In a lawsuit filed last Thursday in federal court in Chicago, seven Chicago-area hospitality groups allege insurance carrier Society Insurance wrongfully denied their insurance claims after they were forced to close by Gov. J.B. Pritzker’s executive order aimed at slowing the spread of COVID-19. The plaintiffs–a group of restaurant owners and operators forced to cease ordinary operations and furlough staff (over 1,500 employees combined) as a result of the orders–claim they purchased business interruption policies from Society that did not explicitly exclude coverage for business interruptions caused by the spread of viral or bacterial contagions.

“I had to lay off 200 dedicated workers in a matter of 24 hours,” says Ryan Marks, Owner/Operator of Legacy Hospitality. “We tried to assure our employees that we were smart enough to protect the company from these types of closures. Now we find out the insurance company has flat-out denied our claims. We are infuriated and heartbroken.”

The lawsuit states: “The closures mandated by these [State] orders present an existential threat to these small, local businesses that employ hundreds of Illinois residents. To protect their businesses from situations just like these, which threaten their livelihoods based on factors wholly outside of their control, Plaintiffs obtained business interruption insurance from Society Insurance. In blatant breach of its insurance obligations that it voluntarily undertook in exchange for Plaintiffs’ premium payments, Society Insurance has declined Plaintiffs’ claims arising from the State-ordered interruption of their business.”

Erik Baylis, owner of Big Onion Hospitality, says, “We were led to believe we were paying for protection against the government closure of our businesses. We believe denying our claims now is not only illegal, it’s heartless and immoral.”

The lawsuit seeks a declaratory judgment that the losses incurred as a result of the mandated interruption of their businesses are covered losses under their policies, damages for breach of contract, and penalties and costs for bad faith insurance practices. The lawsuit claims that “Society Insurance directed its insurance agents, who are not Plaintiffs’ agents, to make sham claim notifications before Society Insurance’s policyholders even noticed their claims. Society Insurance took these actions, before claims were even submitted, as part of its plan to discourage claim notifications and to avoid any responsibility for its policyholders’ staggering losses, in violation of Illinois law.”

Tracy Stary, owner of three McBride’s Pubs in Chicago’s suburbs, says, “As a small, family-owned and operated business, we depend on our insurance companies to help us in desperate times of need. This is obviously one of those times. After years of paying high premiums for this coverage, our claims were denied even before being submitted. We were simply dismissed. It is heartbreaking to sit back and watch our employees and business suffer through no fault of our own and with no end in sight.”

“Many people in the restaurant industry went with Society because they were thought to have favorable coverage for the restaurant business,” says Clay Hamilton of Happy Camper, Paradise Park and Homeslice. “We have made hundreds of premium payments over the last seven years and have not made one claim, until now. The first time we really need what we’ve been paying for, they are nowhere to be found.”

Plaintiffs, who are represented in the lawsuit by King & Spalding LLP, include the owners and operators of the following:

· Fatpour Tap Works-Wicker Park, Fatpour Tap Works-McCormick Place, Hopsmith, Woodie’s Flat, The Irish Oak, Brunch, and Centre Street Kitchen
· Headquarters Beercade-River North and Machine: Engineered Dining & Drink
· The New 400 Theater and Harper Theater
· Welcome Back, The Vig, and The Whale
· McBride’s Pubs: Aurora, Plainfield, and Joliet locations
· Happy Camper Pizza-Old Town, Happy Camper Pizza-Lakeview, Paradise Park, and Homeslice

“Chicago-area restaurants, who willingly complied with Gov. Pritzker’s order and have suffered unprecedented financial harm, should not be victimized again by an insurance company who accepted premiums and offered ‘civil authority’ coverage with no virus exclusion,” said Brian Galati of Machine Hospitality Group.