Zurich wins COVID-related rulings against restaurant, hotel chains


Two Chicago state appeals courts on Friday ruled in favor of a Zurich Insurance Group Ltd. unit in COVID-19-related business interruption litigation filed by restaurant and hotel chains.

Firebirds International, LLC v. Zurich American Insurance Co. was filed by a Charlotte, North Carolina chain that operates more than 50 wood-fired restaurants in 19 states.

GPIF Crescent Court Hotel et al. v. Zurich American Insurance Co. was filed by a group of hotels operated by Norwalk, Connecticut-based HEI Hotels Inc.

Among the issues discussed in the Firebirds case was the virus exclusion included in the two all-risk commercial property insurance policies issued by Zurich.

The policies “explicitly exclude ‘Contamination,’ defined as ‘(a)ny condition of property due to the actual presence of any virus,’” from coverage, according to the ruling by the Appellate Court of Illinois, first district, 6th division.

“It follows that business interruption due to the COVID-19 virus, as alleged by Firebirds in their complaint, is not a suspension caused by a covered cause of loss,” the ruling said.

It “is clear that no set of facts can be proven that would entitle Firebirds to recover for their claims under the Zurich policies,” it said, in affirming a lower court.

The ruling by the Appellate Court of Illinois, first district, 5th division, cites the earlier Illinois appeals court rulings in Sweet Berry Cafe, Inc. v. Society Insurance, Inc. and Lee v. State Farm Fire & Casualty Co. in affirming a lower court ruling in the insurer’s favor.

As with the restaurants in Sweet Berry and Lee, “in order to demonstrate a ‘physical loss GPIF was required to allege a ‘physical alteration to (its) property,’” the ruling said, in quoting the Lee Ruling.

“But it did not do so. Instead, it alleged only that it lost use of its property and that it had to install various items to help contain the spread of the virus (plexiglass barriers, hand sanitizer stations, instructional stickers, etc.),” the ruling said.

“Further, although GPIF did allege that the SARS-CoV-2 virus caused a physical alteration to the property with which it comes into contact, that allegation likewise failed to demonstrate a physical loss because GPIF did not allege that the property needed to be physically repaired or replaced,” the ruling said, in affirming a lower court ruling.

Attorneys in the case did not respond to requests for comment or could not be located.

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