Editor’s Note: This article was originally published on Messer Strickler’s blog and is republished here with permission.


Many business owners have incurred, and will continue to incur, substantial financial losses as a result of the COVID-19 pandemic. Because these losses may be covered by commercial business insurance policies we have been assisting our clients by reviewing their policies and making claims for coverage.  Not surprisingly, insurance companies are quick to provide coverage for COVID-19 related losses.  This, however, should not deter you from pursuing coverage in appropriate cases.  We are glad to assist you in determining whether your business insurance policy provides coverage and making a claim if appropriate.

Lawsuits are already being filed regarding COVID-19 insurance coverage.  One lawsuit which we are following, Big Onion Tavern Group, LLC et al. v. Society Insurance, Inc. is particularly instructive. This lawsuit was filed in the U.S. District Court for the Northern District of Illinois on March 27, 2020. 

The Big Onion Shutdown & Insurance Claim

Big Onion Tavern Group, LLC (“Big Onion”) operates several Chicago area restaurants.  After Illinois Governor Pritzker issued Executive Orders closing restaurants and all “non-essential” businesses in an effort to stop the spread of the coronavirus (the “Closure Orders”) Big Onion and its restaurants made claims for business interruption coverage under their Commercial Business Owners Insurance Policies issued by  Society Insurance, Inc. (“Society”).  

According to Big Onion, even before it could make these claims Society’s CEO had issued a memorandum to its agents stating that Society’s “…policies would likely not provide coverage for losses due to a ‘governmental imposed shutdown due to COVID-19 (coronavirus)’.”  Society thereafter denied the Big Onion claims on the grounds that the losses were not covered because “…the ‘actual or alleged presence of the coronavirus,’ which led to the Closure Orders that prohibited Plaintiffs from operating their businesses, does not constitute ‘direct physical loss’.” 


Big Onion Sues for Insurance Coverage

Quickly thereafter Big Onion and its restaurants filed a Complaint for declaratory judgment, indemnification, breach of contract and bad faith denial of coverage in the U.S. District Court for the Northern District of Illinois.  In its Complaint, Big Onion argues that the  Commercial Business Owners Insurance Polices provide coverage for losses incurred due to a “necessary suspension” of their operations, including when their businesses are forced to close due to government orders, such as the Closure Orders.  Big Onion argues that Society’s denial of the claims is contrary to the law because “Illinois courts have consistently held that the presence of a dangerous substance in a property constitutes ‘physical loss or damage’.”

Claim for Loss of Business Income Coverage

In its Complaint, Big Onion argues that pursuant to its Policies Society “…agreed to ‘pay for the actual loss of Business Income’ sustained by Plaintiffs ‘due to the necessary suspension’ of Plaintiffs’ operations during the period of business interruption caused ‘by direct physical loss or damage to covered property’ at the insureds premises.”  Big Onion claims that “[w]ith respect to business interruption losses, ‘suspension’ means (1) ‘the partial slowdown or complete cessation of your business activities’; or (2) ‘that part or all of the described premises is rendered untenantable if coverage for Business Income applies.’” Big Onion further claims that Society “…also promised to ‘pay necessary Extra Expense’ Plaintiffs incur during the period of interruption that they ‘would not have incurred if there had been no direct physical loss or damage to covered property at the described premises.”  In this connection Big Onion claims that “[t]he continuous presence of the coronavirus on or around Plaintiffs premises has rendered the premises unsafe and unfit for their intended use and therefore caused physical property damage or loss under the Policies.”  

Big Onion further argues that its Policies, unlike many other commercial policies, do not include an exclusion for loss caused by viruses. Big Onion argues that the existence of such exclusions in policies indicates that when policies such as theirs don’t include such exclusions that coverage should be provided.  The logical conclusion here is that “… if a virus could never result in a ‘physical loss’ to property, there would be no need for such an exclusion.”   

Claim for Civil Authority Coverage

Big Onion also claims that the “Civil Authority” coverage provision in the Polices provide coverage.  Specifically, Big Onion claims that through its Policies Society had “…promised to provide coverage for losses incurred due to government actions ‘taken in response to dangerous physical conditions,’ even if those dangerous physical conditions cause damage to property at locations other than those insured under the policies.”  Big Onion claims: “Civil Authority coverage is triggered when any non-excluded cause results in ‘damage to property other than property’ at the Plaintiffs’ premises and is intended to cover losses resulting from governmental actions ‘taken in response to dangerous physical conditions.’” 

Here Big Onion claims it is entitled to coverage because the March 15, 2020 Closure Order was issued by Governor Pritzker “… in direct response to these dangerous physical conditions, and prohibited the public from accessing Plaintiffs’ restaurants, thereby causing the necessary suspension of their operations and triggering the Civil Authority coverage under the Policies.” Similarly, Big Onion argues that the March 20, 2020 Closure Order triggered Civil Authority coverage by closing  “non-essential” businesses in Illinois including restaurants “…in direct response to the continued and increasing presence of the coronavirus on property or around plaintiffs’ premises.”  

Big Onion’s Claim for Bad Faith Claims Handling 

Finally, Big Onion asserts a claim against Society for bad faith denial of coverage under the Illinois Insurance Code.  Big Onion claims that Society acted in bad faith by denying the insurance claims immediately upon receipt, without conducting any investigation, “…let alone a ‘reasonable investigation based on all available information’ as required under Illinois law. See 215 ILCS 5/154.6.”  Big Onion claims that this as well as Society’s “…failure to provide reasonable and accurate explanations of the bases in its denials” constitute “improper claims practices” under the Insurance Code.  Accordingly, Big Onion is seeking damages and its attorneys’ fees and costs incurred in prosecuting its claim for coverage pursuant to the Insurance Code under 215 ILCS 5/155.


If your business has incurred substantial financial losses as a result of the COVID-19 pandemic and you have a business insurance policy you should determine whether you have coverage for those losses.  Don’t be dissuaded if your agent tells you there is no coverage. As was the case with Society, your agent may have been instructed to turn you away at the gate.  But like Big Onion, you have several facially credible arguments for coverage  It is always best to understand your policy and know your arguments for coverage before making a claim.  This helps you avoid rejection by insurers which practice the “three D’s of insurance companies; Deny, Delay and Defend.”  

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