Law360 (April 7, 2021, 7:44 PM EDT) -- LA Fitness can't exercise any of its $100 million in coverage for business interruption losses at its 700 gyms, a U.K. insurer says in a California federal suit, saying the gym chain suffered no "direct physical loss of or damage" caused by the COVID-19 pandemic and government shutdown orders.
Beazley Underwriting Ltd., which insured the primary layer of a $500 million policy, argued in Tuesday's complaint that the owner of LA Fitness is not covered for business income losses from closing its gyms across the country under government orders to help slow the spread of the coronavirus.
"The Policy excludes any losses arising from communicable disease, contamination, loss of market, loss of use, microorganisms, or the threat of anything which endangers or threatens to endanger the health, safety, or welfare of persons," Beazley said, arguing that one or more of these exclusions bar the gym's losses.
Fitness International LLC, the gym's owner, did not notify Beazley of its claim until January, according to the suit. At that time, Beazley said LA Fitness also filed a Washington state suit against other insurers including Zurich American Insurance Co. for business interruption losses under a separate policy.
In Tuesday's complaint, Beazley told the Central District of California that LA Fitness had not responded to requests for additional information to aid in the insurer's claim investigation. Instead, the gym owner slapped it with a notice of intent to file a bad-faith suit, according to Beazley, even though the insurer had not denied the owner's claim.
Gyms, like other businesses, were hit with losses when they were forced to shut their doors during the pandemic. Some gyms fighting coverage suits with insurers have seen their suits tossed.
Last month, a California federal judge ruled that a New Jersey gym, Body Physics, cannot compel its insurer to cover its pandemic-related losses after lockdown requirements kept it closed. The policy's virus exclusion clearly barred any virus-related loss or damage from coverage, according to the judge.
In November, a Florida state judge said a fitness center's losses from the pandemic and government orders were "purely economic" and not covered. Dime Fitness LLC's financial loss did not satisfy the coverage precondition under its policy for "direct physical loss or damage," the judge ruled.
Representatives for the parties did not respond to requests for comment on Wednesday.
Beazley is represented by James L. Wraith and Sara M. Parker of Selvin Wraith Halman LLP.
Counsel information for Fitness International was unavailable.
The case is Beazley Underwriting Ltd. v. Fitness International LLC, case number 8:21-cv-00642, in the U.S. District Court for the Central District of California.
--Additional reporting by Lauren Berg and Daphne Zhang. Editing by Peter Rozovsky.
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