Fitness company’s COVID-19 suit against Zurich may proceed

Citing state law, a Minneapolis state court Thursday refused to dismiss COVID-19 litigation filed by a fitness and recreational sports centers company against a Zurich Insurance Group unit under its builder’s risk coverage.

Chanhassen, Minnesota-based Life Time Inc., which had 19 separate construction projects underway in various parts of Minnesota’s Hennepin County in March 2020, had a builder’s risk policy issued by Zurich American Insurance Co., according to Thursday’s ruling by the Hennepin County Court in Minneapolis in Life Time, Inc. et. al. v. Zurich American Insurance Co.

The policy provided coverage for “direct physical loss or damage to” covered property and had a $100 million per occurrence limit for each project it covered.

The ruling said although Zurich “correctly notes” the large majority of cases have denied coverage filed by companies forced to close because of the pandemic, an insurance contract’s interpretation is one of state law and “the court is not bound by these other court decisions but must look to Minnesota law.”

While other states’ laws have “a narrow view of what direct physical damage is…Minnesota cases are more expansive and allow the claim as pled to proceed,” the ruling said.

Judge Kristin A. Siegesmund said she is unpersuaded by the pro-insurer ruling of the  8th U.S. Circuit Court of Appeals in St. Louis in Oral Surgeons, P.C. v. Cincinnati Insurance Co., whose jurisdiction includes Minnesota, which, she said, applies Iowa law.

In refusing to dismiss the litigation, the ruling said plaintiffs have pled facts that the “insured property is injured in some way” which, if proved, “could support a direct physical loss claim” under the builder’s risk policy.

Attorneys in the case had no comment or did not respond to a request for comment.