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Dentist Sues Cincinnati Insurance Over Pandemic Coverage

April 20, 2020 Coverage News

Chicago, IL — A Chicago-area dental clinic that was forced to cease operations in response to the COVID-19 pandemic has sued its insurer in the United States District Court for the Northern District of Illinois (Case No. 1:20-cv-02160), alleging The Cincinnati Insurance Company wrongfully denied business interruption insurance coverage.  The clinic asserts claims for declaratory relief and breach of contract, and seeks statutory penalties and attorney’s fees under 25 ILCS 5/155 for an alleged bad faith denial of insurance benefits.

The clinic alleges Cincinnati Insurance agreed to pay for loss of “Business Income” caused by action of civil authority that prohibits access to the clinic’s premises due to direct physical loss to property.  The clinic alleges it was legally obligated to cease operations after the State of Illinois ordered all “non-essential businesses” to close on March 20, 2020.  In subsequent opinions, The American Dental Association (“ADA”) and the Center for Disease Control (“CDC”) advised that elective and routine dental practices should be postponed.  And on March 23, 2020, the Illinois State Dental Society (“ISDS”) adopted the ADA and CDC recommendations.  The clinic alleges the ADA, CDC and ISDS decisions rendered its operations “non-essential” and required the clinic to cease operations effective March 23, resulting in substantial, ongoing loss of revenue.

Cincinnati Insurance denied the claim, concluding the clinic has not sustained “direct physical damage from a covered proper cause of loss that eliminates access to the property.”  Central to the denial was Cincinnati Insurance’s finding that the presence of the coronavirus that led to the closure orders does not constitute “direct physical damage,” such as “fire, water damage, wind, etc.”  Echoing an allegation raised in a similar action filed by Chicago-area restaurant, bar and movie theater operators, the clinic alleges that Cincinnati Insurance’s interpretation of “direct physical loss” is contrary to Illinois law. See Big Onion Tavern Group, LLC, et al. v. Society Insurance, Inc. (N.D. Ill., Case No. 1:20-cv-02005, filed March 27, 2020).