Business Interruption Coverage Barred by Virus Exclusion

The United States District Court for the Northern District of Illinois, in an opinion by Judge Kocoras, applying Illinois law, dismissed with prejudice Plaintiffs’ suit against West Bend Mutual Insurance Company (“West Bend”) seeking coverage for business interruption losses stemming from the COVID-19 pandemic. The court found that the underlying policy’s “Virus Exclusion” precluded all coverage.

Mr. Mashallah and Mr. Ranalli (“Plaintiffs”) respectively owned a jewelry store and restaurant in the City of Chicago. Plaintiffs experienced business interruption due to the COVID-19 pandemic and sought coverage from West Bend. West Bend denied coverage. Plaintiffs then pursued, among other things, declaratory judgment to determine the scope of West Bend’s coverage obligations.

The underlying policy included a “Virus Exclusion” which Plaintiffs argued was ambiguous. The court disagreed, finding the “Virus Exclusion” precluded coverage and, contrary to Plaintiffs’ contention, the exclusions were “clear and free from any ambiguity.” In the alternative, Plaintiffs argued that they were entitled to an insurance premium rebate of the premiums they paid to West Bend. The court again disagreed and affirmed the general rule of insurance law that “an insured may not have any part of his or her premium returned once the risk attaches, even if it eventually turns out that the premium was in part unearned.”

Having found Plaintiffs were not entitled to a rebate the court turned to Plaintiffs’ unjust enrichment claim. The court held the Plaintiffs’ unjust enrichment claim failed because where a contract governs the relationship between parties, as here, the unjust enrichment doctrine has no application. Plaintiffs’ allegation that West Bend violated the Illinois Consumer Fraud and Deceptive Business Practices Act (“ICFA”) likewise failed as Plaintiffs did not even allege that West Bend undertook “a deceptive act or practice”—necessary for a claim under ICFA. Moreover, Plaintiffs’ claims failed because there was nothing unfair or unscrupulous about holding Plaintiffs to the terms of the policies they bought, which do not include coverage for “any virus” like COVID-19. Mashallah Inc. v. W. Bend Mut. Ins. Co., No. 20 C 5472 (N.D. Ill. Feb. 22, 2021).