governs the interpretation of insurance policies.

Standard Mutual Insurance Co. v. Lay, 2013 IL 114617, ¶ 24. If the policy language is

unambiguous, the policy will be applied as written unless it contravenes public policy. Id. The

court’s primary objective in interpreting an insurance policy is to ascertain and give effect to the

intentions of the parties as expressed by the language of the policy. West Bend Mutual Insurance

Co. v. Krishna Schaumburg Tan, Inc., 2020 IL App (1st) 191834, ¶ 26. Whether an ambiguity

exists in an insurance policy turns on whether the policy language is subject to more than one

reasonable interpretation. Id. Although “creative possibilities” may be suggested, only reasonable

interpretations will be considered. Id. Thus, we will not strain to find an ambiguity where one does

                                                -6-
No. 1-21-0979

not exist. Id. Just because a term is undefined by the policy does not render it ambiguous. State

Farm Mutual Auto Insurance Co. v. Rodriguez, 2013 IL App (1st) 121388, ¶ 18. Where a term in

an insurance policy is not defined, we give that term its plain, ordinary, and popular meaning. Id.

¶ 19. An insurance policy must not be interpreted in a manner that renders contract provisions

meaningless. Id. ¶ 22.

¶ 16   Subsequent to the briefs being filed in this appeal, this court granted AAIC’s motion to

provide supplemental authority with recent case law addressing the issues raised on this appeal,

which it did by citation to cases from this court as well as federal cases applying Illinois law. Most

relevant to this appeal, the issues raised by MTDB have been previously considered by this court

in two recent cases since its briefs were filed, namely ABW Development LLC v. Continental

Casualty Co., 2022 IL App (1st) 210930 on March 30, 2022, and Firebirds International LLC v.

Zurich American Insurance Co., 2022 IL App (1st) 210558 on May 20, 2022.

¶ 17   In ABW, the insured owner and operator of medical imaging clinics brought action against

its businessowner insurer, seeking to recover losses it allegedly suffered due to the COVID-19

pandemic and due to governmental orders issued in response. ABW, 2022 IL App (1st) 210930, ¶

1. After the insurer denied coverage, ABW sought a declaratory judgment that the losses were

covered by its policy and that it was entitled to recover them. Id. The circuit court dismissed

plaintiff’s complaint, concluding that the unambiguous terms of the policy did not cover plaintiff’s

alleged losses. Id. Similar to the case at bar, the policy contained a “Businessowners Special

Property Coverage Form,” whereby the insurer agreed to “pay for direct physical loss of or damage

to Covered Property at the premises * * * caused by or resulting from a Covered Cause of Loss.”

Id. ¶ 3. A “Covered Cause of Loss” was defined as “Risks of Direct Physical Loss,” unless an

                                                -7-
No. 1-21-0979

exclusion or limitation applied. Id. The policy also contained a “Business Income and Extra

Expense” endorsement which covered loss of income due to the necessary suspension of

operations, as well as a Civil Authority endorsement which extended the business income and

extra expense coverage to apply to the actual loss of business income to apply to the actual loss of

business income sustained and reasonable and necessary extra expense incurred caused by action

of civil authority that prohibited access to the premises due to direct physical loss of or damage to

property. Id. ¶¶ 4, 8.

¶ 18    ABW’s declaratory judgment action raised similar arguments to those raised by MTDB in

the case at bar; namely that: (1) it was forced to suspend much of its business activities due to the

COVID-19 crisis and the ensuing orders of civil authorities; (2) it was likely that SARS-CoV-2,

the virus that causes COVID-19 had been physically present at ABW’s premises during the policy

period and that it sustained direct physical loss and damage to items of property and to its premises

as a result of the presence of the virus and the COVID-19 crisis; (3) the presence of any particles

from the COVID-19 virus rendered the premises and items of physical property unsafe, impaired

their value, usefulness and normal function, causing direct physical loss and damage to its

property; (4) and its operations were suspended due to the physical loss and damage to its property

and the premises due to the orders issued by civil authorities, thereby causing an actual loss of

income. Id. ¶ 10. The insurer responded with a section 2-615 motion to dismiss, contending that

(1) plaintiff had not alleged and could not allege any direct physical loss of or damage to its

property, (2) our supreme court had held that physical injury to property required that a property

be altered in appearance, shape, color, or other material dimension and (3) ABW had not alleged

that the COVID-19 virus was even found at the covered properties. Id. ¶ 13. The insurer further

                                                -8-
No. 1-21-0979

argued that even if ABW had adequately alleged the presence of the virus, the virus did not

physically alter the appearance, shape, color, structure, or other material dimension of the property

where the virus dies naturally on surfaces within hours or days or can be killed or removed with

disinfectants or routine cleaning, and that ABW’s allegations asserted only economic loss from its

inability to use its premises and not any direct physical loss of or damage to property, and such

loss of use was excluded from the policy. Id.

¶ 19   The trial court agreed with the insurer and granted its motion to dismiss with prejudice. Id.

¶ 20. On appeal, this court first considered the question of whether ABW’s alleged losses could

constitute direct physical loss of or damage to its property, noting that while our supreme court

has not specifically addressed the issue of whether damage from the possible or actual presence of

the COVID-19 virus constitutes direct physical loss of damage to property, it has interpreted the

term physical in an insurance policy to mean of or relating to natural or material things as opposed

to things mental, moral, spiritual or imaginary as defined by Webster’s Dictionary. Id. ¶ 29 (citing

Traveler’s Insurance Co. v. Eljer Manufacturing, Inc., 197 Ill. 2d 278, 301 (2001)). In relying on

Eljer, this court concluded that the policy unambiguously required that the covered loss or damage

be physical in nature, meaning the property has been altered in appearance, shape, color, or other

material dimension. Id. ¶ 30. In determining that plaintiff had not met that requirement, this court

noted that the complaint did not allege any facts to support its conclusion that the COVID-19 virus

caused damage to its property; instead, the complaint only alleged that its presence was “likely,”

which did not constitute physical loss of or damage to property because COVID-19 does not

physically alter the appearance, shape, color, structure, or other material dimension of the property.

Id. ¶ 35. Additionally, with respect to the claim of coverage under the civil authority endorsement,

                                                -9-
No. 1-21-0979

this court found that the trigger for coverage was direct physical loss or damage to property, which

the complaint failed to establish. Id. ¶ 39. Accordingly, this court affirmed the dismissal of ABW’s

complaint with prejudice. Id. ¶ 42.

¶ 20   Similarly in Firebirds, this court considered the denial of the plaintiff’s claims for property

damage and business losses due to the COVID-19 pandemic and affirmed the denial of coverage.

Firebirds, 2022 IL App (1st) 210558, ¶ 1. As in ABW, Firebirds submitted a claim to its insurer,

seeking coverage for the significant losses incurred by their restaurants because their policies

insured against direct physical loss of or damage caused by a Covered Cause of Loss to Covered

Property. Id. ¶¶ 7, 8. The insurer denied Firebirds claim because the COVID-19 virus did not

constitute a direct physical loss or damage to property. Id. ¶ 8. The trial court granted the insurer’s

motion to dismiss the complaint and this court affirmed on appeal, finding that Firebirds’ allegation

of business interruption losses due to the presence of the COVID-19 virus in their properties was

excluded from coverage. Id. ¶¶ 13, 29. This court noted that the polices at issue provided coverage

only when there was a direct physical loss or damage to covered property, but found that our

supreme court made clear in Eljer that “diminution in value of a whole, resulting from the failure

of a component to perform as promised, does not constitute a physical injury,” and fell outside of

coverage for physical loss or damage to property. Id. ¶ 40 (quoting Eljer, 197 Ill. 2d at 312).

¶ 21   We find that ABW and Firebirds are dispositive of the issues raised on this appeal as

described below. As we concluded in those cases, according to our supreme court’s determination

in Eljer which defined “physical” for purposes of interpreting direct physical loss or damage for

insurance coverage, there must be an actual alteration to the appearance, shape, color, or other

physical aspect of the property in order for there to be coverage under the policy. We therefore

                                                - 10 -
No. 1-21-0979

reject MTDB’s claim that Eljer stands for the opposite conclusion. Our supreme court was quite

clear that under its plain and ordinary meaning, “physical” meant just that- pertaining to natural or

material things. ABW, 2022 IL App (1st) 210930, ¶ 29 (citing Eljer, 197 Ill. 2d at 301).

Accordingly, the circuit court did not err in reaching that conclusion.

¶ 22   We also reject MTDB’s alternate contention that the COVID-19 virus caused direct

physical loss or damage to its property by infecting surfaces and air of its property, thereby

triggering coverage under the policy. First, MTDB’s complaint, like those at issue in ABW

Firebirds, alleged only that it was “likely” that the COVID-19 virus was present on its property

and therefore infected the surfaces and air of the property, not that it was actually present on its

property. We find that such allegation in the complaint did not sufficiently allege facts to show

how the COVID-19 virus caused direct physical loss or damage to its property. As we concluded

in both ABW and Firebirds, the COVID-19 virus does not alter the appearance, shape, color, or

other physical aspect of the property to trigger coverage under the policies at issue. While we

certainly agree with MTDB that the COVID-19 virus is comprised of particles in the air that can

alight onto surfaces and remain active for hours or days after such contact, we do not find this

contact to rise to the level of a physical or structural alteration of the property. Such contamination

by the COVID-19 virus can be remedied by routine cleaning or disinfecting of surfaces and the

air, all without altering the appearance, shape, color, or other material aspect of the property.

Accordingly, we conclude, as was concluded in ABW and Firebirds, that COVID-19 could not

constitute a physical alteration of the property so as to trigger coverage under the policy.

¶ 23   MTDB also contends that the circuit court erred in rejecting its allegations that the presence

of the COVID-19 virus on others’ property was sufficient to trigger the civil authority coverage of

                                                - 11 -
No. 1-21-0979

the policy. However, MTDB’s brief fails to make any argument in support of this contention, nor

does it cite to any supporting caselaw. Illinois Supreme Court Rule 341(h)(7) (eff. Oct. 1, 2020)

requires an appellant’s brief to contain argument supported by citations of the authorities and the

pages of the record relied on. Gakuba v. Kurtz, 2015 IL App (2d) 140252, ¶ 19. A failure to cite

relevant authority violates Rule 341and can cause a party to forfeit consideration of the issue. Id.

Where an appellant has failed to support his or her argument with citations to authority, this court

will not research the issue on appellant’s behalf. Id. Because MTDB has failed to make any

argument on this issue in its brief or cite relevant authority, this argument is forfeited.

¶ 24   For the foregoing reasons, the judgment of the circuit court of Cook County granting

AAIC’s section 2-615 (735 ILCS 5/2-615 (West 2020)) motion to dismiss with prejudice is

affirmed.

¶ 25   Affirmed.

                                                - 12 -