By Eli Flesch

Law360 (June 2, 2021, 6:43 PM EDT) -- A federal judge in Seattle on Wednesday threw out a cryotherapy clinic's putative class action for coverage of pandemic losses, saying the clinic, like other businesses before it, had failed to show direct physical loss or damage required for coverage.

U.S. District Judge Barbara J. Rothstein said Glacial Cryotherapy LLC's policy with Evanston Insurance Co. did not cover losses resulting from the COVID-19 pandemic. In a four-page order, she said the clinic's case did not vary substantially from over a hundred other pandemic suits she dismissed last week in a major loss for policyholders.

Glacial Cryotherapy's case was filed after those suits had been consolidated, Judge Rothstein said, meaning the order dismissing them did not also apply to the clinic. Other suits filed post-consolidation are still before the court, and more orders are expected.

The court found that, had the clinic managed to adequately show physical loss or damage, it still would have been barred from coverage because of a virus exclusion in its policy. In her ruling last week, Judge Rothstein noted that such exclusions bar coverage during pandemics and for losses from consequent government restrictions.

The Seattle-area Glacial Cryotherapy first accused Evanston of improperly denying it coverage in a March complaint. The clinic sought to represent a national class of Evanston policyholders denied pandemic coverage, as well as a subclass of Washington state policyholders, according to the clinic's original complaint.

Evanston's "across-the-board coverage denials are not consistent with its policy language and with its obligations to investigate losses arising under its policies," the complaint said.

The clinic said government orders forced it to close its doors and suspend its operations. It has since reopened, however, offering a range of sub-freezing physical therapies meant to help reduce inflammation and boost athletic performance.

In April, Evanston asked the court to dismiss the clinic's suit, citing a growing body of pandemic decisions favoring insurers nationwide. The clinic never alleged that the virus itself was present at its place of business, Evanston noted, adding that government orders didn't bar access to the clinic, which could trigger civil authority coverage.

"COVID-19 is a virus, and courts have uniformly held that policies with this or similar language do not provide coverage for business interruption allegedly caused by or resulting from COVID-19 or government orders issued in relation to the pandemic," Evanston said in its dismissal bid.

In her rulings on Wednesday and last week, Judge Rothstein agreed, pointing to widespread findings by courts against policyholders on the issue of physical loss. Over 80% of pandemic suits have been dismissed in favor of insurers in federal courts, according to data compiled by the University of Pennsylvania Carey Law School.

"In its common usage, 'loss' means that the alleged peril must set in motion events which cause the inability to physically own or manipulate the property," Judge Rothstein said Friday. "This reasoning aligns with most of the federal courts who have confronted this question and held that 'physical loss of' requires tangible, material, discernable or corporeal dispossession of the covered property, which COVID-19 does not cause."

Counsel for Evanston did not immediately respond to a request for comment.

Glacial Cryotherapy is represented by Amy Williams-Derry, Lynn L. Sarko, Ian S. Birk, Gretchen Freeman Cappio, Irene M. Hecht, Nathan Nanfelt, Gabriel E. Verdugo and Alison Chase of Keller Rohrback LLP.

Evanston is represented by Marilee C. Erickson of Reed McClure and by P. Bruce Converse of Dickinson Wright PLLC.

The case is Glacial Cryotherapy LLC v. Evanston Insurance Co., case number 2:21-cv-00266, in the U.S. District Court for the Western District of Washington.

--Additional reporting by Daphne Zhang and Shawn Rice. Editing by Leah Bennett.

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