Franchisee 101: McDonald’s Cooks Up COVID-19 Insurance Coverage | Lewitt Hackman

An insurance coverage protection case introduced by McDonald’s and two of its franchisees (collectively, “McDonald’s”), raised a novel query in Illinois state court docket. The query was whether or not or not prices to adjust to a compulsory injunction associated to the COVID-19 pandemic are bodily harm damages triggering the insurance coverage firm’s obligation to defend claims.

Within the underling lawsuit workers claimed public nuisance and negligence for McDonald’s holding its eating places open through the pandemic with out adequate new well being and security practices. McDonald’s coverage was that workers and managers may take off their masks and stand inside six ft of one another however not in extra of 10 minutes. McDonald’s face overlaying and distancing coverage conflicted with the Illinois governor’s government order and CDC steerage. Some McDonald’s eating places didn’t efficiently implement the coverage, which resulted in workers carrying their masks under their nostril and mouth or in no way, because of the “10-minute” rule.

Plaintiff workers sought an injunction requiring McDonald’s to offer ample private protecting tools, preclude reuse of face masks, provide hand sanitizer, require prospects to put on face masks, monitor worker COVID-19 infections, and supply workers with correct details about COVID-19. In June 2020, the court docket granted a partial preliminary injunction that required McDonald’s to coach workers on social distancing and to implement masks carrying insurance policies.

McDonald’s claimed its basic legal responsibility insurance coverage insurance policies coated elevated compliance prices as damages resulting from bodily harm. The insurance coverage firm argued that McDonald’s claims didn’t equate to damages “due to” bodily harm. The court docket disagreed. The obligatory injunction plaintiffs sought would trigger McDonald’s to spend cash to stop steady publicity to the COVID-19 virus and McDonald’s wouldn’t must pay such damages “however for” or “due to” workers contracting the virus which triggered bodily harm. Underneath Illinois regulation, “publicity to doubtlessly dangerous contaminants” will be bodily harm “even with out manifestations of illness or illness.” The insurance coverage firm subsequently had an obligation to defend McDonald’s within the underlying case.

Authorities mandated closures and restrictions imposed on franchisors and franchisees to fight the pandemic led to financial losses to many companies. That led to insurance coverage claims on enterprise interruption and different insurance policies. Normally, losses because of the pandemic have been denied as coverage exclusions. Franchisors and franchisees ought to concentrate on the implications of this case, which can present a roadmap to acquire insurance coverage protection for sure sorts of pandemic associated bills.

McDonald’s Company, McDonald’s USA, LLC, Lexi Administration, LLC, and DAK4 LLC, Plaintiffs v. Austin Mutual Insurance coverage Firm, Defendant., U.S. District Courtroom, N.D. Illinois, ¶16,820, (Feb. 22, 2021)

— to www.jdsupra.com

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