Case: 1:20-cv-05887 Document #: 28 Filed: 05/01/21 Page 1 of 13 PageID #:1120
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE NORTHERN DISTRICT OF ILLINOIS
`EASTERN DIVISION
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`Case No. 20 C 5887
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`DENTAL EXPERTS, LLC, THE DENTAL
`CLINIC, LLC, PREMIER DENTAL CLINIC,
`LLC, STUDIO DENTAL, LLC, BRADLEY
`DENTAL, LLC, DENTAL EXPERTS, PA,
`ELITE DENTAL, LLC, DENTAL DREAMS,
`LLC (PA), DENTAL DREAMS, PLLC (MI),
`DENTAL DREAMS, PLLC (D.C.), FAMILY
`DENTAL, LLC, DENTAL DREAMS, LLC
`(MD), DENTAL DREAMS OF EDMONSON,
`LLC, and DENTAL DREAMS, LLC (MA),
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`Plaintiffs,
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`vs.
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`
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`MASSACHUSETTS BAY INSURANCE
`COMPANY,
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`Defendant.
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`MEMORANDUM OPINION AND ORDER
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`MATTHEW F. KENNELLY, District Judge:
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`The plaintiffs in this case, all dental offices, operate dental practices in the District
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`of Columbia, Illinois, Maryland, Massachusetts, Michigan, Pennsylvania, South
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`Carolina, and Texas. The Court will refer to them collectively as Dental Experts. Dental
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`Experts purchased a property and casualty insurance policy from the defendant,
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`Massachusetts Bay Insurance Company (Massachusetts Bay); all of the plaintiffs'
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`offices are specifically identified as insured locations under the policy. The insurance
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`policy provided coverage between December 1, 2019 and December 1, 2020.
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`Beginning in March 2020, state and local authorities nationwide issued orders
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`Case: 1:20-cv-05887 Document #: 28 Filed: 05/01/21 Page 2 of 13 PageID #:1121
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`limiting or suspending operations of non-essential businesses due to the coronavirus
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`pandemic. Dental Experts complied with these orders and contends that it lost business
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`income as a result of suspending its operations in seven states and the District of
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`Columbia. It filed claims under its insurance policy with Massachusetts Bay to recover
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`for those losses. After Massachusetts Bay denied the claims, Dental Experts filed this
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`lawsuit seeking to recover amounts it contends are due under various provisions of the
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`policy. Dental Experts also asserted a claim in which it alleged that Massachusetts Bay
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`acted in bad faith.
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`In its complaint, Dental Experts alleges that Massachusetts Bay violated its
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`obligations under a "disease contamination provision" of the policy; it asserts claims for
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`breach of contract based on the insurer's denial of coverage under "business income"
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`and "civil authority" provisions; and it contends that the insurer acted in bad faith when it
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`denied or limited coverage based on these provisions of the policy. Massachusetts Bay
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`has moved to dismiss the claims in counts 9 through 22 of the complaint for failure to
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`state a claim under Federal Rule of Civil Procedure 12(b)(6). It argues that the policy
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`does not cover the losses Dental Experts alleges under the business income and civil
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`authority provisions.
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`Background
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`All of the plaintiffs in this lawsuit are dental offices affiliated with a single entity—
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`Dental Experts. Dental Experts operates in several locations: the District of Columbia,
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`Illinois, Maryland, Massachusetts, Michigan, Pennsylvania, South Carolina, and Texas.
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`All of its offices are covered by Massachusetts Bay's insurance policy. As indicated, the
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`policy covers the period from December 1, 2019 to December 1, 2020. Within that
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`2
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`Case: 1:20-cv-05887 Document #: 28 Filed: 05/01/21 Page 3 of 13 PageID #:1122
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`period, the novel coronavirus began to spread worldwide.
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`In March 2020, state and local authorities nationwide entered orders suspending
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`the operations of non-essential businesses as a response to the coronavirus global
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`pandemic. See, e.g., Def.'s Ex. 4 (dkt. no. 14-4). Dental Experts contends that it
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`suspended its operations to comply with these orders and consequently lost business
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`income. It filed claims with Massachusetts Bay, seeking to recover amounts under
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`three distinct provisions of the policy: (1) business income; (2) disease contamination;
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`and (3) civil authority.
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`
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`The business income provision under the insurance policy reads as follows:
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`We will pay for the actual loss of Business Income you sustain due to the
`necessary "suspension" of your "operations" during the "period of
`restoration". The "suspension" must be caused by direct physical loss of
`or damage to property at premises which are described in the
`Declarations and for which a Business Income Limit Of Insurance is
`shown in the Declarations. The loss or damage must be caused by or
`result from a Covered Cause of Loss. With respect to loss of or damage to
`personal property in the open or personal property in a vehicle, the
`described premises include the area within 100 feet of such premises.
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`Def.'s Ex. 1, Policy at 270 (dkt. no. 14-1). The civil authority provision reads as follows:
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`When a Covered Cause of Loss causes damage to property other than
`property at the described premises, we will pay for the actual loss of
`Business Income you sustain and necessary Extra Expense caused by
`action of civil authority that prohibits access to the described premises,
`provided that both of the following apply:
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`(1) Access to the area immediately surrounding the damaged
`property is prohibited by civil authority as a result of the damage, and the
`described premises are within that area but are not more than one mile
`from the damaged property; and
`(2) The action of civil authority is taken in response to dangerous
`physical conditions resulting from the damage or continuation of the
`Covered Cause of Loss that caused the damage, or the action is taken to
`enable a civil authority to have unimpeded access to the damaged
`property.
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`3
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`Id. at 271. The disease contamination provision reads as follows:
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`We will pay the actual covered loss of "business income" or "extra
`expense" you sustain due to the necessary "suspension" or delay of your
`"operations" during the "period of Restoration". The "suspension" must be
`caused by a disease contamination event declared by the National Center
`for Disease Control, or the applicable city, county or state Department of
`Health.
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`Id. at 202.
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`Dental Experts contends that it is entitled to coverage under each of these
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`provisions of the Massachusetts Bay policy. Regarding the disease contamination
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`provision, Massachusetts Bay concluded that Dental Experts was entitled to coverage
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`and paid it a total of $25,000 for all of its offices' closures. But Dental Experts alleges
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`that this payment was insufficient because it was based on Massachusetts Bay's
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`assessment that the business income Dental Experts lost was a single "occurrence" of
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`disease contamination, rather than multiple occurrences affecting several of Dental
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`Experts' offices across seven states and the District of Columbia. Accordingly, Dental
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`Experts contends that the policy entitles it to over $500,000 in lost business income—
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`$25,000 per location—and that Massachusetts Bay acted in bad faith when paid a
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`significantly lower amount than what it owed.
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`Dental Experts also says that Massachusetts Bay breached its obligations under
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`the insurance contract when it denied claims under the business income and civil
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`authority provisions. Massachusetts Bay contends that Dental Experts' losses are not
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`covered by either of these provisions. It makes two key arguments. First,
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`Massachusetts Bay contends that Dental Experts did not suffer direct physical loss
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`within the meaning of the policy. Second, it argues that another provision of the
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`policy—the "virus exclusion" bars Dental Experts' claims. The virus exclusion provision
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`Case: 1:20-cv-05887 Document #: 28 Filed: 05/01/21 Page 5 of 13 PageID #:1124
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`reads as follows:
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`We will not pay for loss or damage caused by or resulting from any virus,
`bacterium or other microorganism that induces or is capable of inducing
`physical distress, illness or disease.
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`However, this exclusion does not apply to loss or damage caused by or
`resulting from "fungus", wet rot or dry rot. Such loss or damage is
`addressed in a separate exclusion in this Coverage Part or Policy.
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`Policy at 298. Dental Experts contends that the virus exclusion in the insurance
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`contract does not bar coverage under the business income and civil authority
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`provisions.
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`Dental Experts filed this lawsuit against Massachusetts Bay in Illinois state court
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`in August 2020. The insurer removed the case to this Court in October 2020 based on
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`diversity of citizenship. In its complaint, Dental Experts asserts numerous claims based
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`on the laws of the states in which it operates dental practices. Specifically, Dental
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`Experts alleges that Massachusetts Bay breached its obligations under the disease
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`contamination provision (counts 1-8), breached the insurance contract by denying
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`coverage under the business income and civil authority provisions (counts 9-16), and
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`acted in bad faith (counts 17-22). Massachusetts Bay has moved to dismiss Dental
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`Experts' complaint with respect to the breach of contract (counts 9-16) and bad faith
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`claims (counts 17-22) under Federal Rule of Civil Procedure 12(b)(6). The bad faith
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`claims include allegations concerning the insurer's actions with respect to under the
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`disease contamination, business income, and civil authority provisions.
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`Discussion
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`On a motion to dismiss for failure to state a claim, the Court takes the plaintiff's
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`factual allegations as true, draws reasonable inferences in the plaintiff's favor, and
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`Case: 1:20-cv-05887 Document #: 28 Filed: 05/01/21 Page 6 of 13 PageID #:1125
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`assesses whether the plaintiff has asserted a plausible basis for relief. See, e.g.,
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`Firestone Fin. Corp. v. Meyer, 796 F.3d 822, 826 (7th Cir. 2015) (citing Ashcroft v. Iqbal,
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`556 U.S. 662, 679 (2009)).
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`The parties agree that the insurance policy is governed by Illinois law. "Where
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`the parties agree on the law that governs a dispute, and there is at least a reasonable
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`relation between the dispute and the forum whose law has been selected by the parties,
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`we will forego an independent analysis of the choice-of-law issue and apply the parties'
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`choice." Harter v. Iowa Grain Co., 220 F.3d 544, 559 n.13 (7th Cir. 2000) (quotations
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`omitted and alterations accepted). In this case, the insurance contract was negotiated
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`in Illinois and Massachusetts Bay delivered the contract to Dental Experts at its office in
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`Chicago, Illinois. The Court will therefore apply Illinois law to the parties' insurance
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`contract interpretation dispute.
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`Construction of an insurance policy is a question of law. Country Mut. Ins. Co. v.
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`Livorsi Marine, Inc., 222 Ill. 2d 303, 309, 856 N.E.2d 338, 342 (2006). "When
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`construing the language of an insurance policy, a court is to ascertain and give effect to
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`the intentions of the parties as expressed by the words of the policy." Id. at 311, 856
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`N.E.2d at 342-43. "An insurance policy must be construed as a whole, giving effect to
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`every provision." Id. "if the words used in the policy are unambiguous, they are given
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`their plain, ordinary, and popular meaning." Id. "Although insurance policies are
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`construed liberally in favor of coverage, this rule of construction comes into play only
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`when the policy language is ambiguous." Id. "Words are ambiguous if they are
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`reasonably susceptible to more than one interpretation, not simply if the parties can
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`suggest creative possibilities for their meaning, and a court will not search for ambiguity
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`Case: 1:20-cv-05887 Document #: 28 Filed: 05/01/21 Page 7 of 13 PageID #:1126
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`where there is none." Valley Forge Ins. Co. v. Swiderski Elecs., Inc., 223 Ill. 2d 352,
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`363, 860 N.E.2d 307, 314 (2006) (citations omitted).
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`In its complaint, Dental Experts alleges that it is entitled to recover for loss of
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`business income caused by coronavirus shutdown orders pursuant to the business
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`income and civil authority provisions of the insurance policy. It also contends that
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`Massachusetts Bay acted in bad faith under the law of various states' by denying
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`coverage for losses it incurred due to shutdown orders based on these provisions, as
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`well as for paying only $25,000 under the disease contamination provision. See Compl.
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`¶¶ 256-292. In its response brief, Dental Experts says it has sufficiently alleged a bad
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`faith denial of insurance coverage because Massachusetts Bay "denied the vast
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`majority of Plaintiffs' claims without conducting the reasonable investigation required by
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`law and rendered an internally inconsistent coverage determination without explanation
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`or justification." Pl.'s Resp. Mem. at 18 (dkt. no. 17).
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`Massachusetts Bay contends that the "virus exclusion" in the policy excludes
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`coverage for Dental Experts' insurance claims based on the business income and civil
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`authority provisions. See Policy at 298. Specifically, Massachusetts Bay argues that
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`even if Dental Experts "could somehow show direct physical loss of or damage to
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`property, there would be no coverage" under either provision because the "plain and
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`unambiguous language of the Virus Exclusion" reflects that it will not pay for "'loss or
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`damage caused by or resulting from any virus . . . .'" Def.'s Opening Mem. at 14 (dkt.
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`no. 14) (quoting Policy at 298). Massachusetts Bay cites numerous cases from other
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`jurisdictions in which federal district courts have concluded that similar virus exclusions
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`bar coverage for insured parties' claims for coronavirus-related losses. See id. at 14-15;
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`7
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`see, e.g., Franklin EWC, Inc. v. Hartford Fin. Servs. Grp., Inc., 488 F. Supp. 3d 904, 907
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`(N.D. Cal. 2020) (concluding that the virus exclusion provision "excludes from its
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`coverage any loss caused directly or indirectly by a virus"); Wilson v. Hartford Cas. Co.,
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`492 F. Supp. 3d 417, 429 (E.D. Pa. 2020) (granting insurer's motion to dismiss because
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`"an unambiguous virus exclusion bars coverage"). In response, Dental Experts
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`contends that the virus exclusion in the policy should not apply because it was state and
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`local authorities' shutdown orders, not the virus itself, that caused its loss of business
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`income. Pls.' Resp. Mem. at 16-17.
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`The Court concludes that the virus exclusion is plain and unambiguous: it
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`excludes loss or damage "caused by or resulting from any virus." Policy at 298
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`(emphasis added). Given the "resulting from" language, Dental Experts' argument—
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`that the shutdown orders, not the virus caused loss of business income—lacks merit.
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`The shutdown orders were enacted in direct response to the coronavirus global
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`pandemic; it therefore follows that within the meaning of the policy, any business
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`income loss Dental Experts suffered due to a shutdown order resulted from the virus
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`even if it one could say that the loss was not caused directly by the virus.
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`Although the Seventh Circuit has not addressed whether a virus exclusion
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`provision in an insurance policy bars an insured party from claiming loss of business
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`income due to the coronavirus pandemic, several judges of this Court have concluded—
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`in similar coronavirus-related insurance cases—that it does. See, e.g., Riverwalk
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`Seafood Grill Inc. v. Travelers Cas. Ins. Co., No. 20 C 3768, 2021 WL 81659, at *3
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`(N.D. Ill. Jan. 7, 2021) ("[T]he plain language of the Virus Exclusion is dispositive here
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`and requires the Court to dismiss [plaintiff's] Complaint").
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`Case: 1:20-cv-05887 Document #: 28 Filed: 05/01/21 Page 9 of 13 PageID #:1128
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`Judge Kocoras explained in Riverwalk that the virus exclusion provision
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`unambiguously covered coronavirus-related claims. Id.; see also Firenze Ventures LLC
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`v. Twin City Fire Ins. Co., No. 20 C 4226, 2021 WL 1208991, at *4 (N.D. Ill. Mar. 31,
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`2021) ("[T]he court joins other courts to have interpreted comparable [virus exclusion]
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`policy language in the same manner"); Sojo's Studios, Inc. v. Citizens Ins. Co., No. 20 C
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`4780, 2021 WL 837623, at *2 (N.D. Ill. Mar 4, 2021) ("There is simply no doubt as to
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`what the Virus Exclusion means and Plaintiffs' litigation tactics, however clever, cannot
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`override clear, sweeping, and unambiguous language."); Mashallah, Inc. v. West Bend
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`Mut. Ins. Co., No. 20 C 5472, 2021 WL 679227, at *2 (N.D. Ill. Feb. 22, 2021) (rejecting
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`argument that "Governor Pritzker's COVID-19 orders are an independent intervening
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`cause" and concluding that virus exclusion bars claims); AFM Mattress Co., LLC v.
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`Motorists Com. Mut. Ins. Co., No. 20 C 3556, --- F. Supp. 3d ---, 2020 WL 6940984, at
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`*2 (N.D. Ill. Nov. 25, 2020) ("Plaintiff's argument that its losses occurred because the
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`Indiana and Illinois governmental entities issued shutdown orders, not because of the
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`virus itself, is unpersuasive.").
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`For these reasons, the Court concludes that Dental Experts' claims that
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`Massachusetts Bay breached the insurance contract when it denied coverage under the
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`business income and civil authority provisions are not viable claims upon which relief
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`may be granted. The dismissal of these claims is with prejudice, without leave to
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`amend.
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`The Court next turns to Dental Experts' bad faith claims to the extent they are
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`connected to denial of coverage under the business income and civil authority
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`provisions. An Illinois statute, 215 Ill. Comp. Stat. 5/155, provides a remedy to
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`"insureds who encounter unnecessary difficulties resulting from an insurance company's
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`unreasonable and vexatious refusal to honor its contract with the insured." First Ins.
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`Funding Corp. v. Fed. Ins. Co., 284 F.3d 799, 807 (7th Cir. 2002) (internal quotations
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`omitted). "However, when an insurer denies the claim of an insured because no
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`coverage exists, the insurer has not failed to honor its contractual obligations under an
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`insurance policy." Id. "As such, Illinois courts allow a cause of action to proceed under
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`Section 155 only if the insurer owed the insured benefits under the terms of the policy."
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`Id. In this case, the "virus exclusion" in the insurance policy undercuts all of Dental
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`Experts' breach of contract claims based on the business income and civil authority
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`provisions. Accordingly, because no coverage exists under either provision,
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`Massachusetts Bay has not failed to meet its contractual obligations under the law of
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`any of the states where a Dental Experts office is located. For this reason, Dental
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`Experts has not asserted a plausible basis for relief based on bad faith, whether under
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`Illinois law or under the law of any of the other states at issue. Dental Experts' bad faith
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`claims are therefore dismissed with prejudice to the extent the claims arise from the
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`insurer's handling of the business income and civil authority coverage.
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`2.
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`Disease contamination provision
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`In counts 17 through 22 of its complaint, Dental Experts also alleges bad faith in
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`connection to Massachusetts Bay's failure to pay the full amount that Dental Experts
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`contends was due under the disease contamination provision of the insurance policy.
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`See Policy at 202. Specifically, Dental Experts alleges that it filed insurance claims with
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`Massachusetts Bay under the "disease contamination" provision of the policy for loss of
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`business income. Dental Experts contends that it operates numerous offices within
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`10
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`each state and the District of Columbia. For instance, in Illinois alone, it has eighteen
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`dental clinics that were affected by Governor Pritzker's shutdown order. Compl. ¶ 52-
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`28. Dental Experts alleges that it is entitled to a recovery of up to $25,000 for each
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`office that suspended operations due to the coronavirus shutdown orders. Id. ¶ 62.
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`The proof of loss it submitted to Massachusetts Bay reflected a total of more than
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`$500,000 in losses. Id. ¶ 63.
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`Dental Experts contends that Massachusetts Bay improperly treated the disease
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`contamination claim as a single "occurrence," rather than eighteen separate
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`occurrences, and sent Dental Experts a single check in the amount of $25,000. Id. ¶
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`66. Under the policy, "occurrence" is defined as "all loss or damage that is attributable"
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`to "[a]n act, event, cause or series of similar, related acts, events or causes involving
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`one or more persons" or "[a]n act, event, cause or series of similar, related acts, events
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`or causes not involving any person." Policy at 156. Dental Experts says that
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`Massachusetts Bay—in bad faith—treated its losses in connection to coronavirus
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`shutdown orders "as a single occurrence" rather than multiple ones. Pl.'s Resp. Mem.
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`at 18. In a single footnote in its opening memorandum, Massachusetts Bay summarily
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`states that the dispute regarding whether Dental Experts was entitled to recover a
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`higher amount for its disease contamination claim "is not addressed in this Motion, but
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`Massachusetts Bay intends to bring a motion for summary judgment on this issue later
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`in this case." Def.'s Opening Mem. at 1.
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`"Whether an insurer acted unreasonably or vexatiously" within the meaning of
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`section 155 "is a question of fact." Med. Prot. Co. v. Kim, 507 F.3d 1076, 1086 (7th Cir.
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`2007). The requirements to show bad faith under Maryland, Massachusetts,
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`Pennsylvania, South Carolina, and Texas law are similar to what is required under
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`Illinois law. See Def.'s Opening Mem. at 15-17. In the current version of Dental
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`Experts' complaint, however, its factual allegations relating to bad faith in connection to
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`the disease contamination claim are inappropriately conclusory. See, e.g., Compl. ¶
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`258 ("[Massachusetts Bay] failed to investigate Illinois Dentists' claims and failed to
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`reimburse Illinois Dentists for each occurrence as required under the Policy."), ¶ 269
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`("[Massachusetts Bay]'s conduct . . . was and continues to be unreasonable and
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`vexatious . . . without proper justification and without a reasonable investigation.") .
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`"Allegations that state legal conclusions or threadbare recitals of the elements of a
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`cause of action are not entitled to the assumption of truth" in addressing a motion to
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`dismiss under Rule 12(b)(6). Meyer, 796 F.3d at 827 (cleaned up). For a plaintiff's
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`complaint to survive a motion to dismiss, it must state "sufficient facts to plausibly
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`suggest that the plaintiff has a right to relief." See Bell Atlantic Corp. v. Twombly, 550
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`U.S. 544, 555 (2007).
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`Dental Experts' complaint falls short on the question of bad faith in connection
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`with the disease contamination claims because it essentially just recites the elements of
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`a section 155 claim. For this reason, the Court dismisses the bad faith claims with
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`leave to amend with respect to the claim of bad faith regarding the disease
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`contamination coverage.
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`Conclusion
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`For the foregoing reasons, the Court grants Massachusetts Bay's motion to
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`dismiss [dkt. no. 10] counts 9 through 22 of the plaintiffs' complaint—the breach of
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`contract (counts 9 through 16) and bad faith claims (counts 17 through 22). The bad
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`faith claims are dismissed with prejudice to the extent they concern the denials
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`regarding the business income and civil authority coverages, and with leave to amend
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`to the extent with concern the insurer's treatment of the disease contamination
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`coverage. Any amended bad faith claims are to be filed by no later than May 17, 2021.
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`Date: May 1, 2021
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`________________________________
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`MATTHEW F. KENNELLY
` United States District Judge
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`13
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