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Life Time Fitness Sues Zurich Over ‘Measly’ Virus Coverage (1)

Aug. 20, 2020, 6:19 PM; Updated: Aug. 20, 2020, 8:56 PM

Life Time Inc. is suing its insurer for full coverage of more than $200 million in alleged losses from numerous gym closures mandated by states in the wake of the coronavirus pandemic.

The $1 million Zurich American Insurance Co. offered under an “interruption by communicable disease” provision of its policy represents a “measly” 0.28% of the policy’s overall limit of $350 million, Life Time said in a complaint filed Wednesday in Minnesota state court. The policy encompassed roughly 150 gyms across the country, according to the complaint.

Life Time’s lawsuit is one of hundreds filed by companies large and small in response to commercial insurance providers denying claims for coverage stemming from the virus and state-ordered shutdowns of nonessential businesses.

The key issue in many cases is whether the virus triggers coverage by causing physical property damage, and whether losses from mandatory closures are recoverable under business interruption policy provisions.

Insurers have notched a handful of wins so far, and more decisions on insurers’ pending motions to dismiss are expected in the coming weeks following the U.S. Judicial Panel on Multidistrict Litigation’s refusal to funnel more than 200 business interruption lawsuits into a single venue.

Maximum Coverage

Zurich rejected Life Time’s assertion that its policy provides $1 million in coverage for each insured location, the Minnesota-based fitness chain said. Instead, the insurer insisted that $1 million is the maximum coverage available for all communicable disease claims.

The contract “does not say anywhere that the promised coverage for ‘interruption by communicable disease’ has an aggregate limit of $1 million,” Life Time argued in its complaint.

Since early March, “governmental orders have had a serious impact on Life Time’s business, members, and guests, prohibiting access to and use of Life Time’s insured locations, including its many services,” the complaint said.

As a result, Life Time says it lost significant membership revenue and earnings through the issuance of membership dues credits, canceled memberships, and a drop-off in payments for in-club services such as personal training and kids’ programs.

Cause of Action: Breach of contract; declaratory judgment.

Relief: Declaration that Life Time is entitled to $1 million in coverage for each insurance location, subject to a $350 million policy limit; at least $130 million in damages; attorneys’ fees.

Response: “It is not Zurich’s practice to provide information on litigation,” a Zurich American spokesperson told Bloomberg Law.

Attorneys: Maslon LLP is representing Life Time.

The case is Life Time, Inc. v. Zurich Am. Ins. Co., Minn. Dist. Ct., No. 27-cv-20-10599, complaint filed 8/19/20.

(Updated with comment from Zurich American.)

To contact the reporter on this story: Jacob Rund in Washington at jrund@bloomberglaw.com

To contact the editors responsible for this story: Melissa B. Robinson at mrobinson@bloomberglaw.com, Laura D. Francis at lfrancis@bloomberglaw.com

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