Justia U.S. 7th Circuit Court of Appeals Opinion Summaries

Glick, without a written agreement, provided home daycare for Clayton’s infant daughter, Kenzi, for $25 per day, paid in cash at the end of the week. On January 29, 2018, Kenzi died while in Glick’s care. The coroner’s office indicated that her death resulted from bedding asphyxia after being placed prone on a couch cushion covered with a blanket to nap. The Glicks’ Liberty Mutual insurance policy, covered personal liability for “bodily injury” except for liability “[a]rising out of or in connection with a ‘business’ engaged in by an insured.” A separate endorsement stated: If an “insured” regularly provides home daycare services to a person or persons other than “insureds” and receives monetary or other compensation for such services, that enterprise is a “business.” Mutual exchange of home daycare services, however, is not considered compensation. The rendering of home daycare services by an “insured” to a relative of an “insured” is not considered a “business.”Liberty Mutual denied coverage. In Clayton’s wrongful death lawsuit, the district court granted Liberty Mutual summary judgment and expressly declared Liberty Mutual has no duty to defend or indemnify Glick in the underlying lawsuit. The Seventh Circuit affirmed, stating that Clayton’s claim “did not even potentially fall within the scope of coverage.” View "Liberty Mutual Fire Insurance Co. v. Clayton" on Justia Law

In March 2020, to prevent the spread of Covid-19, Illinois Governor Pritzker ordered all persons living in the state to stay at home except to perform specified “essential activities” and ordered “non-essential” businesses to cease all but minimum basic operations. Childcare providers were permitted to continue operating only with an emergency license to care for the children of essential workers. Michigan’s Governor Whitmer issued a similar order. Both states lifted those restrictions by June 2020. West Bend denied claims by childcare centers under their all-risk commercial property insurance policies.The policies cover the actual loss of income and expense due to the suspension of an insured’s operations “caused by direct physical loss of or damage to property”. The loss or damage must be caused by “[d]irect physical loss.” Lost income and extra expenses are covered when a civil authority prohibits access to insured premises because of damage at nearby property. The policies cover income lost and expenses incurred when an insured’s operations are temporarily suspended by government order "due to an outbreak of a ‘communicable disease’ … at the insured premises.”The district court concluded that the Centers had not plausibly alleged that COVID-19 caused physical loss of or damage to their property—or to nearby property— or that government shutdown orders were due to an outbreak at their premises. The Seventh Circuit affirmed, noting that other circuits have reached the same conclusion. View "Paradigm Care & Enrichment Center, L.L.C. v. West Bend Mutual Insurance Co." on Justia Law

ECE's movie theaters lost money after North Carolina's Governor imposed statewide closures in response to COVID-19. ECE’s insurance policy with HCC provides: We will pay 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 physical loss of or damage to property at premises that are described in the Declarations and for which a Business Income Limit of Insurance is shown in the Declarations. The loss or damages must be caused by or result from a Covered Cause of Loss. A “Civil Authority” provision covers “the actual loss of Business Income you sustain and necessary Extra Expense caused by action of civil authority that prohibits access to the described premises due to direct physical loss of or damage to property, other than at the described premises, caused by or resulting from any Covered Cause of Loss.”After HCC denied ECE’s claim, the district court dismissed ECE’s suit. ECE argued that the policy covered losses due to COVID-related closures because the virus rendered ECE’s property unsafe. The Seventh Circuit affirmed the dismissal. ECE alleged neither a physical alteration to property nor an accessor use-deprivation so substantial as to constitute physical dispossession. View "East Coast Entertainment of Durham, LLC v. Houston Casualty Co." on Justia Law

Larry Nassar sexually assaulted hundreds of girls and young women during his involvement with USA Gymnastics (USAG), the non-profit organization which governs the sport in the United States. As a result of Nassar’s abuse, USAG has been sued several times and investigated by Congress and federal and state authorities. USAG sought financial help with its defense from insurers, including Liberty, with which USAG had a claims-made, directors and officers (D&O) liability insurance policy. An insurance-coverage lawsuit in Indiana state court was removed to federal court.The Nassar-related litigation and investigations forced USAG into bankruptcy. The bankruptcy court issued proposed findings and conclusions, including that the Nassar-related claims were timely made and that a wrongful-conduct exclusion applied to only those claims for which Nassar was criminally convicted. The district court agreed.The Seventh Circuit remanded, first holding that it had jurisdiction because the ruling had the “practical effect” of an injunction under 28 U.S.C. 1292(a)(1). USAG’s claims were timely made during the policy period. The wrongful conduct exclusion, which the court found ambiguous as applied to this case, applies to 10 instances of Nassar’s sexual abuse, but not to claims related to his abuse that were not finally adjudicated. A bodily injury exclusion in the policy does not preclude coverage; coverage is proper for various government investigations and other matters. View "USA Gymnastics v. Liberty Insurance Underwriter, Inc." on Justia Law

ATC purchased a commercial general liability insurance policy from Westchester, which provided coverage against liability incurred because of “advertising,” a defined term that included trade dress infringement. BizBox sued ATC for breach of contract and interference with its business expectancies, alleging that ATC manufactured and sold a knock-off trailer using BizBox’s design. ATC sought a declaratory judgment that Westchester owed it a duty to defend and a duty to indemnify. Westchester argued that BizBox’s underlying suit was not covered under the insurance policy because BizBox did not allege, in that litigation, an infringement of its trade dress in ATC’s advertising.The Seventh Circuit affirmed the dismissal of the suit. BizBox’s complaint never alleged a trade dress infringement claim against ATC nor an advertising injury and could not be construed to plausibly allege a trade dress infringement claim against ATC. BizBox alleged no facts that can plausibly be construed to show that it asserted that an advertising injury occurred. Westchester, therefore, has no duty to defend or indemnify ATC under the “personal and advertising injury” provision of the Policy. View "Aluminum Trailer Co. v. Westchester Fire Insurance Co" on Justia Law

Mashallah sells handcrafted jewelry at its Chicago store. Ranalli’s operates a bar and restaurant. Both purchased West Bend all-risk commercial property insurance policies. In March 2020, in response to the COVID-19 pandemic, Illinois Governor Pritzker ordered all individuals to stay at home except to perform specified “essential activities” and ordered “non-essential” businesses to cease all but minimum operations. Restaurants were considered essential businesses and permitted to sell food solely for off-premises consumption. Ranalli’s was restricted to filling takeout and delivery orders. Mashallah was not classified as an essential business and had to cease its retail activities. Both businesses sustained heavy financial losses. Their West Bend policies are materially identical. West Bend agreed to pay for actual business income lost and necessary extra expenses incurred if they were caused by “direct physical loss of or damage to” the businesses’ properties. Both policies contain virus exclusions. West Bend denied their claims.The Seventh Circuit affirmed the dismissal of contract and bad faith claims and a claim that West Bend’s retention of full premiums—despite decreased risks occasioned by the reduction in insureds’ business operations—constituted unjust enrichment, requiring rebates. The virus exclusions barred coverage for the purported losses and expenses and the businesses failed to allege viable legal bases for rebate of premiums. View "Mashallah, Inc v. West Bend Mutual Insurance Co." on Justia Law

In March 2020, the Dallas County government issued orders restricting the operations of local businesses in light of the COVID-19 pandemic. Hotels were permitted to continue to provide lodging, and delivery and take-out food services, subject to social-distancing rules. Crescent owns the Dallas Ritz-Carlton hotel, which offers guest rooms, a restaurant and bar, general event space, a salon, spa, and fitness center. Crescent alleges that COVID-19 rendered the air in the hotel unsafe and diminished the functional space available, causing significant losses of income. Crescent also alleges that it incurred expenses to install plexiglass partitions and hand sanitizer stations, to display signs throughout the hotel, and to move furniture to permit social distancing. Crescent’s Zurich insurance policy requires “direct physical loss or damage” to covered property and includes an exclusion for losses attributable to any communicable disease, including viruses, and a microorganism exclusion, which bars coverage for losses “directly or indirectly arising out of or relating to mold, mildew, fungus, spores or other microorganisms of any type, nature, or description, including but not limited to any substance whose presence poses an actual or potential threat to human health.”The Seventh Circuit affirmed the dismissal of Crescent’s suit against Zurich. The phrase “direct physical loss or damage” requires either “a permanent [dispossession] of the property due to a physical change … or physical injury to the property requiring repair.” The microorganism exclusion independently bars coverage for the hotel’s claimed losses. View "Crescent Plaza Hotel Owner, L.P. v. Zurich American Insurance Co." on Justia Law

In March 2020, in response to the rapidly expanding COVID-19 pandemic, Illinois Governor Pritzker issued an order mandating the temporary closure to the public of restaurants, bars, and movie theaters; a subsequent order required all non-essential businesses to shut down partially and temporarily. Bradley operates a Quality Inn & Suites with a restaurant, bar, and general event space and suspended in-person dining at the restaurant and bar, and canceled previously scheduled weddings and meetings.Bradley’s general business property insurance policy from Aspen requires “direct physical loss of or damage to” covered property; its loss of use exclusion bars coverage for “loss or damage caused by or resulting from … [d]elay, loss of use or loss of market” and another exclusion bars coverage for “loss or damage caused directly or indirectly by … [t]he enforcement of or compliance with any ordinance or law: (1) Regulating the construction, use or repair of any property; or (2) Requiring the tearing down of any property.”Affirming the district court, the Seventh Circuit held that the term “direct physical loss of or damage to” property does not apply to a business’s loss of use of the property without any physical alteration. The loss of use exclusion and the ordinance or law exclusion in this policy provide separate bars to coverage. View "Bradley Hotel Corp. v. Aspen Speciality Insurance Co." on Justia Law

On March 15, 2020, in response to the rapidly expanding COVID-19 pandemic, Illinois Governor Pritzker issued an order mandating the temporary closure to the public of restaurants, bars, and movie theaters. On March 20, another order required all non-essential businesses to shut down partially and temporarily. As a result of these orders, the plaintiffs (businesses) were each required to close or dramatically scale back operations. The businesses held materially identical commercial-property insurance policies, issued by Cincinnati Insurance Company, providing coverage for income losses sustained on account of a suspension of operations caused by “direct physical loss” to covered property. The policies also provided coverage for income losses sustained as a result of an action of civil authority prohibiting access to covered property, when such action was taken in response to “direct physical loss” suffered by other property. Cincinnati denied their claims.The Seventh Circuit affirmed the dismissal of each suit. The businesses did not adequately allege that either the virus that causes COVID-19, SARS-CoV-2, or the resulting closure orders caused “direct physical loss” to property; the loss of use, unaccompanied by any physical alteration to property, does not constitute “direct physical loss” under the relevant insurance policies. View "Sandy Point Dental, P.C. v. Cincinnati Insurance Co." on Justia Law

In 2006, Moore, an Indiana-based insurance broker, advised Mathis, an Alabama surgeon, to replace his Standard disability insurance policy with a MetLife disability-insurance policy with higher limits that had occupational disability coverage, like the Standard policy. The MetLife policy did not actually provide occupational disability coverage but provided total disability coverage only if Mathis was not gainfully employed and provided residual disability coverage only under various limitations. Mathis became disabled in 2017. Neck and arm problems prevented him from performing some of his duties. He underwent surgery but could no longer work at his usual level; his income decreased. He left his practice in March 2018 and began working for a device manufacturer in a nonsurgical capacity. MetLife paid Mathis residual disability benefits, April-August 2017, then determined he was not entitled to residual disability benefits. The policy lapsed.Mathis sued Moore and Source Brokerage for negligent procurement and brought a breach of contract claim against MetLife. The Seventh Circuit affirmed the dismissal of the claims, applying Alabama law, rather than Indiana law. Mathis’s contributory negligence in failing to read the new policy and the Alabama statute of limitations barred the negligence claims. The court rejected the contract claim because Mathis failed to comply with his contractual obligation to submit proof of loss for any period after September 2017. View "Mathis v. Metropolitan Life Insurance Co" on Justia Law