The United States Court of Appeals for the Seventh Circuit, applying Illinois law, joined four other U.S. circuits in dismissing various insureds’ claim for coverage for losses stemming from the COVID-19 pandemic. In doing so, the Seventh Circuit held that the plaintiffs failed to adequately allege physical damage or loss caused by the coronavirus and that several exclusions, discussed below, would nonetheless apply to any loss. The insureds, comprising two restaurants, three hoteliers, one retailer, and one dentist’s office, each suffered severe loss of income due to the Illinois governor’s shutdown order at the outset of the COVID-19 pandemic. In each case, the Seventh Circuit upheld the lower court’s dismissal of the claims.

First, in an opinion written by Judge Wood, the Seventh Circuit joined several other courts in holding that the insureds failed to adequately allege physical damage or loss as a result of the COVID-19 pandemic. Acknowledging that Illinois’ shutdown order limited each insured’s optimal use of their property, the Seventh Circuit reminded the insureds that their policies “insured its property, not its ideal use of that property,” saying that the loss of a property’s primary use is not akin to a complete dispossession of that property. As such, the Seventh Circuit affirmed the District Court’s dismissal of the insureds’ claim for coverage. Sandy Point Dental, P.C. v. Cincinnati Ins. Co., No. 21-1186, 2021 WL 5833525 (7th Cir. Dec. 9, 2021).

The Seventh Circuit, in an opinion written by Judge Hamilton, then extended that analysis to three other cases, while also holding that certain exclusions also applied in each case. In examining a “microorganism exclusion,” which bars coverage for losses arising out of “microorganisms of any type, nature, or description… whose presence poses an actual or potential threat to human health,” the Seventh Circuit held that the virus that causes COVID-19 is indeed a microorganism as contemplated by the exclusion. Crescent Plaza Hotel Owner, L.P. v. Zurich Am. Ins. Co., No. 21-1316, 2021 WL 5833485 (7th Cir. Dec. 9, 2021).

Next, the Seventh Circuit, in an opinion also written by Judge Hamilton, found that loss of income due to government shutdown orders fell squarely within both a loss of use exclusion and a law or ordinance exclusion. The former excludes coverage for losses caused by mere loss of use, unless that loss results from a covered cause. Here, there was no covered cause of loss, so the exclusion applied. In holding that the latter exclusion applied, the Seventh Circuit found that a governor’s executive order, issued under statutory authority to protect public health, is a “law or ordinance” as used in the exclusion. Bradley Hotel Corp. v. Aspen Specialty Ins. Co., No. 21-1173, 2021 WL 5833486 (7th Cir. Dec. 9, 2021).

Finally, the Seventh Circuit, in an opinion written by Judge Manion, found that an exclusion for losses stemming from any virus that induces or is capable of inducing physical illness, distress, or disease applied in the present case. Additionally, the Seventh Circuit held that analyzing the application of exclusions prior to a determination of the scope of coverage is an acceptable method of analysis, that the insurers did not violate either public policy or the Illinois Consumer Fraud and Deceptive Business Practices Act in collecting premiums despite reduced risk resulting from the shutdowns, that a claim of unjust enrichment against the insurers was improperly pleaded, and that insurers are not required to provide a rebate of premiums. Mashallah, Inc. v. W. Bend Mut. Ins. Co., No. 21-1507, 2021 WL 5833488 (7th Cir. Dec. 9, 2021).

With these four opinions, the Seventh Circuit joined the Sixth, Eighth, Ninth, and Eleventh Circuits in finding in favor of insurers regarding COVID-19 coverage claims.