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Law360 (March 3, 2021, 3:44 PM EST) -- Resort chain Great Wolf Lodge claims in Illinois state court that Zurich American Insurance Co. wrongfully denied it coverage for business losses its 17 nationwide resorts have sustained during the coronavirus pandemic.
Great Wolf was forced to close its resorts in March 2020, and reopened some in the following summer and fall, though four were shuttered again due to government orders, the resort company said in its complaint, filed in Cook County Circuit Court Friday. Those closures, and the need to operate at a reduced occupancy to prevent the spread of COVID-19, have led to "substantial, multi-million-dollar losses," the resort company said, but Zurich denied coverage for that lost income in July.
The coronavirus pandemic, and the government shutdown orders that arrived in its wake, caused direct physical loss and direct physical damage, Great Wolf said, as its insured resorts were rendered "physically nonfunctional and inaccessible for the conduct of Great Wolf's ordinary business operations."
Great Wolf claims those events trigger coverage under various provisions in its policy with Zurich, the company said, including gross earnings coverage, civil or military coverage — as shutdown orders were issued amid the public health crisis — and leasehold interest loss, as Great Wolf was still obligated to pay rent even when various premises it leased were unusable, it said.
These events also triggered extra expense coverage under the policy, the resort chain said, citing measures it took to prevent the spread of COVID-19 at its resorts, including the purchase of protective equipment, new training for employees on safety efforts and protocols, new chemical cleaning supplies and technology to better monitor occupancy in its water parks.
An exclusion in the policy for losses or damage arising from the enforcement of laws regulating occupancy and operations doesn't apply, "because Great Wolf's losses were caused by the presence of the novel coronavirus itself and the governmental orders issued in response to the public health crisis, both of which constitute a covered cause of Loss under the policy." Great Wolf said.
Neither does a contamination exclusion, as the virus isn't a "solid, liquid, gaseous or thermal irritant or contaminant" as those terms are commonly understood, Great Wolf said.
"Furthermore, the governmental orders arising from the public health crisis are not 'contamination,'" it said. "This exclusion is applied as a matter of law only to traditional forms of environmental pollution, which are not involved in this claim."
Great Wolf is suing for breach of contract and asking an Illinois state court judge to declare that it's entitled to coverage from Zurich for its COVID-19-related losses or damages.
Representatives for the parties could not be immediately reached for comment on Wednesday.
Great Wolf is represented by Bradley H. Dlatt, Molly E. Mitchell, Selena J. Linde, Vivek Chopra and Peter L. Tracey of Perkins Coie LLP.
Counsel information for Zurich could not be immediately determined.
The case is Wild Holdings LP et al. v. Zurich American Insurance Co., case number 2021CH00949, in the Circuit Court of Cook County.
--Editing by Ellen Johnson.
For a reprint of this article, please contact reprints@law360.com.
