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Law360 (April 28, 2021, 2:34 PM EDT ) Evanston Insurance Co. urged a Washington state federal court to toss a cryotherapy clinic's putative class action over pandemic-related losses, arguing that a growing number of courts this past year have held that the coronavirus doesn't cause direct physical loss or damage to property.
Glacial Cryotherapy LLC doesn't allege that the coronavirus was detected at its Seattle-area cryotherapy clinic or that it repaired or replaced any of its property, Evanston told U.S. District Judge Barbara Jacobs Rothstein on Monday, asking for the business interruption suit to be dismissed.
"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," the insurer said, citing its virus exclusion and referring to the respiratory disease caused by the virus.
In March, Glacial Cryotherapy hit Evanston with the proposed class action, claiming the insurer was wrongfully denying coverage under all-risk policies. The clinic, which provides cryotherapy treatment, light therapy and infrared sauna therapy, had to close like other businesses under government orders.
Glacial Cryotherapy had said the orders tied to the pandemic caused a covered physical loss. When in-person and on-site treatments were forbidden, the clinic said, its cryotherapy machines and whole-body cryotherapy chamber, sauna and treatment beds all lost their intended function.
In Monday's motion, Evanston also argued the cryotherapy clinic isn't covered under the civil authority provision in the policy. Noting many other courts have considered this coverage issue, the insurer said the government orders didn't bar access to the clinic, a measure that would trigger the civil authority coverage.
Even if there was a physical loss or damage to the clinic, Evanston said the policy excludes coverage separately for damage caused by a virus or an organic pathogen. Glacial Cryotherapy's compliance with an ordinance or law regulating its use of the clinic is also barred from coverage, the insurer argued.
"The policy also excludes 'acts or decisions, including the failure to act or decide, of any person, group, organization or governmental body.' Additionally, the policy excludes from coverage 'loss or damage caused by or resulting from' 'delay, loss of use or loss of market,'" Evanston said.
So far there haven't been any coverage rulings in Washington federal courts. However, a federal judge in Washington gave policyholders a blow by refusing to send questions offered by a group of dentist and orthodontic offices on the physical loss and virus exclusion issues to the state's Supreme Court.
But in Washington state courts, policyholders have fared better in business interruption suits.
A Washington dental practice escaped an earlier dismissal in its suit against Mutual of Enumclaw Insurance Co. and Perry Street Brewing won a partial summary judgment bid against the same insurer in a different suit, according to the University of Pennsylvania's COVID Coverage Litigation Tracker.
Amy Williams-Derry of Keller Rohrback LLP, counsel for the clinic, told Law360 on Wednesday that "Glacial Cryotherapy was forced to close through no fault of its own. It had a business insurance policy to cover it for exactly this situation, and it is eager to have the court review and enforce its policy."
Representatives of Evanston couldn't immediately be reached 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. Editing by Tim Ruel.
Updated: This article was updated with a response from the policyholder's counsel.
For a reprint of this article, please contact reprints@law360.com.
