In Q Excelsior Italia SRL v. Zurich Am. Ins. Co., No. 23-1451, (7th Cir. Mar. 20, 2024), it was determined that a luxury Italian hotel has no coverage for certain COVID-related losses The Seventh Circuit affirmed, saying that the hotel’s own filings contradicted its claim that it suffered a covered physical loss. Here, the owner of the Westin Excelsior Rome hotel, has sued its insurer, defendant Zurich American Insurance Company, alleging wrongful denial of coverage for losses the hotel suffered in the early weeks of the COVID-19 pandemic. Defendant Zurich moved to dismiss for failure to state a claim.
The district court granted Zurich’s motion in all relevant parts, and plaintiff appealed. Prior decisions of the 7th Circuit in Crescent Plaza Hotel Owner, L.P. v. Zurich American Insurance Co., 20 F.4th 303 (7th Cir. 2021), and Sandy Point Dental, P.C. v. Cincinnati Insurance Co., 20 F.4th 327 (7th Cir. 2021), affirmed dismissal of nearly identical claims of wrongful denial of coverage. Crescent Plaza dealt with nearly identical claims by a hotel owner and even interpreted the same policy – not just the same policy form, but the same policy – at issue here. Accordingly, the Court of Appeals affirmed the dismissal.
The 7th Circuit pointed out the usual two basis for COVID coverage denials. First, it noted that there was no allegation of “direct physical loss,” despite plaintiff’s argument that it was “dispossessed” of the property by the virus. The Hotel’s pleadings included allegation of special precautions it took to insure the safety of guests and staff, thus undercutting its novel claim of “dispossession.” The Court also relied upon the “Microorganism Exception” to independently bar plaintiff’s claims. In a footnote the 7th Circuit pointed out that there have been “[a]t least fourteen cases on property insurance coverage for COVID-19 losses have received final decisions from the Illinois appellate courts, all declining to find coverage.”