Insurer Scores Win In Ky. Fitness Center's Virus Coverage Suit

By Eli Flesch
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Law360 (June 10, 2021, 3:32 PM EDT) -- A Kentucky gym isn't entitled to coverage for losses sustained because of government pandemic restrictions, a federal judge found Thursday, saying the gym failed to show the kind of physical loss required for coverage under its policy.

The Lexington-based LexFit suffered "purely economic losses," U.S. District Judge Danny C. Reeves said in his decision, rather than the kind of physical alteration to its property that could qualify it for coverage from West Bend Mutual Insurance Co.

Judge Reeves pushed back on LexFit's contention that the language in its commercial property policy was ambiguous and unenforceable, saying that the plain meaning of "direct physical loss" didn't require it to be defined in the policy.

"LexFit offers the broadest possible definition of 'covered cause of loss' and argues that its broad definition governs the meaning of the phrase 'direct physical loss,'" Judge Reeves wrote in a 12-page order and memorandum. "Before reaching for any dictionary or case law, LexFit's proposed definition conflicts with the language of the policy."

In a complaint filed last year in Kentucky state court, LexFit argued that the government restrictions issued to curb the spread of the coronavirus caused a covered loss of income, rather than the presence in its gym of any virus or bacteria.

It said a virus exclusion in its policy would not have precluded coverage for losses sustained as a result of those restrictions. West Bend rejected LexFit's claim based on the virus exclusion, according to court documents. It had also denied the claim on the basis that LexFit failed to show any physical damage to its property.

In April, West Bend moved to toss the case, saying LexFit didn't establish any connection between government closure orders and alleged damage to its gym. That would have been required for LexFit to qualify for civil authority coverage, the insurer said.

"Although the COVID-19 global pandemic is unprecedented, it does not change the plain and unambiguous terms of the insurance policy," West Bend said. LexFit, the insurer said, paid premiums to cover for certain risks to its business, but "did not pay for nor obtain a guarantee of income."

Judge Reeves agreed, finding that while the government orders "undoubtedly" hurt LexFit, they weren't the type of action by a civil authority contemplated by West Bend and LexFit when they agreed upon their policy.

The decision cancels a jury trial that was scheduled to start in October.

With the ruling, LexFit joins hundreds of other businesses that have seen their coronavirus coverage suits thrown out in federal court. Over 82% of such cases have now been permanently dismissed, according to data compiled by the University of Pennsylvania Carey Law School.

Counsel for the parties did not immediately respond to requests for comment.

LexFit is represented by Robert E. Maclin III and Scott A. Schuette of McBrayer PLLC.

West Bend is represented by Anthony Pernice of Reminger Co. LPA and by John C. Scott and Joseph T. Mordino of Faulkner & Tepe LLP.

The case is LexFit LLC v. West Bend Mutual Insurance Co., case number 5:20-cv-00413, in the U.S. District Court for the Eastern District of Kentucky.

--Editing by Neil Cohen.

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Case Information

Case Title

LexFit, LLC v. West Bend Mutual Insurance Company

Case Number



Kentucky Eastern

Nature of Suit



Danny C. Reeves

Date Filed

October 05, 2020

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