Virus Exclusion Bars Coverage for Lost Business Income  

The United States District Court for the Northern District of Illinois, in an opinion written by Judge Kennelly, applying Illinois law, granted Westfield National Insurance Company’s (“Westfield”) motion to dismiss a complaint brought by two of its insureds stemming from losses due to COVID-19. The insureds sought declaratory judgment and alleged, among other things, breach of contract and unjust enrichment.

The court found that the insureds’ lost business income stemmed indirectly from COVID-19 and was therefore excluded from coverage under a virus exclusion. It noted a substantial similarity between the virus exclusion in the underlying policies and a virus exclusion in a case recently decided by the court. Dental Experts, LLC v. Massachusetts Bay Ins. Co., No. 20 C 5887, 2021 WL 1722781, at 3 (N.D. Ill. May 1, 2021) (Kennelly, J.). As in Dental Experts, the court found that the virus exclusion at issue “unambiguously excludes claims for the loss of business income indirectly caused by a virus.” Because the business closure orders were issued because of the COVID-19 pandemic, the insureds’ claims that the closure order rather than COVID-19 caused lost business income proved unpersuasive and lacking merit.

Finally, the court addressed the insureds’ claim, brought in the alternative, for unjust enrichment, which alleged Westfield’s continued acceptance of full premium payments as if the businesses remained fully operational constituted unjust enrichment. The court decidedly rejected this argument and found that the doctrine of unjust enrichment has no application where an underlying contract exists between the parties. M&E Bakery Holdings, LLC d/b/a Bittersweet v. Westfield National Insurance Company, No. 20 C 5849 (N.D. Ill. May 7, 2021).