Midwest Orthodontic Assocs., Ltd. v. Cincinnati Cas. Co.

564 F.Supp.3d 663

MIDWEST ORTHODONTIC ASSOCIATES, LTD., on behalf of itself and all others similarly situated, Plaintiff,

v.The CINCINNATI CASUALTY COMPANY, INC. and The Cincinnati Insurance Company, Defendants.

No. 3:20-cv-01167-GCS

United States District Court, S.D. Illinois.

Signed September 30, 2021

Kevin P. Green, Mark C. Goldenberg, Thomas P. Rosenfeld, Goldenberg Heller & Antognoli, P.C., Edwardsville, IL, Richard S. Cornfeld, Daniel Scott Levy, Law Office of Richard S. Cornfeld, LLC, St. Louis, MO, for Plaintiff.

Brian M. Reid, Litchfield Cavo LLP, Chicago, IL, for Defendants.

MEMORANDUM & ORDER

SISON, Magistrate Judge:

INTRODUCTION AND BACKGROUND

Plaintiff, Midwest Orthodontic Associates, LTD, conducts a dental practice limited to orthodontic services and treatments in Peoria and Washington, Illinois. (Doc. 1-1, ¶¶ 1, 13). On March 20, 2020, Governor Pritzker issued his first stay-at-home order for Illinois. Id. at ¶ 41. Plaintiff also received various guidance directives from the American Dental Association ("ADA"), Illinois State Dental Society ("ISDA"), Centers for Disease Control ("CDC"), and the Illinois Department of Public Health ("IDPH"). Id. at ¶¶ 6-8. See also Id. at ¶¶ 31-47. As such, beginning on March 20, 2020, and continuing for approximately six weeks thereafter, Plaintiff shut down its practice, resulting in a substantial loss of revenue. Id. at ¶ 8.

On or about September 3, 2020, Plaintiff, on behalf of itself and all others similarly situated, filed a nine count Class Action Complaint in the Circuit Court of Madison County, Illinois, against Defendants, The Cincinnati Casualty Company, Inc. and The Cincinnati Insurance Company. (Doc. 1, ¶ 2). The Defendants removed the matter to this Court on diversity jurisdiction grounds on November 4, 2020. (Doc. 1). In its complaint, Plaintiff seeks relief related to Defendants' denial of Plaintiff's insurance claim for alleged business damages sustained during the COVID-19 pandemic. (Doc. 1-1). Plaintiff also seeks an order certifying appropriate classes and/or subclasses; designating Plaintiff as the class representative and his counsel as class counsel; a declaration determining the meaning of the Business Income, Extra Expense, and Civil Authority coverage provisions; and awarding damages, as appropriate. Id. Plaintiff further asserts claims for breach of contract for failing to provide coverage. Id. Id. It finally requests damages and attorneys' fees for vexatious and unreasonable conduct under 215 ILL. COMP. STAT. § 5/155. Id.

Now before the Court is Defendants' Motion to Dismiss, which Defendants filed on November 12, 2020. (Doc. 7, 8). Plaintiff filed a response in opposition on January 8, 2021. (Doc. 28). Defendant filed a reply in support on January 22, 2021. (Doc. 29). During the pendency of this motion, both parties filed a number of supplementary authorities. (Doc. 35, 36, 39, 43, 46, 51, 52, 55, 60). Having reviewed the briefing, arguments, and supplementary authorities, the Defendants' Motion to Dismiss (Doc. 7) is GRANTED for the reasons set forth below.

FACTUAL ALLEGATIONS AND PERTINENT POLICY PROVISIONS

During the time period that Plaintiff shut down its practice, it only saw a "handful" of patients for urgent problems. (Doc. 1-1, ¶¶ 8, 49). From May through June 30, 2020, Plaintiff's practice was limited to seeing 50% of its usual number of patients. Id. at ¶ 49. This was due to the need for adhering to social distancing requirements because of COVID-19. Id. Plaintiff argues that the losses incurred during the shutdown are covered under an insurance policy issued by Defendant for the period of August 7, 2018 to August 7, 2021. Id. at ¶ 59. Plaintiff contends that coverage exists under the policy's Business Income and Extra Expenses coverage and Civil Authority coverage provisions. Id. at ¶¶ 61-74.

The relevant policy provisions upon which Plaintiff relies can be found in the Building and Personal Property Coverage Form (Including Special Causes of Loss). (Doc. 1-1, p. 68-107). The policy's general coverage provision states that Defendants "will pay for direct ‘loss’ to Covered Property at the ‘premises’ caused by or resulting from any Covered Cause of Loss." (Doc. 1-1, p. 70). The term "Covered Cause of Loss," which is used in the Business Income, Extra Expense and Civil Authority sections set forth below, is defined as "direct ‘loss’ unless the ‘loss’ is excluded or limited in this Coverage Part." (Doc. 1-1, p. 72). "Loss" is further defined as "accidental physical loss or accidental physical damage." (Doc. 1-1, p. 105).

The Business Income section of the Building and Personal Property Coverage Form states, in pertinent part:

We will pay for the actual loss of "Business Income" and "Rental Value" you sustain due to the necessary "suspension" of your "operations" during the "period of restoration." The "suspension" must be caused by direct "loss" to property at a "premises" caused by or resulting from any Covered Cause of Loss.

(Doc. 1-1, p. 85-86).

The Extra Expense coverage section of the Building and Personal Property Coverage Form provides in pertinent part as follows:

(a) We will pay Extra Expense you sustain during the "period of restoration." Extra Expense means necessary expenses you sustain ... during the "period of restoration" that you would not have sustained if there had been no direct "loss" to property caused by or resulting from a Covered Cause of Loss.

(b) If these expenses reduce the otherwise payable "Business Income" "loss," we will pay expenses ... to:

1) Avoid or minimize the "suspension" of business and to continue "operations" either:

a) At the "premises;" or

b) At replacement "premises" or temporary locations, including relocation expenses and costs to equip and operate the replacement location or temporary location; or

2) Minimize the "suspension" of business if you cannot continue "operations."

(c) We will also pay expenses to:

1) Repair or replace property; or

2) Research, replace or restore the lost information on damaged "valuable papers and records;"

but only to the extent this payment reduces the otherwise payable "Business Income" "loss," if any property obtained for temporary use during the "period of restoration" remains after the resumption of normal "operations," the amount we will pay under this Coverage will be reduced by the salvage value of that property ...

...

(Doc. 1-1, p. 86).

The Building and Personal Property Coverage Form also provides for Civil Authority coverage and states:

When a Covered Cause of Loss causes damage to property other than Covered Property at a "premises", we will pay for the actual loss of "Business Income" and necessary Extra Expense you sustain caused by action of civil authority that prohibits access to the "premises" provided that both of the following apply:

(a) Access to the area immediately surrounding the damaged property is prohibited by civil authority as a result of the damage; and

(b) The action of civil authority is taken in response to dangerous physical conditions resulting from the damage or continuation of the Covered Cause of Loss that caused the damage....

(Doc. 1-1, p. 86)

Business Income, Extra Expense and Civil Authority provisions are also found in the Business Income (And Extra Expense) Coverage Form. (Doc. 1-1, p. 138-146). The Business Income section is generally the same, except for the omission of "Rental Value." The section states:

We will pay for the actual loss of Business Income you sustain due to the necessary "suspension" of your "operations" during the "period of restoration". The "suspension" must be caused by direct "loss" to property at a "premises" which is described in the Declarations and for which a Business Income Limit of Insurance is shown in the Declarations. The "loss" must be caused by or result from a Covered Cause of Loss.

(Doc. 1-1, p. 138).

The Extra Expense section is also generally the same, but with some minor variations. The section provides as follows:

(a) Extra Expense Coverage is provided at the "premises" described in the Declarations only if the Declarations show that "Business Income" coverage applies at that "premises."

(b) Extra Expense means necessary expenses you sustain (as described in Paragraphs 2.c., d. and e.) during the "period of restoration" that you would not have sustained if there had been no direct "loss" to property caused by or resulting from a Covered Cause of Loss.

(c) If these expenses reduce the otherwise payable "Business Income" "loss," we will pay expenses ... to:

1) Avoid or minimize the "suspension" of business and to continue "operations" either:

a) At the "premises;" or

b) At replacement "premises" or temporary locations, including relocation expenses and costs to equip and operate the replacement location or temporary location; or

2) Minimize the "suspension" of business if you cannot continue "operations."

(d) We will also pay expenses to:

1) Repair or replace property; or

2) Research, replace or restore the lost information on damaged "valuable papers and records;"

but only to the extent this payment reduces the otherwise payable "Business Income" loss. If any property obtained for temporary use during the "period of restoration" remains after the resumption of normal "operations," the amount we will pay under this Coverage will be reduced by the salvage value of that property ...

...

(Doc. 1-1, p. 138-139).

The coverage provided for in the Civil Authority is essentially the same. (Doc. 1-1, p. 139). As for the term "Covered Cause of Loss," the Business Income (And Extra Expense) Coverage Form refers back to the definition contained in the Building and Personal Property Coverage Form. Id. Finally, the definition of "Loss" is the same. Id. at p. 146.

LEGAL STANDARDS

"The purpose of a motion to dismiss is to test the sufficiency of the complaint, not to decide the merits." Gibson v. City of Chicago , 910 F.2d 1510, 1520 (7th Cir. 1990). "To survive dismissal, Plaintiff must state a claim that is ‘plausible on...