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Illinois court refuses to dismiss business interruption suit

covid litigation

An Illinois court on Thursday refused to dismiss a COVID-19 business interruption lawsuit filed by construction development and management companies against a CNA Financial Corp. unit, stating the plaintiffs had alleged evidence of physical loss or damage, which is covered under their policy.

New York-based construction management company JDS Construction Group LLC and Nyack, New York-based 9 Dekalb Fee Owner LLC, a construction developer developing an 80-story condominium tower in Brooklyn, filed a business interruption lawsuit against CNA unit Continental Casualty Co. in state court in Chicago, according to the ruling in JDS Construction Group, LLC and 9 Dekalb Fee Owner LLC v. Continental Casualty Co.

Both JDS and 9 DeKalb are insured under a builders risk policy covering the period March 2019 to June 2022, according to the ruling.

In refusing to dismiss the case, the court said the plaintiffs allege the virus has caused the direct physical loss or damage that is required for coverage under the policy.

For example, the ruling said, the complaint alleges “that the COVID-19 droplets or nuclei were present on solid surfaces and in the air at insured property and that the virus, a physical substance, has attached and adhered to plaintiffs’ properties.”

“Furthermore, plaintiffs set forth detailed allegations about how the virus drops are conveyed from infected people to any solid surfaces in the property, into the air and (heating, ventilation and air-conditioning) system, causing damage and alteration to the property and the air from safe and breathable to unsafe and dangerous, capable of surviving on the surfaces for an extended significant period of time,” the ruling said.

The court also agreed with the plaintiffs that they had sufficiently alleged that the direct physical loss triggered the policy’s civil authority coverage.

Plaintiff attorney Robin Cohen, chair of Cohen Ziffer Frenchman & McKenna in New York, said the ruling “will be influential in Illinois, and it could cause some analysis in New York because the judge found under both Illinois and New York law that the virus, as alleged, could cause loss or damage.” She added these allegations are “based upon the science.”

CNA did not respond to a request for comment.