Mashallah, Inc v. West Bend Mutual Insurance Com

In the

United States Court of Appeals
For the Seventh Circuit
____________________
No. 21-1507
MASHALLAH, INC., and RANALLI’S PARK RIDGE, LLC,
Plaintiffs-Appellants,
v.

WEST BEND MUTUAL INSURANCE COMPANY,
Defendant-Appellee.
____________________

Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 1:20-cv-05472 — Charles P. Kocoras, Judge.
____________________

ARGUED SEPTEMBER 10, 2021 — DECIDED DECEMBER 9, 2021
____________________

Before MANION, WOOD, and HAMILTON, Circuit Judges.
MANION, Circuit Judge. In this case, as in several others
decided today, businesses seek insurance coverage for losses
and expenses they allegedly sustained as a result of the
COVID-19 pandemic and government orders issued in
response to it. Mashallah, Inc., and Ranalli’s Park Ridge, LLC,
filed claims under the property insurance policies they had
with West Bend Mutual Insurance Company. But those
policies, presciently for purposes of this litigation, contained
2 No. 21-1507

express exclusions for losses and expenses caused by viruses.
Based on these exclusions, West Bend denied the claims.
The businesses sued, alleging breach of contract or, if that
should fail, entitlement to rebate of premiums. The district
court granted West Bend’s motion to dismiss the suit in its en-
tirety under Rule 12(b)(6) for failure to state a claim, and the
businesses appeal.
Because the district court properly determined that the vi-
rus exclusions barred coverage for the policyholders’ pur-
ported losses and expenses and that the businesses failed to
allege viable legal bases for rebate of premiums, we affirm.
I. Background
In an appeal from an order granting a motion to dismiss,
we must accept all well-pleaded facts as true and draw all rea-
sonable inferences therefrom in the plaintiffs’ favor. White v.
United Airlines, Inc., 987 F.3d 616, 620 (7th Cir. 2021).
Mashallah sells handcrafted jewelry at its store in Chicago.
Ranalli’s operates a bar and restaurant known as Holt’s in
Park Ridge, Illinois. Both purchased all-risk commercial prop-
erty insurance policies from West Bend, a mutual insurance
company organized under the laws of Wisconsin. Mashallah’s
coverage ran from August 1, 2019, to August 1, 2020; Ranalli’s
coverage ran from October 8, 2019, to October 8, 2020. At the
end of these terms, both Mashallah and Ranalli’s renewed
their policies.
The businesses operated successfully until the arrival of
COVID-19. After emerging in China “in early 2020” and mak-
ing its first confirmed appearance in the United States on Jan-
uary 20, 2020, a novel coronavirus spread across the nation,
causing the COVID-19 pandemic.
No. 21-1507 3

Beginning in March 2020, Illinois Governor J.B. Pritzker
and other government officials issued several orders aimed at
stopping or slowing the virus’s spread. In particular, on
March 20, 2020, Governor Pritzker ordered all individuals liv-
ing in Illinois to stay at home except to perform specified “es-
sential activities” and ordered “non-essential” businesses to
cease all but minimum basic operations. Exec. Order No.
2020-10 (Mar. 20, 2020). Restaurants were considered essential
businesses and permitted to continue selling food but solely
for off-premises consumption. That meant Ranalli’s opera-
tions were restricted to filling takeout and delivery orders.
Mashallah, a jeweler, was not classified as an essential busi-
ness and had to cease its retail activities. As a result, both busi-
nesses sustained heavy financial losses.
They filed insurance claims with West Bend. The two pol-
icies’ coverage provisions are materially identical. As relevant
here, 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’ proper-
ties.
Both policies also contain virus exclusions, worded
slightly differently. In Mashallah’s policy, West Bend stated it
would “not pay for loss or damage caused directly or indi-
rectly” by “[a]ny virus … that induces or is capable of induc-
ing physical distress, illness or disease.” Ranalli’s exclusion
reads: “We will not pay for loss or damage caused by or re-
sulting from any virus … that induces or is capable of induc-
ing physical distress, illness or disease.”
Finally, the policies address the issue of premium rebates.
“In return for the payment of the premium, and subject to all
the terms of this policy,” West Bend agreed “to provide the
4 No. 21-1507

insurance as stated in this policy.” If a premium was desig-
nated as an “advance premium,” and if an audit showed that
the premium paid in advance was greater than the “earned
premium” for the policy period, West Bend committed to “re-
turn the excess.”
West Bend denied the claims in April and May 2020, citing
among other things the policies’ virus exclusions. The
businesses sued. Count I of the complaint seeks a declaratory
judgment that West Bend is obligated to pay the claims under
the terms of the policies. Count II alleges breach of contract
and Count III asserts bad-faith denial of insurance claims in
violation of 215 ILCS 5/155. If West Bend’s denials of coverage
are upheld, the complaint seeks alternative relief on behalf of
a class. Count IV alleges that West Bend’s retention of full
premiums—despite decreased risks occasioned by the
government-ordered reduction in insureds’ business
operations—constitutes unjust enrichment, requiring rebate.
Count V further asserts that West Bend’s retention of
premiums in these circumstances violates the Illinois
Consumer Fraud and Deceptive Business Practices Act
(ICFA).
West Bend moved to dismiss under Rule 12(b)(6) for fail-
ure to state a claim. In addition to arguing that the businesses
hadn’t alleged “direct physical loss of or damage to” property
necessary to invoke coverage, West Bend contended that the
plain language of the virus exclusions precluded coverage. It
further asserted that the unjust enrichment theory failed in
the face of a valid contract and that the plaintiffs had not al-
leged any deceptive or unfair practice on West Bend’s part.
The district court granted West Bend’s motion. It bypassed
the question of whether the businesses alleged direct physical
No. 21-1507 5

damage or loss and instead concluded that the policies’ virus
exclusions foreclosed any potential coverage. The district
court also determined that the unjust enrichment and ICFA
claims failed as matters of law. And because it concluded that
any attempt to amend the complaint would be futile, the dis-
trict court dismissed the case with prejudice. This appeal fol-
lowed.
II. Analysis
We review a district court’s grant of a motion to dismiss
on the pleadings de novo. Chaidez v. Ford Motor Co., 937 F.3d
998, 1004 (7th Cir. 2019). “To avoid dismissal, the complaint
must ‘state a claim to relief that is plausible on its face.’” Ban-
corpSouth, Inc. v. Fed. Ins. Co., 873 F.3d 582, 586 (7th Cir. 2017)
(quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)).
A federal court hearing a case under diversity jurisdiction
“must attempt to resolve issues in the same manner as would
the highest court of the state that provides the applicable
law,” id., and the parties agree that Illinois law applies. “In the
absence of Illinois Supreme Court precedent, we must use our
best judgment to determine how that court would construe its
own law,” and we “may consider the decisions of the Illinois
appellate courts.” Neth. Ins. Co. v. Phusion Projects, Inc., 737
F.3d 1174, 1177 (7th Cir. 2013) (quotation marks omitted).
Under Illinois law, the interpretation of an insurance pol-
icy, like any other contract, is a question of law. Sanders v. Ill.
Union Ins. Co., 157 N.E.3d 463, 467 (Ill. 2019). A court’s “pri-
mary function” in that interpretation “is to ascertain and give
effect to the intention of the parties, as expressed in the policy
language.” Id. Policy terms that are “clear and unambiguous”
must be given their “plain and ordinary meaning.” Id.
6 No. 21-1507

A.
Before resolving the substantive legal issues presented in
this appeal, we address two of the businesses’ preliminary
criticisms with the district court’s analysis. First, they contend
that the district court improperly skipped the threshold ques-
tion of whether coverage under the policies was established
and proceeded directly to the effects of the virus exclusions.
This, the businesses assert, contributed to the district court’s
second misstep, namely, failing to use the proper standard to
determine whether the exclusions apply. We see no merit to
either contention.
The businesses cite no authority for the proposition that
Illinois law requires a court to resolve the scope of an insur-
ance policy’s coverage before addressing the applicability of
a potentially relevant exclusion. Cf. Cohen Furniture Co. v. St.
Paul Ins. Co., 573 N.E.2d 851, 854–55 (Ill. App. Ct. 1991) (“We
need not address the defendant’s argument concerning the
scope of replacement cost insurance, since in any event we
would find coverage excluded by the building laws exclu-
sion.”).
Nor, as a general legal matter, do we discern a problem
with the district court’s approach here. It’s true that if an
insured adequately alleges coverage under a policy, the
burden shifts to the insurer to show that an exclusion applies.
Addison Ins. Co. v. Fay, 905 N.E.2d 747, 752 (Ill. 2009). But this
burden-shifting approach does not demand a rigidly
sequential order of analysis. For example, in the burden-
shifting McDonnell Douglas framework for analyzing
disparate-treatment employment-discrimination claims, this
No. 21-1507 7

court has sometimes left unresolved the initial inquiry into
whether a plaintiff has made a prima facie showing of
discrimination and, assuming arguendo that the burden has
been met, resolved an appeal based on the employer’s
successful rebuttal of any purported discrimination. See, e.g.,
Ptasznik v. St. Joseph Hosp., 464 F.3d 691, 697 (7th Cir. 2006); see
also Fuhr v. Hazel Park Sch. Dist., 710 F.3d 668, 676–77 (6th Cir.
2013).
When the success of a claim turns on resolution in a plain-
tiff’s favor of multiple independent issues, a district court
may resolve the claim based on what it deems the simplest
dispositive issue. In doing so, however, the court must take
care to observe the proper allocation of burdens between the
parties.
The businesses assert that the district court failed to ob-
serve that here. An insurer bears not only the burden of show-
ing that an exclusion from coverage applies but that its ap-
plicability is “clear and free from doubt.” 4220 Kildare, LLC v.
Regent Ins. Co., 171 N.E.3d 957, 966 (Ill. App. Ct. 2020); accord
Country Mut. Ins. Co. v. Oehler's Home Care, Inc., 160 N.E.3d
977, 986 (Ill. App. Ct. 2019). Yet that exact phrase, the busi-
nesses note, is absent from the district court’s opinion.
Although the district court did not incant those specific
words, we are confident that the right standard was applied.
The court recognized that West Bend bore the burden of af-
firmatively establishing that the virus exclusions apply and
concluded that the exclusions were “clear and free from any
ambiguity.” Mashallah, Inc. v. W. Bend Mut. Ins. Co., No. 20 C
5472, 2021 U.S. Dist. LEXIS 31816, at *6 (N.D. Ill. Feb. 22, 2021).
We discern no material difference in this context between a
“clear and free from doubt” standard and a “clear and free
8 No. 21-1507

from any ambiguity” standard, and at oral argument, the
businesses couldn’t articulate one. In any event, the district
court cited its decision in another COVID-19 insurance case
where it determined that virus-exclusion language similar to
that involved here was “clear and free from doubt.” Id. (citing
Riverwalk Seafood Grill Inc. v. Travelers Cas. Ins. Co. of Am., No.
20 C 3768, 2021 U.S. Dist. LEXIS 5899, at *6 (N.D. Ill. Jan. 7,
2021)).
In short, we see no error in the form of the district court’s
analysis or the standard of persuasion it applied.
B.
Turning to the virus exclusions, the legal question is
whether “the average, ordinary, normal, reasonable person
for whom these policies were written would understand that
the exclusion applies.” Founders Ins. Co. v. Munoz, 930 N.E.2d
999, 1006 (Ill. 2010) (quotation marks and citation omitted).
We agree with the district court that the virus exclusions
clearly and without doubt preclude coverage for the losses
and expenses alleged by the businesses.
Recall that the virus exclusion in Ranalli’s policy states
that West Bend would “not pay for loss or damage caused by
or resulting from any virus … that induces or is capable of
inducing physical distress, illness or disease.” Mashallah’s ex-
clusion is the same, save that it precludes payment more
broadly for “loss or damage caused directly or indirectly” by
such a virus. There is no dispute that the coronavirus at the
heart of the COVID-19 pandemic can induce physical distress,
illness, and disease.
Nor do we think it can reasonably be argued that the
coronavirus did not cause the losses and expenses alleged by
No. 21-1507 9

the businesses. Generally, “it appears that Illinois favors the
efficient-or-dominant-proximate-cause rule in the absence of
contrary language in the policy.” 1 Bozek v. Erie Ins. Grp.,
46 N.E.3d 362, 368–69 (Ill. App. Ct. 2015); see also 7 STEVEN
PLITT ET. AL., COUCH ON INSURANCE § 101:43 (3d ed. 2021)
(“Most courts define the concept [of proximate cause] relative
to the ‘dominant’ or ‘moving ‘ cause, even if that cause was
accompanied by, or followed by, other causes of a relatively
minor nature.”); 5 JEFFREY E. THOMAS, NEW APPLEMAN ON
INSURANCE LAW LIBRARY EDITION § 44.03[6] (LexisNexis 2021)
(noting that “most jurisdictions” apply “the most significant,
or ‘efficient,’ cause or ‘the dominant and efficient cause’”
standards in commercial property insurance cases).
A risk is an efficient or dominant cause if it “sets in motion,
in an unbroken causal sequence, the events that cause the ul-
timate loss.” Bozek, 46 N.E.3d at 368; accord 7 COUCH ON
INSURANCE § 101:45; see also Denham v. La Salle-Madison Hotel
Co., 168 F.2d 576, 580 (7th Cir. 1948) (“’The proximate cause is
the efficient cause, the one that necessarily sets the other
causes in operation.’” (quoting Aetna Ins. Co. v. Boon, 95 U.S.
117, 130 (1877))). And “[a]lthough the issue of proximate
cause is ordinarily a question of fact determined by the trier
of fact, it is well settled that it may be determined as a matter
of law by the court where the facts as alleged show that the

1 One state court observed long ago that the Supreme Court of Illinois
“has not passed on the ‘efficient and predominating cause’ rule.” Davis v.
Sheehan, 357 N.E.2d 690, 695 (Ill. App. Ct. 1976). As far as we can tell, that
is still the case. We nevertheless believe that the Illinois high court would
adopt the analysis we set out today. In any event, the businesses do not
dispute “that Illinois follows the efficient or dominant proximate causa-
tion rule.” Appellants’ Br. at 25.
10 No. 21-1507

plaintiff would never be entitled to recover.” Abrams v. City of
Chicago, 811 N.E.2d 670, 674 (Ill. 2004).
Here, the novel coronavirus causing the COVID-19 pan-
demic led directly to the issuance of the government orders,
which the complaint alleges as the cause of the losses and ex-
penses. As Governor Pritzker declared when issuing the exec-
utive order that limited the public’s activities and the busi-
nesses’ operations: “I find it necessary to take additional
measures consistent with public health guidance to slow and
stop the spread of COVID-19.” Exec. Order No. 2020-10. In
other words, the virus set in motion an unbroken causal chain
via the government orders to the purported losses and ex-
penses.
The complaint’s attempt to decouple the government
COVID-19 orders from the COVID-19 virus itself are untena-
ble. It’s likely true, as the businesses assert, that the orders
were “predicated on a myriad of considerations, not just the
existence of the virus.” Appellant’s Br. at 16–17. Public offi-
cials must weigh many factors in formulating the scope and
specifics of orders that dramatically curtail society’s social
and commercial activities. But there can be no honest dispute
that the coronavirus was the reason these orders were prom-
ulgated. It was, so to speak, the prime mover. The causal rela-
tionship between the novel coronavirus, the COVID-19 pan-
demic, the government orders, and the alleged losses and ex-
penses “is not debatable.” Mudpie, Inc. v. Travelers Cas. Ins. Co.
of Am., 15 F.4th 885, 894 (9th Cir. 2021) (rejecting a similar ar-
gument’s attempt to evade a virus exclusion).
Given this reality, taking the businesses’ artful pleadings
at face value would allow them “to circumvent the terms and
intent of the policy and its exclusions,” thereby rendering
No. 21-1507 11

them “essentially meaningless.” Neth. Ins. Co., 737 F.3d at
1179. A creative complaint cannot evade the coverage limits
agreed to in an insurance contract. The district court properly
concluded that the novel coronavirus, in the exclusions’ lan-
guage, “caused” the businesses’ alleged losses and expenses. 2
The businesses also maintain that the language of the ex-
clusions is facially ambiguous as to whether a virus must be
present on an insured’s premises for the exclusions to apply.
Any ambiguity in an insurance policy, they remind us, must
be resolved in an insured’s favor.
While it is true that “ambiguities in an insurance policy
will be construed against the insurer, courts will not distort
the language of a policy to create an ambiguity where none
exists.” Dixon Distrib. Co. v. Hanover Ins. Co., 641 N.E.2d 395,
399 (Ill. 1994). The relevant exclusions here are broadly
worded and do not distinguish between purported losses and
expenses caused by a virus that is found on an insured’s
premises and a virus that is not. Instead, where policy exclu-
sions turn on whether the cause of purported loss or damage
originated “away from” or “at the … premises,” the policies
so distinguish. See Doc. 1-1 at 35; Doc. 1-2 at 58 (regarding loss
or damage resulting from failure of utility services). The only
reasonable interpretation of the virus exclusions is that their
applicability does not depend on whether a virus is actually
detected on the insureds’ properties.

2 Because we find that the language present in both policies’ virus ex-
clusions clearly removes coverage for losses or expenses “caused” by the
COVID-19 pandemic, we need not resolve whether the addition of the
term “directly or indirectly” in Mashallah’s exclusion—a so-called “anti-
concurrent causation” clause—is contrary to Illinois law.
12 No. 21-1507

Like the district court, we conclude that the virus exclu-
sions in the businesses’ policies clearly preclude insurance
coverage for losses and expenses allegedly caused by the
COVID-19 pandemic and government orders issued to stem
its tide. Accordingly, the court below correctly dismissed
Counts I and II for declaratory judgment and breach of con-
tract. Count III was also properly dismissed because, where
no benefits are owed under the terms of an insurance policy,
a claim of bad-faith denial under 215 ILCS 5/155 necessarily
fails. See First Ins. Funding Corp. v. Fed. Ins. Co., 284 F.3d 799,
807 (7th Cir. 2002).
C.
Having concluded that the businesses’ policy-based
claims were properly dismissed, we turn to their alternative
pleadings. In Count V, they allege that West Bend violated Il-
linois’s consumer protection statute, the ICFA. See 815 ILCS
505/1–505/12. “To prevail on a claim under the ICFA, a plain-
tiff must plead … that the defendant committed a deceptive
or unfair act with the intent that others rely on the deception,
that the act occurred in the course of trade or commerce, and
that it caused actual damages.” Benson v. Fannie May Confec-
tions Brands, Inc., 944 F.3d 639, 646 (7th Cir. 2019) (quotation
marks omitted). Conduct is deceptive “if it creates a likeli-
hood of deception or has the capacity to deceive” a “reasona-
ble consumer.” Id. It is unfair if it offends public policy; is “im-
moral, unethical, oppressive, or unscrupulous”; and causes
substantial injury to consumers. Id. at 647.
“A mere breach of contract” is insufficient to show a viola-
tion of the ICFA. Cmty. Bank of Trenton v. Schnuck Mkts., Inc.,
887 F.3d 803, 822 (7th Cir. 2018). Rather, plaintiffs must iden-
tify “some stand-alone … fraudulent act or practice” and
No. 21-1507 13

“show that the injury they seek to redress was proximately
caused by the alleged consumer fraud.” Id. (quotation marks
omitted).
In their complaint, the businesses allege that West Bend
acted deceptively and unfairly when it collected and retained
full premiums from businesses affected by government
COVID-19 orders even though the risks justifying those pre-
miums went down when the orders scaled back the busi-
nesses’ commercial operations. Per the businesses, West Bend
“misrepresented and omitted facts” concerning premium
rates, actual risk assumed, and scope of coverage with respect
to business interruptions already occurring because of gov-
ernment COVID-19 orders.
But there are fatal chronological problems with the decep-
tion theory, which the district court well observed. The com-
plaint asserts that the novel coronavirus leading to the
COVID-19 pandemic first arose in early 2020. But the insur-
ance policies at issue here began months earlier, in August
and October 2019. West Bend could not have intended to in-
duce the businesses to sign contracts through reliance on mis-
representations or deceptions related to a pandemic of which
West Bend as yet had no knowledge.
And when the businesses renewed their policies in August
and October 2020, West Bend had already denied in the spring
of that year their claims for COVID-19-related coverage. The
terms of the policies beginning in 2020 were identical to those
beginning in 2019. Thus, at the time of renewal, West Bend
had already made clear that it did not think the businesses’
COVID-19-related claims were covered by the insurance pol-
icies. So, even if the policies’ terms might have left open the
possibility of recovering losses and expenses caused by the
14 No. 21-1507

novel coronavirus—and, to be clear, we do not think the terms
can be plausibly read that way—West Bend’s denials of the
businesses’ claims removed any doubt that virus-caused
losses and expenses were excluded from coverage. No reason-
able policyholder could have been deceived about the scope
of coverage.
While the businesses allege that they “paid more pre-
mium[s] than … they otherwise would have paid had they
known the truth—that [West Bend] was not assuming risk
commensurate with those premiums charged”—they do not
assert that they would not have purchased (or renewed) their
policies if they had known about these issues. Without such
an assertion, the businesses fail to state a claim that West Bend
made a material omission under the ICFA. See Toulon v. Cont'l
Cas. Co., 877 F.3d 725, 740 (7th Cir. 2017).
Finally, as to unfairness, there are no plausibly alleged
facts in the businesses’ complaint that West Bend’s conduct
either violated public policy or was immoral, unethical, op-
pressive, or unscrupulous. “As a general rule, in the absence
of a statutory provision or an express or implied agreement
to the contrary, an insured may not have any part of his or her
premium returned once the risk attaches, even if it eventually
turns out that the premium was in part unearned.” 5 COUCH
ON INSURANCE § 79.7 (footnotes omitted) (noting that “the in-
surer has, by taking upon itself the peril, become entitled to
the premium”). The businesses’ brief doesn’t identify any Illi-
nois public policy that West Bend purportedly transgressed.
Cf. Harris Trust & Sav. Bank v. Ill. Fair Plan Ass’n, 386 N.E.2d
341, 345 (Ill. App. Ct. 1979) (observing the “general rule at
common law” that, “if the policy is void from the beginning
so that the risk never attached, the premiums must be
No. 21-1507 15

tendered or returned by the insurer to the insured; but if the
risk attached, then the insured is not entitled to recover the
premiums paid”).
And since the exclusions were clear that the policies
would not cover any losses or expenses caused by a virus, the
businesses were free to reject West Bend’s terms and look else-
where in the insurance marketplace. See Toulon, 877 F.3d at
741. An insurer, however, doesn’t act wrongfully by adhering
to the agreement set forth in a policy. See id. (“[T]here is noth-
ing oppressive or unscrupulous about giving a counterparty
the choice to fulfill his contractual duties or be declared in de-
fault for failing to do so.”). In exchange for the insureds pay-
ing premiums, West Bend agreed to insure them against risks
that did not include, among other things, viruses. A “policy
need not provide coverage against all possible liabilities; if it
provides coverage against some, the policy is not illusory.”
Nicor, Inc. v. Associated Elec. & Gas Ins. Servs. Ltd., 841 N.E.2d
78, 86 (Ill. App. Ct. 2005), aff'd, 860 N.E.2d 280 (Ill. 2006).
The ICFA “was not intended to apply to every contract dis-
pute or to supplement every breach of contract claim with a
redundant remedy.” Avery v. State Farm Mut. Auto. Ins. Co.,
835 N.E.2d 801, 844 (Ill. 2005). A “’deceptive act or practice’
involves more than the mere fact that a defendant promised
something and then failed to do it.” Id. At bottom, the busi-
nesses think that, because of the COVID-19 pandemic, West
Bend was fortuitously subjected to less risk than the parties
bargained for. Whether or not true, however, the businesses
have not adequately alleged that West Bend engaged in a de-
ceptive or unfair act or practice.
16 No. 21-1507

D.
Last, the businesses argue that, if the insurance policies do
not obligate West Bend in these circumstances to pay the
claims, then West Bend has unjustly enriched itself. Like
Count V, Count IV alleges that West Bend priced and charged
premiums based on the risks associated with fully operational
businesses. Because government orders reduced business op-
erations and (likewise) reduced risks, the insureds contend,
West Bend is obliged to rebate excessive premiums collected
contrary to “equity and good conscience,” since its “miscon-
duct” in this context was “willful, wanton, and in bad faith.”
The district court concluded that the unjust-enrichment
theory fails because no misconduct on West Bend’s part has
been reasonably alleged and because a valid insurance con-
tract governs the parties’ relationships. We agree.
Unjust enrichment under Illinois law “does not constitute
an independent cause of action. Rather, it is a condition that
may be brought about by unlawful or improper conduct as
defined by law, such as fraud, duress or undue influence, or,
alternatively, it may be based on contracts which are implied
in law.” Toulon, 877 F.3d at 741.
To the extent that the unjust enrichment claim is premised
on the ICFA or bad-faith denial claims, the unjust enrichment
claim cannot survive the proper dismissal of those matters.
See id. at 741–42; Ass'n Ben. Servs. v. Caremark Rx, Inc., 493 F.3d
841, 855 (7th Cir. 2007) (“[W]here the plaintiff’s claim of unjust
enrichment is predicated on the same allegations of fraudu-
lent conduct that support an independent claim of fraud,
No. 21-1507 17

resolution of the fraud claim against the plaintiff is dispositive
of the unjust enrichment claim as well.”).
The valid insurance contracts between the businesses and
West Bend are a further reason why the unjust enrichment
theory fails. “A claim for unjust enrichment is ‘based upon an
implied contract; where there is a specific contract that
governs the relationship of the parties, the doctrine has no
application.’” Blythe Holdings, Inc. v. DeAngelis, 750 F.3d 653,
658 (7th Cir. 2014) (quoting People ex rel. Hartigan v. E&E
Hauling, Inc., 607 N.E.2d 165, 177 (Ill. 1992)). That is, “no
implied contract can exist where an express one governs
because no equitable remedy”—restitution based on unjust
enrichment—“can lie where a legal one”—contractual
damages—“is available.” Cohen v. Am. Sec. Ins. Co., 735 F.3d
601, 615 (7th Cir. 2013). Although the businesses assert that
West Bend has breached the terms of their insurance
agreements, they have not alleged that the agreements are
invalid.
This last point is fatal to the businesses’ suggestion that
they can successfully plead unjust enrichment as an alterna-
tive theory of recovery. As we have explained, a party’s op-
tion to plead inconsistent theories such as breach of contract
and unjust enrichment is “limited.” Id. “A plaintiff may plead
as follows: (1) there is an express contract, and the defendant
is liable for breach of it; and (2) if there is not an express con-
tract, then the defendant is liable for unjustly enriching him-
self at my expense.” Id. But what a plaintiff may not do is “in-
clude allegations of an express contract which governs the re-
lationship of the parties” in the count for unjust enrichment.
Id.
18 No. 21-1507

The complaint in this case contains just such impermissi-
ble pleading. The businesses premise their unjust enrichment
theory on the validity of their insurance contracts with West
Bend. “If Defendant Insurer’s denials of coverage for Plain-
tiffs’ claims for business interruption coverage are upheld,”
Count IV reads, “then Defendant has been unjustly enriched
in the amount of excess premium for business interruption
coverage it has charged and retained.”
Peddinghaus v. Peddinghaus, 692 N.E.2d 1221 (Ill. App. Ct.
1998), does not help the businesses. The Illinois Court of Ap-
peals said there that, because the plaintiff’s “unjust enrich-
ment claim [was] based on tort, instead of quasi-contract, the
existence of a specific contract [did] not defeat his cause of ac-
tion.” Id. at 1225. The businesses contend that this passage
permits the sort of pleading found in their complaint. But the
tort alleged by the Peddinghaus plaintiff was that the defend-
ant fraudulently induced him to enter the specific contract in
question. Id. Far from asserting the validity of the contract, the
plaintiff was seeking its rescission. Id. A successful showing
of fraudulent inducement invalidates a contract, see Wilkinson
v. Appleton, 190 N.E.2d 727, 729–30 (Ill. 1963), clearing the way
for an unjust enrichment claim.
The businesses, in contrast, haven’t alleged that they were
induced by West Bend through fraud or misrepresentation to
enter (or renew) the insurance contracts. Nor are they trying
to invalidate those contracts. Instead, the businesses are rely-
ing on the validity of their insurance policies to buttress their
allegations of unjust enrichment. That they may not do.
Finally, to the extent that the insureds argue that a tort ba-
sis for rebate of premiums exists by virtue of West Bend’s gen-
eral fiduciary duty to them, the argument fails.
No. 21-1507 19

The businesses maintain that in Wisconsin, where West
Bend is based, a mutual insurance company has a fiduciary
duty to its policyholders. See Noonan v. NW. Mut. Life. Ins. Co.,
687 N.W.2d 254, 260 (Wis. 2004). But “[w]hatever rights a
member of a mutual company has are delineated by the terms
of the contract, and come from it alone.” Andrews v. Equitable
Life Assurance Soc., 124 F.2d 788, 789 (7th Cir. 1941); see also
Lubin v. Equitable Life Assurance Soc., 61 N.E.2d 753, 756 (Ill.
App. Ct. 1945) (“the rights and interests of policyholders in
the assets of a mutual life insurance company are contractual
in nature and are measured by their policies and by the stat-
utes, charter and by-laws, if any, which comprise the terms of
their contracts”). The complaint does not allege that the insur-
ance policies oblige West Bend to issue the businesses pre-
mium rebates in these circumstances. Indeed, the policies’
only mention of rebates concerns advance premiums, which
the businesses do not contend are at issue here. Yet “there is
nothing inconsistent in the insurer’s continuing to accept pre-
miums, on the one hand, and relying on limitations on its lia-
bility set forth in its policy on the other hand,” since a “pre-
mium is charged on the basis that there may or may not be a
loss, not on a certainty that for each premium received there
will be a covered loss.” Harris Trust & Sav. Bank, 386 N.E.2d at
345.
Nor have the businesses explained why the general fidu-
ciary duty of a mutual insurance company would entitle them
to rebate of premiums here. In Penn Mutual Life Insurance Co.
v. Lederer, 252 U.S. 523 (1920), the United States Supreme
Court explained the practical workings of such enterprises. It
recognized that, although it is “of the essence of mutual in-
surance that the excess in the premium over the actual cost as
later ascertained shall be returned to the policyholder,” the
20 No. 21-1507

excess is necessary because “the redundancy in the premium
furnishes the guaranty fund out of which extraordinary losses
may be met.” Id. at 525. Yet, because “[t]he percentage of the
redundancy to the premium varies, from year to year, greatly,
in the several fields of insurance, and likewise in the same
year in the several companies in the same field,” a rebate “is
rarely made within the calendar year in which the premium
(of which it is supposed to be the unused surplus) was paid.”
Id. at 525, 526 & n.2.
Thus, absent “a clear contractual duty on the part of a mu-
tual insurance company to spend its surplus when a specific
reserve has been achieved, … such matters are typically left to
the discretion of the company’s board of directors.” Babbitt
Municipalities, Inc. v. Health Care Serv. Corp., 64 N.E.3d 1178,
1188 (Ill. App. Ct. 2016). Other than a vague appeal to West
Bend’s status as a mutual insurance company owing them a
fiduciary duty, the businesses have not alleged a legal basis to
demand a rebate of premiums.
We conclude that Counts IV and V were properly dis-
missed. 3
III. Conclusion
The district court’s judgment is AFFIRMED.

3 The district court was correct that, as a result of the dismissal of the
businesses’ claims, their class motion could not go forward. See Collins v.
Vill. of Palatine, 875 F.3d 839, 846 (7th Cir. 2017).