2023 IL App (1st) 220936-U
No. 1-22-0936
Order filed September 22, 2023
FIFTH DIVISION
NOTICE: This order was filed under Supreme Court Rule 23 and is not precedent except in the
limited circumstances allowed under Rule 23(e)(1).
______________________________________________________________________________
IN THE
APPELLATE COURT OF ILLINOIS
FIRST DISTRICT
______________________________________________________________________________
STATS LLC, )
) Appeal from the
Plaintiff-Appellant, ) Circuit Court of
) Cook County.
v. )
) No. 21 CH 00644
THE CONTINENTAL INSURANCE COMPANY and )
NATIONAL FIRE INSURANCE COMPANY OF ) Honorable
HARTFORD, ) Eve M. Reilly,
) Judge Presiding.
Defendants-Appellees. )
JUSTICE LYLE delivered the judgment of the court.
Justice Mikva and Justice Navarro concurred in the judgment.
ORDER
¶1 Held: We affirm the judgment of the circuit court granting defendants’ motion to dismiss
plaintiff’s complaint where plaintiff’s alleged business income losses and extra
expenses resulting from the COVID-19 virus were not covered by the commercial
insurance policies issued by defendants.
¶2 After plaintiff Stats LLC and its affiliates (collectively, “Stats Perform”), a provider of
services and products created from the collection of sports statistical data, incurred income losses
No. 1-22-0936
and extra expenses following the outbreak of the COVID-19 pandemic, it sought coverage under
its commercial property insurance policies issued by defendants, the Continental Insurance
Company and National Fire Insurance Company of Hartford (hereinafter, “Continental and
National Fire”). In its complaint, Stats Perform alleged that the COVID-19 pandemic resulted in
the cancellation of thousands of sporting events worldwide and the losses it experienced as a result
of these cancellations and the “damage” done to its dependent properties (the stadiums and arenas
where these events were to take place) by the virus were covered under the broad insurance policies
that it purchased from Continental and National Fire.
¶3 Continental and National Fire filed a motion to dismiss the complaint arguing that their
policies did not provide coverage because the COVID-19 virus 1 particles did not cause “material
alteration” to the insured properties. The circuit court agreed, finding that Stats Perform failed to
allege any physical loss or damage to property that would bring its losses within the business
income and extra expense coverage in the policies. The court therefore granted Continental and
National Fire’s motion to dismiss the complaint with prejudice.
¶4 On appeal, Stats Perform contends that the circuit court erred in granting the motion to
dismiss where it stated a possible claim for coverage based on its alleged “physical loss” of
property. Stats Perform maintains that the court ignored its well-pled allegations that the COVID-
19 virus detrimentally alters property by damaging the air and surfaces at the dependent properties.
Stats Perform asserts that Illinois law has held that noxious particles, like the COVID-19 virus
particles, can cause damage to property, and the court erred in failing to consider the unique nature
1
SARS-CoV-2 is the virus that causes the respiratory illness COVID-19. See Firebirds
International, LLC v. Zurich American Insurance Co., 2022 IL App (1st) 210558, ¶ 5. For simplicity, we
will refer to this virus as COVID-19 or the COVID-19 virus.
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No. 1-22-0936
of Stats Performs’ business and the policies it purchased from Continental and National Fire in
granting the motion to dismiss. For the reasons that follow, we affirm the judgment of the circuit
court.
¶5 I. BACKGROUND
¶6 In its complaint, Stats Perform alleged that it creates products and services using sports
statistical data that it collects from thousands of sporting events that take place every year.
Following the outbreak of COVID-19, many of these sporting events were cancelled or postponed,
which caused Stats Perform to incur significant losses and expenses when it could not collect the
resultant data it needed to create its products. Stats Perform alleged that when it sought coverage
for these losses from Continental and National Fire, they performed only a “perfunctory”
investigation and denied coverage based on the lack of “direct physical loss of or damage to
property.”
¶7 Stats Perform purchased two different policies from Continental and National Fire: a
domestic policy and an international policy. Both policies ran from June 2019 through June 2020,
and then were renewed from June 2020 through June 2021. The international policies provide
“Time Element Coverage,” which is coverage that applies for the loss of business income that
Stats Perform sustains during the “period of restoration” due to the actual suspension or delay of
operations and extra expense “caused by direct physical loss of or damage to property at a
location.” The international policies also provide “Dependent Property Time Element Coverage,”
which provides coverage for the loss of business income that Stats Perform sustains during the
“period of restoration” due the actual suspension or delay of operations and extra expense “caused
by direct physical loss of or damage to property at a dependent property.” The “period of
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No. 1-22-0936
restoration,” as it is used in the policies, begins at the date of the physical loss of or damage to the
property and ends when the property is “repaired, rebuilt, or replaced ***.” “Extra expense[s]” are
reasonable and necessary expenses that Stats Perform incurs that would not have been incurred if
there had not been a direct physical loss of or damage to the property.
¶8 The domestic policies provided for substantially similar coverage as the international
policies for Stats Perform’s domestic operations. That is, it also provided coverage for Stats
Perform’s loss of business income and extra expense “caused by direct physical loss of or damage
to property ***” at the dependent properties during the period of restoration. The domestic policies
also contained an exclusion for damage caused by “microbes.” The domestic policies define the
term microbes to mean: “A. non-fungal microorganism; B. non-fungal, colony-form organism; C.
virus; or D. bacteria.” The international policies likewise have an exclusion for microbes.
However, the international policies omit the terms virus and bacteria from the definition of
microbe, defining it as “any non-fungal microorganism or nonfungal, colony-form organism.”
¶9 Stats Perform contended that COVID-19 caused direct physical loss of and damage to its
dependent properties sufficient to trigger coverage under the policies. Stats Perform alleged that
COVID-19 virus particles spread through the air and settle on surfaces. Stats Perform maintained
that the presence of COVID-19 on property “causes physical loss and physical damage by
necessitating remedial measures to reduce or eliminate the presence of the coronavirus” and
transforms the property “from one that is usable and safe into one that is unsatisfactory for use,
uninhabitable, unfit for its intended function, and extremely dangerous and potentially deadly.”
Stats Perform asserted that “[m]any sports venues experienced direct physical loss or damage due
to coronavirus.”
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¶ 10 Stats Perform contended that the COVID-19 pandemic resulted in the cancellation and
postponement of thousands of sports events which cause it to incur significant losses and expenses.
Specifically, Stats Perform identified the cancellation and postponement of Ligue 1, a French
professional soccer league, matches, Major League Baseball games, and Women’s Tennis
Association matches, in addition to other sporting events both domestically and internationally.
¶ 11 Stats Perform maintained that Continental and National Fire failed to reasonably
investigate its claim and wrongfully denied coverage. Continental and National Fire denied
coverage finding that Stats Perform failed to claim that its operations were “suspended because of
any direct physical loss of or damage to property” at the dependent properties. Continental and
National Fire stated that its investigation revealed no evidence of any direct physical loss of or
damage to property. Stats Perform maintained, however, that Continental and National Fire
conducted no investigation of direct physical loss of or damage to property at any dependent
property.
¶ 12 Stats Perform raised a claim for breach of contract arguing that COVID-19 caused it actual
business income losses and forced it to incur additional expenses due to physical loss and damage,
which is a risk covered by both the domestic and international policies. Stats Perform asserted that
Continental and National Fire were contractually obligated to indemnify it for the full amount of
its losses. Stats Perform also sought a declaratory judgment pursuant to section 2-701 of the Code
of Civil Procedure (Code) (735 ILCS 5/2-701 (West 2020)), declaring that COVID-19 causes
direct physical loss of or damage to property within the meaning of the policies, and further
declaring that Stats Perform was entitled to coverage. Finally, Stats Perform raised a claim for
attorney fees pursuant to section 155 of the of the Illinois Insurance Code (Insurance Code) (215
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ILCS 5/155 (West 2020)) based on Continental and National Fire’s failure to fully investigate Stats
Perform’s claim and their unjustified denial of coverage.
¶ 13 Continental and National Fire filed a motion to dismiss the complaint pursuant to section
2-615 of the Code. 735 ILCS 5/2-615 (West 2020). They asserted, inter alia, that Stats Perform
failed to adequately allege that it suffered “direct physical loss of or damage to” its insured property
because the complaint did not allege that the Covid-19 virus was actually present at the insured
properties. Continental and National Fire maintained that Stats Perform’s allegations were based
on insinuations that persons infected with the virus might have been present on the dependent
properties and that the possible presence of the virus constituted physical loss or damage to these
properties. Continental and National Fire asserted that even if the complaint sufficiently alleged
that the virus was present at the dependent properties, it failed to plausibly allege that the virus
“tangibly and materially altered such property.” They contended that “numerous” courts
throughout the country have recognized that “the mere presence of the coronavirus does not
constitute physical loss or damage to property because the virus can be eliminated by routine
cleaning and disinfecting.” Continental and National Fire also contended that the policies directly
excluded coverage for loss or damage caused by “microbes,” which included viruses.
¶ 14 In response, Stats Perform contended that the complaint alleged “direct physical loss of or
damage to property” because “physical loss of” property includes the inability to use the property,
even absent material alteration, due to a physical peril. Stats Perform maintained that the COVID-
19 virus was a physical peril that rendered the dependent properties unable to be used. Stats
Perform also asserted that the complaint contained detailed and specific allegations explaining that
sports event organizers could not use the sports venues due to physical circumstances created by
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No. 1-22-0936
COVID-19, which represented a physical loss of the property. Stats Perform maintained that the
complaint alleged direct physical damage to property because the COVID-19 virus is a physical,
tangible substance that damages the air and surfaces by attaching to them and physically changing
their composition.
¶ 15 After oral argument on the motion to dismiss, but before any ruling was entered, Stats
Perform moved for substitution of the judge. The case was reassigned to a new trial court judge
who granted Continental and National Fire’s motion to dismiss the complaint with prejudice. The
trial court’s order reflects that it entered its ruling after hearing oral argument on May 23, 2022;
however there is no report of proceedings from said hearing in the record. The court dismissed
Stats Perform complaint finding that it failed to allege a “ ‘physical loss of or damage to property’
” that would bring its losses within the business income or extra expense coverage in the policies.
¶ 16 Stats Perform filed a timely notice of appeal following the circuit court’s dismissal. We
find that we have jurisdiction to consider the merits of this appeal pursuant to Illinois Supreme
Court Rule 303(a) (eff. July 1, 2017).
¶ 17 II. ANALYSIS
¶ 18 On appeal, Stats Perform contends that the circuit court erred in granting Continental and
National Fire’s motion to dismiss the complaint where it stated a possible claim for coverage based
on its “physical loss” of property. Stats Perform maintains that because of the physical presence
of the COVID-19 virus at the dependent properties, the sports event organizers were unable to use
the properties for their intended purpose, which triggered coverage under the policies after Stats
Perform incurred losses because of their inability to collect data from the events to create its
services and products. Stats Perform also asserts that the circuit court erred in ignoring its well-
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No. 1-22-0936
pled allegations that the COVID-19 virus detrimentally alters property by causing damage to the
air and surfaces at the dependent properties.
¶ 19 A. Standard of Review
¶ 20 Continental and National Fire brought their motion to dismiss Stats Perform’s complaint
pursuant to section 2-615 of the Code (735 ILCS 5/2-615 (West 2020)). “A motion to dismiss
under section 2–615 of the Code challenges the legal sufficiency of a complaint based on defects
apparent on its face.” Jane Doe-3 v. McLean County Unit District No. 5 Board of Directors, 2012
IL 112479, ¶ 15. The critical question in addressing a motion to dismiss under section 2-615 is
whether the allegations in the complaint, construed in a light most favorable to the plaintiff, are
sufficient to state a cause of action upon which relief may be granted. Id. ¶ 16. A cause of action
should be dismissed pursuant to section 2-615 where it is clearly apparent that no set of facts can
be proved that would entitle the plaintiff to recovery. Marshall v. Burger King Corp., 222 Ill. 2d
422, 429 (2006). The plaintiff is not required to set forth evidence in the complaint, but it must
allege sufficient facts to bring a claim within a legally recognized cause of action. Id. at 429-30.
We review de novo an order granting a section 2-615 motion. Id. at 429.
¶ 21 In addition, the interpretation of an insurance policy is a legal question, which we review
de novo. Lee v. State Farm Fire and Casualty Company, 2022 IL App (1st) 210105, ¶ 15. Under
Illinois law, “the general rules governing the interpretation of other types of contracts also govern
the interpretation of insurance policies.” Hobbs v. Hartford Insurance Co. of the Midwest, 214 Ill.
2d 11, 17 (2005). In interpreting the language of an insurance policy, “the court’s primary objective
is to ascertain and give effect to the intent of the parties to the contract” taking into account the
policy as a whole. Travelers Insurance Co. v. Eljer Manufacturing, Inc., 197 Ill. 2d 278, 292
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(2001). “If the terms of the policy are clear and unambiguous, they must be given their plain and
ordinary meaning.” American States Insurance Co. v. Koloms, 177 Ill. 2d 473, 479 (1997). If,
however, the terms of the policy are ambiguous and susceptible to more than one meaning, they
will be strictly construed against the insurer who drafted the policy. Id. “However, this court ‘will
not strain to find ambiguity in an insurance policy where none exists.’ ” Eljer, 197 Ill. 2d at 293
(quoting McKinney v. Allstate Insurance Co., 188 Ill. 2d 493, 497 (1999)).
¶ 22 B. Physical Loss or Damage
¶ 23 Our court has addressed the issue of whether the presence of the COVID-19 virus causes
“physical loss or damage to” property as that phrase is used in a commercial property insurance
policy in two recently published cases.
¶ 24 In ABW Development, LLC v. Continental Casualty Company, 2022 IL App (1st) 210930,
this court found that a medical imaging clinic was not entitled to coverage from its insurer based
on losses that it allegedly suffered as a result of the COVID-19 pandemic. The plaintiff asserted
that it was “ ‘likely’ ” that the COVID-19 virus was physically present on their premises and that,
as a result, the plaintiff “ ‘sustained direct physical loss and damage to items of property and to
their premises as a result of the presence of’ ” the virus. Id. ¶ 10.
“It further alleged that the ‘presence’ of any particles from the COVID-19 virus
‘render[ed]’ the premises, and items of physical property, ‘unsafe,’ impairing their ‘value,
usefulness and/or normal function,’ and causing ‘direct physical harm or loss to property.’
Plaintiff maintained that its operations had ‘been suspended’ due to the ‘physical loss and
damage’ to its property and the premises and due to the ‘orders issued by civil authorities,
thereby causing an actual loss of income.’ ” Id.
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The plaintiff sought, among other things, a declaration from the court that it sustained physical
loss or damage as a result of the presence of the COVID-19 virus on its premises, and that the
presence of COVID-19 on its premises was a covered loss under its commercial insurance policy.
Id. ¶ 11.
¶ 25 The circuit court granted the defendant’s motion to dismiss the complaint with prejudice
finding that the plaintiff had failed to allege coverage under the business income and extra expense
provisions of the policy because COVID-19 does not cause “ ‘direct physical loss of or damage to
property.’ ” Id. ¶ 20. The court found that the virus merely lands of surfaces, but does not “
‘penetrate’ ” them so that those surfaces can be easily cleaned or disinfected. Id.
¶ 26 On appeal, this court turned to our supreme court’s ruling in Eljer, 197 Ill. 2d at 312 in
order to define the term “physical” as it was used in “physical loss of or damage to property.” ABW
Development, 2022 IL App (1st) 210930, ¶ 29. This court credited the supreme court’s definition
that a “physical injury” requires “ ‘an alteration in appearance, shape, color, or in other material
dimension.’ ” Id. The ABW court found that the policy at issue “unambiguously requires that the
covered loss or damage be physical in nature, meaning that property has been “alter[ed] in
appearance, shape, color or in other material dimension.’ ” Id. ¶ 30.
¶ 27 In examining the policy, the ABW court noted that it referred to a “period of restoration”
when the property is “repaired, rebuilt, or replaced.” Id. ¶ 31. The court reasoned that the policy’s
focus on “on repairing, rebuilding, or replacing property (or moving entirely to a new location),
indicates that the ‘loss’ or ‘damage’ that gives rise to business income coverage has a physical
nature that can be fixed or that the physical loss or damage is so extensive that it requires a
complete move to a new location.” Id. The court noted that numerous federal courts examining the
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same or similar policy language, had likewise held that the terms direct physical loss or damage
do not extend to mere loss of use of the premises, but require physical damage to the premises. Id.
¶¶ 31, 32.
¶ 28 The court found that the plaintiff had failed to adequately allege that the COVID-19 virus
caused physical loss or damage to its property because “the mere presence of the virus on surfaces
does not constitute ‘physical loss of or damage to property’ because COVID-19 does not
physically alter the appearance, shape, color, structure, or other material dimension of the
property.” Id. ¶ 35. In so holding, the court relied on the Seventh Circuit’s holding in Sandy Point
Dental, P.C. v. Cincinnati Insurance Company:
“Even if the virus was present and physically attached itself to [the plaintiff]’s
premises, [the plaintiff] does not allege that the virus altered the physical structures to
which it attached, and there is no reason to think that it could have done so. While the
impact of the virus on the world over the last year and a half can hardly be overstated, its
impact on physical property is inconsequential: deadly or not, it may be wiped off surfaces
using ordinary cleaning materials, and it disintegrates on its own in a matter of days. We
thus find no reversible error in the district court's denial of [the plaintiff]’s motion for leave
to amend its complaint.” (Internal quotation marks omitted.) ABW, 2022 IL App (1st)
210930, ¶ 35 (quoting Sandy Point Dental, P.C. v. Cincinnati Insurance Company, 20 F.
4th 327, 335 (7th Cir. 2021))
The ABW Court concluded that the plaintiff therefore was not entitled to coverage because it failed
to allege physical alteration of its property that would bring its alleged losses within the coverage
provided by the policy. Id. ¶ 36.
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¶ 29 In reaching its conclusion, the ABW court cited with approval the second district’s ruling
in Sweet Berry Café, Inc. v. Society Insurance, Inc., 2022 IL App (2d) 210088. There, as in the
case at bar and in ABW, the plaintiff policyholder sought a declaration that its policy covered
business income it lost and extra expenses it incurred due to “direct physical loss of or damage to”
its property that it sustained as a result of the presence of the COVID-19 virus at its premises. Id.
¶¶ 1, 4. In affirming the trial court’s dismissal of the complaint, the second district found that the
plaintiff’s insurance policy required “physical alteration or substantial dispossession,” and not
merely loss of use. Id. ¶ 39. The plaintiff asserted that the virus physically damaged tangible
property by rendering it unusable because it adheres to surfaces, creating a dangerous property
condition and “ ‘direct physical loss of or damage to’ ” the property. Id. ¶ 43. The court rejected
this contention finding that the virus did not cause physical damage to the property because none
of the property needed to be repaired or replaced. Id. Relying on Sandy Point Dental, the Sweet
Berry Café court noted that the virus’s presence could be easily remediated by routine cleaning
and disinfecting or will die off on its own after a few days. Id. (citing Sandy Point Dental, P.C.,
20 F. 4th at 335). The court observed that the trial court could take judicial notice of the ease of
cleaning the virus off surfaces, as it was a matter of common knowledge. Id. The court also noted
the policy’s reference to a period of restoration, which considered the time needed to repair,
rebuild, or replace the property, supported its conclusion because that provision assumed physical
alteration of the property, not mere loss of use. Id.
¶ 30 The court explicitly rejected the plaintiff’s contention that “direct physical loss” includes
loss of use. Id. ¶ 46. The court concluded that the plaintiff’s loss of use of its premises, without
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No. 1-22-0936
any physical alteration to the property was not sufficient to allege a “ ‘direct physical loss of or
damage to’ ” its property sufficient to trigger coverage under the policy. Id. ¶ 55.
¶ 31 We observe that there are also numerous unpublished cases that have followed the
reasoning of our published authority detailed above. See, e.g., Ragan Consulting Group LLC v.
Continental Casualty Company, 2023 IL App (1st) 220905-U, ¶ 23 (“Because Ragan failed to
allege that the COVID-19 Virus or various government orders caused an alteration in appearance,
shape, color or in other material dimension to its property, i.e., a ‘direct physical loss of or damage
to property,’ the allegations in Ragan’s complaint are insufficient to establish that its alleged
business income losses and necessary extra expenses were covered by the Business Income
Coverage and Extra Expense Coverage provisions of its insurance policy.”); State & 9 Street
Corporation v. Society Insurance, 2022 IL App (1st) 211222-U, ¶ 36 (“As discussed in Sweet
Berry Café and Lee, without an allegation of a change to the physical nature of the existing
property, plaintiffs’ allegations are insufficient to establish a physical loss. Furthermore, plaintiffs’
complaint likewise failed to demonstrate a physical loss because they did not allege that the
restaurants and taverns at issue needed to be physically repaired or replaced.”); Ortiz Eye
Associates, P.C. v. Cincinnati Insurance, Inc., 2022 IL App (1st) 211312-U, ¶ 32 (“Plaintiff failed
to plead any facts showing that the presence of the COVID-19 virus inside the described property
caused any direct accidental physical loss or direct accidental physical damage thereto that altered
its appearance, shape, color, structure or material dimension necessitating any repairs or requiring
a move to a new location.”).
¶ 32 In MTDB Corporation v. American Auto Insurance Company, 2022 IL App (1st) 210979-
U, ¶ 2, the policyholder plaintiff contended that the circuit court erred in, inter alia, “interpreting
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‘direct physical loss or damage’ to mean only losses resulting from physical alteration of MTDB’s
property” and in “deciding that MTDB’s allegations that COVID-19 infested the surfaces and air
of its property did not constitute physical alteration of the property.” Relying on ABW, and this
court’s ruling in Firebirds International, LLC v. Zurich American Insurance Company, 2022 IL
App (1st) 210558, this court found that in order to trigger coverage for a physical loss under the
policy, the damage must be “an actual alteration to the appearance, shape, color, or other physical
aspect of the property.” Id. ¶ 21. The court found that the circuit court therefore did not err in
finding that “direct physical loss or damage” requires physical alteration. Id.
¶ 33 The court also rejected the plaintiff’s contention that the virus caused physical loss or
damage to its property by infecting surfaces and air. Id. ¶ 22. The court acknowledged that the
virus is composed of particles that land on surfaces and linger in the air, but the court found that
this contact did not “rise to the level of a physical or structural alteration of the property.” Id. The
court noted that contamination by the COVID-19 virus can be remedied by routine cleaning or
disinfecting without altering the appearance, shape, color, or other material aspect of the property.
Id. Accordingly, the court concluded that “COVID-19 could not constitute a physical alteration of
the property so as to trigger coverage under the policy.” Id.
¶ 34 Thus, it is clear that under Illinois law, in order for a policyholder to trigger coverage under
policy language requiring “physical loss of or damage to property” the policyholder must
sufficiently allege facts to show some damage of a physical nature, such that the property has been
altered in appearance, shape, color, or in other material dimension, such that the property needs to
be repaired, rebuilt, or replaced. It is also clear that particles of the COVID-19 virus, because of
their ephemeral and easily remediated nature, do not physically alter property. The contract
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language in the policies at issue in the above-cited authority is substantially similar to the language
in policies in the case at bar including that the coverage is triggered by “physical loss of or damage
to property” and references to the “period of restoration,” which includes the time needed to repair,
rebuild, or replace the property. Stats Perform’s allegations concerning COVID-19 causing
physical damage to its property also closely mirror the allegations raised by the plaintiff
policyholders in these cases. We therefore find this precedent dispositive of the issue before us.
¶ 35 Stats Perform nonetheless asks us to depart from this precedent because (1) the
policyholder plaintiffs in these cases did not allege “enough” to show that COVID-19 was present
on their property and that it caused physical loss or damage to the property and (2) the
circumstances of this case, including the policy language at issue, present unique considerations
not present in ABW, Sweet Berry Café, and the other authority cited above. Stats Perform points
out, for instance, that the plaintiff in ABW merely alleged that it was “likely” that the virus was
present on its premises and the court affirmed the dismissal of the complaint in part on that basis.
In contrast, Stats Perform unequivocally alleged that the virus was present at certain dependent
properties.
¶ 36 First, we note that although Stats Perform is correct that the plaintiff in ABW alleged that
the virus was only “likely” present on their property, the same ambiguous allegations were not
present in other cases. For example, in Sweet Berry Café, the court specifically acknowledged that
because of the standard of review on a section 2-615 motion to dismiss, it had to accept as true that
the virus was on the plaintiff’s premises. Sweet Berry Café, 2022 IL App (2d) 210088, ¶ 43. Even
accounting for the unquestioned presence of virus, the Sweet Berry Café court nevertheless found
that the presence of the virus did not cause “direct physical loss of or damage to” the property. Id.
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Moreover, the ABW court specifically found that “even assuming the COVID-19 virus was present
at the premises, the mere presence of the virus on surfaces does not constitute ‘physical loss of or
damage to property’ because COVID-19 does not physically alter the appearance, shape, color,
structure, or other material dimension of the property.” (Emphasis added.) ABW, 2022 IL App (1st)
210930, ¶ 35. Accordingly, it is not the plaintiff’s failure to specifically allege that the virus was
present on the insured premises that is fatal to their claims, it is the fact that this court has
repeatedly reiterated that the virus, by its very nature, cannot cause physical loss of or damage to
property merely by its presence in the air and on surfaces. 2
¶ 37 We also find that the circumstances in this case are not sufficiently distinct to warrant a
different result than the one reached in similar cases. Stats Perform maintains that although several
decisions of this court have cited the Seventh Circuit’s holding in Sandy Point Dental for the
proposition that COVID-19 may be easily cleaned off of surfaces, those cases did not involve large
arenas and stadiums that would require industrial-scale cleaning efforts. The Seventh Circuit in
Sandy Point Dental, however, did not find that COVID-19 does not cause physical loss of or
damage to property merely because it can be easily cleaned, but discussed its temporary character
as illustrative of the fact that it does not materially alter surfaces. See supra ¶ 27 (quoting Sandy
Point Dental, 20 F. 4th at 335) Thus, the scale of cleaning required to remove the virus from the
2
In an apparent effort to allege “enough” to show physical loss or damage, Stats Perform
dedicates multiple pages of its briefs to discussion of the virus’ chemical properties and the reactions that
take place when the virus lands on surfaces. However, “the question is how an ordinary reader or
policyholder, not a scientist, would understand the term as used in the policy. Courts are not to adopt ‘an
interpretation which rests on ‘gossamer distinctions’ that the average person, for whom the policy is
written, cannot be expected to understand.’ ” Crescent Plaza Hotel Owner v. Zurich American Insurance
Co., 20 F. 4th 303, 309-10 (7th Cir. 2021) (quoting Founders Insurance Co. v. Monoz, 237 Ill. 2d 424,
433 (2010). In any event, is it well-established that whatever chemical reactions occur when particles of
the virus land on surfaces, it does not materially alter the property.
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property is irrelevant, particularly where, as the Seventh Circuit noted in Sandy Point Dental, the
virus “disintegrates on its own in a matter of days.” Id. Therefore, the key takeaway from Sandy
Point Dental, which this court has repeatedly endorsed, is that even if the virus alights on surfaces,
it does not cause material alteration to the property, and its temporary nature means that it can be
removed from those surfaces without altering the appearance, shape, color, or other material aspect
of the property. See MTDB, 2022 IL App (1st) 210979-U, ¶ 22.
¶ 38 Stats Perform also contends that the policies in this case differ from those in other cases
because the domestic policies contained an exclusion for “microbes” that specifically included
“virus[es],” but the international policies’ “microbe” exclusion did not include viruses. However,
“[a]n exclusion in an insurance policy is a provision that eliminates coverage that would have
existed in the absence of the exclusion.” (Emphasis added.) Wells v. State Farm Fire & Casualty
Insurance Company, 2021 IL App (5th) 190460, ¶ 27. In this case, Stats Perform was not entitled
to coverage even in the absence of the exclusion because they failed to allege physical loss of or
damage to property. Therefore, the international policies’ failure to specifically include “virus” in
the definition of “microbe” is of no import here. See Sweet Berry Café, 2022 IL App (2d), ¶ 47
(“Unless the policy already granted coverage, which it does not do, a virus exclusion was not
necessary.”).
¶ 39 We also reject Stats Perform’s contentions that liken COVID-19 to other causes of loss like
asbestos fibers or noxious gases. The second district considered and rejected a similar argument in
Sweet Berry Café, finding that the presence of those substances rendered the premises unusable.
Id. ¶ 43. The Sweet Berry Café court cited Sandy Point Dental, which distinguished “gas cases”
on the basis that the contamination barred “ ‘all uses by all persons,’ whereas the COVID-19 virus
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only partially limited the plaintiffs’ preferred use of their premises.” Id. (quoting Sandy Point
Dental, 20 F. 4th at 334). The seventh circuit in Sandy Point Dental explained that in the noxious
gas cases cited by the plaintiff, “the gas infiltration *** led to more than a diminished ability to
use the property. It was so severe that it led to complete dispossession—something easily
characterized as a “ ‘direct physical loss.’ ” Sandy Point Dental, 20 F. 4th at 334. The Seventh
Circuit also distinguished asbestos fiber cases, relying on our supreme court’s decision in United
States Fidelity & Guaranty Co. v. Wilkin Insulation Co., 144 Ill. 2d 64 (1991). Id. at 333. The
Wilkin Insulation court explained that “asbestos fiber contamination constitutes physical injury to
tangible property, i.e., the buildings and their contents” because the fibers damage the buildings to
the extent where “ ‘corrective action, under the law, must be taken’ ” to remediate the damage.
Wilkin Insulation, 144 Ill. 2d at 76 (quoting Board of Education v. A.C. & S, Inc., 131 Ill. 2d 428,
449 (1989)). Here, there is no law compelling corrective action to remove the COVID-19 virus
from the property.
¶ 40 Finally, Stats Perform urges this court to rely on out-of-state and federal district court cases
that it maintains support its position here. We observe that Stats Perform has identified only one
case applying Illinois law, In re Society Insurance Co. COVID-19 Business Interruption Protection
Insurance Litigation, 521 F. Supp. 3d 729 (N.D. Ill. 2021). In that case, the district court denied
the defendant insurance company’s motion for summary judgment finding that the plaintiffs could
plead “direct physical loss” by pleading only “loss of use” and did not need to show a change to
the property’s physical characteristics. Id. at 739-43. The court held that the “disjunctive ‘or’ ” in
“ ‘direct physical loss or damage to covered property’ ” must indicate that “physical loss” means
something different from “ ‘physical damage.’ ” Id. at 741.
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¶ 41 First, we observe that this court is not bound by the decisions of United States district
courts. See City of Chicago v. Groffman, 68 Ill. 2d 112, 118 (1977) (noting “[t]he general rule is
that decisions of United States district and circuit courts are not binding upon Illinois courts”).
Instead, we choose to conduct our own review of the allegations and the policies at issue and apply
established Illinois precedent. See Firebirds International, 2022 IL App (1st) 210558, ¶ 21.
¶ 42 We also observe that numerous other cases reviewing the decision in In re Society
Insurance have termed it an “outlier” that contradicts established precedent. See, e.g., Menominee
Indian Tribe of Wisconsin v. Lexington Insurance Company, 556 F. Supp. 3d 1084, 1097-98 (N.D.
Cal. 2021); Colectivo Coffee Roasters, Inc. v. Society Insurance, 2022 WI 36, ¶¶ 15-16; Town &
Kitchen LLC v. Certain Underwriters at Lloyd’s, London, 522 F. Supp. 3d 1216, 1223 (S.D. Fla.
2021). Indeed, this court has expressly declined to follow In re Society Insurance finding that it
“ignore[s] the unambiguous, plain, and ordinary meaning of ‘direct physical loss’ and do[es] not
read the policies as a whole ***.” Sweet Berry Café, 2022 IL App (2d) 210088, ¶ 53; see also
ABW, 2022 IL App (1st) 210930, ¶ 34 (“We disagree with [In re Society Insurance] and observe
that since [it was] decided, corresponding federal appellate courts in the same circuits have spoken
to the contrary.”); Ark Restaurants Corporation v. Zurich American Insurance Company, 2022 IL
App (1st) 211147-U, ¶ 27 (noting that the Seventh Circuit rejected the reasoning of In re Society
Insurance in Sandy Point Dental when it ruled, “ ‘Without a physical alteration to property, there
would be nothing to repair, rebuild, or replace.’ ” (quoting Sandy Point Dental, 20 F. 4th at 333)).
We likewise decline to follow the reasoning of In re Society Insurance. 3
3
We observe that Stats Perform cites another out-of-state federal district court case, Studio 417,
Inc. v. Cincinnati Insurance Co., 478 F. Supp. 3d 794 (W.D. Mo. 2020). In that case, the district court,
applying Missouri law, denied the defendant insurance company’s motion to dismiss the complaint
finding that the plaintiffs had adequately alleged “direct physical loss” where the plaintiffs alleged that
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No. 1-22-0936
¶ 43 We also observe that the vast majority of authority from federal and out-of-state
jurisdictions examining similar policy language and similar circumstances reached the same
conclusion as we reach here. See ABW, 2022 IL App (1st) 210930, ¶ 32 (collecting federal court
authority that holds that the presence of the COVID-19 virus on the premises does not cause
physical damage or material alteration to the property); Sweet Berry Café, 2022 IL App (2d)
210088, ¶ 48-49 (same). In the months since briefing was completed on this case, our research has
revealed dozens of federal and state court cases from nearly every jurisdiction finding that the
presence of COVID-19 particles does not constitute physical loss or damage as those terms are
used in commercial insurance contracts. See, e.g., Cinemark Holdings, Inc. v. Factory Mutual
Insurance Company, 2023 WL 2588548 * 10 (E.D. Tex. 2023) (“The ordinary and generally
accepted meaning of ‘physical loss or damage’ and the weight of binding precedent compel the
same answer to this question—COVID-19 is a virus that has a profound effect on people, but it
does not cause ‘physical harm or damage’ to property as a matter of both law and common sense.”);
Cajun Conti LLC v. Certain Underwriters at Lloyd’s, London, 359 So. 3d 922, 926-27 (La. 2023)
(“We find the plain, ordinary and generally prevailing meaning of ‘direct physical loss of or
damage to property’ requires the insured’s property sustain a physical, meaning tangible or
corporeal, loss or damage. The loss or damage must also be direct, not indirect. Applying these
meanings to the facts and arguments presented, COVID-19 did not cause direct physical loss of or
damage to Oceana’s property.”); K.C. Hopps, Ltd. v. Cincinnati Insurance Company, Inc., 2023
WL 5341496, * 2 (8th Cir. 2023) (“While contamination can be a direct physical loss, [citation],
the COVID-19 virus attached to surfaces at their property and rendered them unsafe for use. Id. at 800-
803. This court, however, has declined to follow the ruling in Studio 417 for the same reasons that it has
declined to follow In re Society Insurance. Sweet Berry Café, 2022 IL App (2d) 210088, ¶ 53; ABW, 2022
IL App (1st) 210930, ¶ 34.
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No. 1-22-0936
SARS-CoV-2 is [not] the kind of contaminant that results in a direct physical loss, [citation].
Rather, although SARS-CoV-2 may have a physical element, it does not have a physical effect on
real or personal property. [citation]. So even if K.C. Hopps had discovered COVID-19 at its
properties, it could not meet the standard for physicality.”) (Internal quotation marks omitted.)
¶ 44 These decisions weigh against Stats Perform’s citations to amicus briefs in other, out-of-
state, cases, which they argue demonstrate that the scientific community disagrees with Seventh
Circuit’s ruling in Sandy Point Dental that the virus can be removed by routine cleaning and
disinfecting. We therefore find those arguments unpersuasive.
¶ 45 Finally, we affirm the dismissal of Stats Perform’s count for bad faith denial of coverage
under section 155 of the Insurance Code, because where no coverage is owed under the policy,
there can be no finding that the insurance company acted vexatiously or unreasonably with respect
to that claim. Lee, 2022 IL App (1st) 210105, ¶ 23; ABW, 2022 IL App (1st) 210930, ¶ 41.
¶ 46 III. CONCLUSION
¶ 47 For the reasons stated, we affirm the judgment of the circuit court of Cook County.
¶ 48 Affirmed.
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