Buttermilk Geneva sues insurance company for claim denial linked to COVID-19

GENEVA – The owners of Buttermilk Geneva and Hollywood Boulevard Theater in Woodridge, are suing their insurance company in federal court for denying their claims for business interruption due to the COVD-19 pandemic.

The lawsuit, filed April 23 in U.S. District Court for the Northern District of Illinois, Eastern Division, is a class action that seeks nearly $10 million.

But lead attorney David Fish said the actual amount is unknown at this point.

“We don’t know the extent of the losses,” Fish said. “Buttermilk has not been able to have people eat there and the movie theater is closed. They’re losing thousands and thousands of dollars. … They bought business interruption insurance. That’s the insurance policy that they thought would cover them.”

The plaintiffs are Geneva resident Katie Kouvelis, president and owner of Buttermilk Geneva, 7 W. State St., Geneva, Buttermilk Naperville and Buttermilk Vernon Hills; and Hobson Financial Group of Illinois, which owns Hollywood Boulevard Cinema, 1001 W. 75th St., Woodridge.

They allege that Society Insurance Inc. of Fond du Lac, Wis., wrongfully denied their claims for loss of business income and extra expense coverage.

The company denied the claims, stating COVID-19 is not a “physical loss damage” or a “contamination” and is not covered, the lawsuit stated.

A message left for a Society Insurance spokeswoman was not immediately returned.

This latest filing follows a spate of other lawsuits, as businesses file claims under business interruption policies, which various insurance companies have denied.

The filing as a class action means that it is open for other businesses to join, Fish said.

“The idea is that we want this to be able to benefit not only Buttermilk and the movie theater, but other people who have similar claims to be able to benefit,” Fish said. “The insurance company is taking the position that there is no coverage. Insurance companies are wonderful when they’re taking your premiums. But when you need them, sometimes they’re not as helpful.”

Buttermilk Geneva opened March 30, 2015, Buttermilk Naperville opened in January 2018 and Buttermilk Vernon Hills was scheduled to have an April 20 grand opening – which was canceled.

Though the Buttermilk restaurants are considered essential business, food pickup and delivery services are limited, according to the lawsuit.

“This business interruption has resulted in catastrophic business income loss and significant extra expense,” according to the lawsuit.

As a non-essential business, Hollywood Boulevard Cinema ceased all of its operations, which “has resulted in a total loss of actual business income and significant extra expense,” the lawsuit stated.

'Special Property Coverage'

To protect their businesses in situations like these, the restaurants and the movie theater both bought identical business interruption insurance policies from Society Insurance, the lawsuit stated.

The “Special Property Coverage Form” included coverage for business income, extra expense, civil authority and contamination if loss and expenses occur due to an involuntary business interruption, the lawsuit stated.

The policies do not exclude losses from viruses or pandemics, therefore, the company should have covered the losses caused by COVID-19, the lawsuit stated.

Society Insurance “could have excluded pandemic-related losses … as other insurers regularly do,” the lawsuit stated.

The lawsuit alleges that Society Insurance “issued blanket denials … without first conducting a meaningful coverage investigation.”

The lawsuit also details the ways that health organizations have said the virus is spread – through human contact as well as by inanimate surfaces – which has prompted the emergency declarations by the Illinois governor and those of other states.

On March 16, the CEO of Society Insurance circulated a memorandum to its agency partners “acknowledging that states, such as Illinois, had ‘taken steps to limit operations of certain businesses’ but prospectively concluding that Society Insurance’s policies would likely not provide coverage for losses due to a ‘governmental imposed shutdown due to COVID-19 (coronavirus),” the lawsuit stated.

'I've never seen anything like this'

Among exhibits included in the federal filing was a March 25 letter from Kouvelis to her insurance broker – which she asked to be given to Society Insurance.

In it, Kouvelis implored the insurance company to cover them for lost profits and fixed costs.

In addition to business interruption, the restaurant has also suffered financially from the cancellation of events due to the state of emergency caused by the coronavirus pandemic.

“Nothing in our (insurance) policies rules out the possibility of damage caused by the presence of microscopic organisms or requires that loss or damage be visible to the naked eye or visible at all,” Kouvelis’s letter stated. “In short, the functionality of the property has been nearly if not wholly eliminated or destroyed, which in turn has rendered the property useless.”

The lawsuit seeks a jury trial.

“I’ve spoken to a lot of business owners in similar situations and it’s a very tough time for small business owners right now,” Fish said. “I’ve never seen anything like this. I’ve been a lawyer for a long time. I’ve never seen so many businesses impacted in a similar way. It’s a very sad situation.”