First Take: Duty To Defend COVID-19 Claim Under CGL Policy

April 14, 2021 / Writing and Speaking

By Amy R. Paulus

On February 22, 2021, the U.S. District Court for the Northern District of Illinois held that a commercial general liability (“CGL”) insurer has a duty to defend McDonald’s against claims brought by employees allegedly exposed to coronavirus on the job. This is the first finding of a duty to defend a COVID-19 claim in the third-party liability context.


In August 2020, McDonald’s and its franchisees (“McDonald’s”) filed a declaratory judgment action seeking defense and indemnity under CGL policies issued by Austin Mutual Insurance Company (“Austin Mutual”) for claims brought by McDonald’s employees. The employees’ lawsuit alleges that McDonald’s is liable for nuisance and negligence due to its decision to remain open during the COVID-19 pandemic without enhanced health and safety standards for its employees. At least three of the plaintiffs allegedly contracted COVID-19. The employees’ lawsuit seeks injunctive relief requiring McDonald’s to provide its employees with sufficient personal protective equipment, supply hand sanitizer, require customers to wear face masks, monitor employee COVID-19 infections, and provide its employees with accurate information about COVID-19.


Austin Mutual moved to dismiss McDonald’s declaratory judgment complaint on the grounds that the employees’ complaint did not seek damages because of bodily injury where “the nature of [McDonald’s] expenditure is not to remedy bodily injury to third-persons.” McDonald’s responded that COVID-19 and SARS-CoV-2 are bodily injuries, without which McDonald’s would not sustain the damages associated with injunctive relief. McDonald’s further argued that any money spent to comply with the injunctive relief constituted damages “‘because of’ exposure to [COVID-19 and SARS-CoV-2].”

Judge Charles Kocoras held that the mandatory injunction sought in the employees’ suit constituted “damages” because it would require McDonald’s “to expend money to remediate the continuous and ongoing exposure to [COVID-19 and SARS-CoV-2].” In addition, Judge Kocoras reasoned that “because of” requires only “but for” causation, and that but for the employees’ contracting COVID-19, McDonald’s would not face the costs of complying with a mandatory injunction.

The court rejected Austin Mutual’s argument that CGL policies are only meant to cover damages paid to a third-party, stating that the argument is “untethered to any language in the policy,” and contrary to Seventh Circuit precedent in Cincinnati Ins. Co. v. H.D. Smith, LLC, 829 F.3d 771, 774 (7th Cir. 2016) (state’s costs to address the opioid epidemic were because of bodily injury even though state did not sustain bodily injury).

Of note, the court highlighted the lack of a virus exclusion in the CGL policies at issue, suggesting that the exclusion may preclude coverage for similar third-party claims. Also, the court did not reach Austin Mutual’s argument that the employer’s liability exclusion applied, concluding the argument was waived.

Learning Point: This ruling is significant because it recognizes a potential for COVID-19 claims to implicate a duty to defend under CGL policies. Further, the court relied on the Seventh Circuit’s extremely broad reading of “because of bodily injury” from the governmental entity opioid claim context, arguably a much different analysis. Finally, this ruling may be viewed as limited by its particular facts, and it remains to be seen if the court will ultimately determine whether coverage for the employees’ claims actually exists under the policies at issue.

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