Bottega, LLC v. National Surety Corporation-Chicago, Il

Background

This case concerns insurance coverage for business-income losses following the 2017 North Bay Fires. Bottega, LLC; Una Marca, LLC doing business as Ottimo; Gruppo Chiarello, Inc.; and Solo I O, Inc. sued National Surety Corporation for breach of contract and breach of the implied covenant of good faith and fair dealing.

The policy covered actual business-income losses caused by a necessary suspension of operations resulting from direct physical loss of or damage to property at the insured premises. The policy also provided limited coverage when a civil authority prohibited access because of physical loss or damage elsewhere. National Surety paid the plaintiffs $108,190 for business-income losses during the period when civil-authority actions prevented access to the insured premises. The plaintiffs later sought additional business-income coverage beyond the civil-authority provision’s two-week period.

The parties filed cross-motions for partial summary judgment limited to whether each plaintiff had a qualifying claim under the policy’s Business Income provision.

Legal Standard

Summary judgment is appropriate when the evidence shows no genuine dispute about a fact that could affect the outcome and the moving party is entitled to judgment as a matter of law. When both sides move for summary judgment, the court considers the evidence supporting and opposing both motions before ruling on each one.

To trigger the Business Income provision, the plaintiffs had to establish four elements: (1) a suspension of operations, (2) caused by (3) direct physical loss of or damage to property, (4) resulting from a covered cause of loss.

Bottega

The court found it undisputed that Bottega’s operations were suspended because Bottega completely closed on October 9 and October 16, 2017. The court also found that National Surety’s admissions established that the fires caused smoke, soot, and ash damage, direct physical loss, and direct physical damage to the insured locations. The policy identified smoke causing sudden and accidental loss or damage as a covered cause of loss.

The remaining issue was causation: whether smoke damage caused Bottega’s closure on October 9, rather than the civil-authority order, a lack of customers, or general disorder after the fires. Evidence supported both sides. The plaintiffs presented testimony that the restaurant smelled like an ashtray, was inundated with smoke, soot, ash, and char, and could not serve customers in that condition. National Surety pointed to Bottega’s reopening on October 10 while the public-safety order remained in effect, the limited evidence about the cleaning needed before reopening, and the delay in replacing an allegedly damaged awning.

Because a reasonable factfinder could draw different conclusions about why Bottega closed on October 9, the court found a genuine dispute of material fact. It therefore denied National Surety’s motion for partial summary judgment and denied the plaintiffs’ motion for partial summary judgment as to Bottega.

Ottimo

The court applied the same four-part test to Ottimo. It found evidence of suspensions of operations, physical loss or damage caused by the fires, and a covered cause of loss. But the evidence conflicted about why Ottimo remained closed. Some evidence supported the conclusion that smoke damage caused the closure. Other evidence indicated that financial and staffing shortages, along with the larger facility’s cleaning needs, affected the decision not to reopen Ottimo at the same time as Bottega.

Because this factual dispute concerned whether smoke damage caused Ottimo’s suspension, the court denied the plaintiffs’ motion for partial summary judgment and denied National Surety’s motion for partial summary judgment as to Ottimo.

Gruppo Chiarello

National Surety sought summary judgment on the ground that Gruppo Chiarello never ceased operations. The court found that the undisputed evidence showed Gruppo Chiarello continued its management business during the fires and managed two properties in addition to Bottega and Ottimo.

The plaintiffs argued that Gruppo Chiarello’s income was directly linked to Bottega’s and Ottimo’s ability to operate. The court concluded that this did not establish a suspension of Gruppo Chiarello’s own operations. Because the plaintiffs did not produce evidence creating a genuine dispute about that required element, the court granted National Surety’s motion for partial summary judgment and denied the plaintiffs’ motion as to Gruppo Chiarello. The court held that Gruppo Chiarello was not entitled to coverage under the Business Income provision.

Solo

National Surety also sought summary judgment on the ground that Solo never ceased operations. Solo was described as a holding company that received discretionary distributions from Bottega. The court found no evidence that Solo suspended its operations. The court rejected the argument that Solo’s income dependence on Bottega and Ottimo established a suspension of Solo’s operations.

The court therefore granted National Surety’s motion for partial summary judgment and denied the plaintiffs’ motion as to Solo. The court held that Solo was not entitled to coverage under the Business Income provision.

Disposition

As to Bottega and Ottimo, the court denied the plaintiffs’ motion for partial summary judgment and denied National Surety’s motion for partial summary judgment. As to Gruppo Chiarello and Solo, the court granted National Surety’s motion for partial summary judgment and denied the plaintiffs’ motion. The order disposed of Docket Nos. 64 and 68. The court also ordered the parties to file a proposed schedule through trial, including a mediation date.