Restaurant insurer wins COVID-era coverage battle

A Wisconsin insurer that faced multiple lawsuits from bars and restaurants seeking coverage for COVID-19-related business interruption losses won the dismissal of multiple cases.

In the litigation In re: Society Insurance Co. COVID-19 Business Interruption Protection Insurance Litigation, the U.S. District Court for the Northern District of Illinois, Eastern Division, ruled Wednesday in three “bellwether” claims that the restaurants had not experienced the necessary physical damage to trigger business interruption claims.

Society Insurance faced numerous suits in 2020 alleging it owed coverage for losses caused by government-ordered shutdowns during the pandemic. While it won several of the cases, federal judge Edmond E. Chang in Chicago allowed the consolidated case to move forward, saying the restaurants may have suffered direct physical damage.

In this week’s ruling, Judge Chang noted that numerous courts, including the 7^th U.S. Circuit Court of Appeals in Chicago, had ruled in favor of insurers in similar cases. The appeals court determined there had to be a “physical alteration” to the property to trigger coverage.

“The weight of authority decided after the initial opinion dictates interpreting the key terms — loss caused by direct physical loss — as excluding the loss of income from the pandemic interruption,” Judge Chang ruled.