The lower court’s decision finding no coverage based upon the governmental action exclusion was affirmed by the Appellate Court of Illinois. McCann Plumbing, Heating & Cooling v. Pekin Ins. Co., 2023 Ill.App. LEXIS 300 (Ill. App. Ct. Aug. 23, 2023).
McCann purchased a building to use for its heating, ventilation, and air conditioning business. The building was surrounded by two unihhabited properties which often flooded. The city determined that a building on the adjacent property had to be demolished. In the course of destruction, the McCann’s building was damaged, leaving a portion of their building open to the elements.
McCann sought coverage from Pekin for damage incurred in the demolition. The policy provided coverage for “direct physical loss of or damage to” the covered property. Pekin denied coverage under the policy’s governmental action exclusion, which provided,
We will not pay for loss or damage caused directly or indirectly by any of the following:
. . .
c. Governmental Action
Seizure or destruction of property by order of governmental authority . . .
McCann filed suit for a declaratory judgment. The trial court granted Pekin’s motion for judgmenon the pleadings, finding that the governmental action exclusion applied. The case was dismised.
On appeal, McCann argued that because the city neither issued a demolition order for their buileing nor had the authority to cause damage to it pursuant to its demolition order concerning the adjacent property, the governmental action exclusion was inapplicable.
The appellate court focused on whether the damage was casued “directly or indirectly” from the destruction and whether that damage fell within the purview of the governmental action exclusion. The court found that the McCann’s property damage was a loss that grew out of and was therefore “caused indirectly” from the destruction of property. Further, the McCann’s loss fell under the governmental action exclusion because the damage stemmed from the city’s demolition order.
Therefore, the lower court’s judgment was affirmed.