Insurer Says LA Fitness' Virus Losses Aren't Fit For Coverage

By Shawn Rice
Law360 is providing free access to its coronavirus coverage to make sure all members of the legal community have accurate information in this time of uncertainty and change. Use the form below to sign up for any of our weekly newsletters. Signing up for any of our section newsletters will opt you in to the weekly Coronavirus briefing.

Sign up for our California newsletter

You must correct or enter the following before you can sign up:

Select more newsletters to receive for free [+] Show less [-]

Thank You!



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.

For a reprint of this article, please contact reprints@law360.com.

Attached Documents

Useful Tools & Links

Related Sections

Case Information

Case Title

Beazley Underwriting, LTD. v. Fitness International, LLC


Case Number

8:21-cv-00642

Court

California Central

Nature of Suit

Insurance

Judge

Cormac J. Carney

Date Filed

April 06, 2021

Law Firms

Companies

Government Agencies

Hello! I'm Law360's automated support bot.

How can I help you today?

For example, you can type:
  • I forgot my password
  • I took a free trial but didn't get a verification email
  • How do I sign up for a newsletter?
Ask a question!