Motion to Dismiss COVID Claim Granted in Part, Denied in Part

    The insurer’s motion to dismiss the insured’s claim for business losses due to COVID-19 was granted in part, denied in part. SRL v Zurich Am. Ins Co., 2022 U.S. Dist. LEXIS 210058 (N.D. Ill. Nov. 21, 2022). 

    Excelsior owned and managed the Westin Excelsior Rome, a luxury hotel in Rome. The hotel suffered business income losses with the onset of the pandemic.While the hotel was not forced to close, its bookings decreased to virtually nothing. The Excelsior’s complaint alleged that the COVID-19 virus was present in and around the hotel as multiple guests and at least six employees tested positive for COVID-19. It further alleged that the virus attached to interior property and was in the air. 

    Excelsior was insured under a commercial property policy issued by Zurich. The court agreed there was no direct physical loss because no structure suffered damage. Among the coverages under the policy, however, was a “Cancellation of Bookings” provision. Zurich agreed there was coverage under this provision, but argued that Excelsior had already reached its annual limit for Cancellation of Bookings claims.

    Zurich relied upon a declaration from one of its executives claiming that “the Policy’s annual aggregate ‘limit under the Cancellation of Bookings provision has been fully paid, thereby exhausting this potential available coverage.” The court determined that Excelsior’s claim under the Cancellation of Bookings provision survived dismissal. Zurich could later move for summary judgment on the claim.

    The court also denied Zurich’s motion in so far as it sought a declaratory judgment that it was entitled to coverage under the policy. Because Excelsior’s claim for coverage under the Cancellation of Bookings provision survived, Zurich’s argument that Excelsior’s declaratory judgment claim should be dismissed for failure to state a claim lacked merit as to that provision.