By Shawn Rice

Law360 (March 25, 2022, 5:47 PM EDT ) Law360 Insurance Authority readers may know his business as Kim-Chee LLC, the first name in the case caption of the Second Circuit's recent decision in favor of insurers in a wave of business interruption coverage suits stemming from the pandemic. But to Grand Master Chuck Gorino and his students, the business means so much more.

Federal appeals courts are closing the book on the earliest lawsuits over whether insurers should cover the losses that policyholders suffered when the COVID-19 pandemic swept the nation, forcing shops to close and, in some cases, change the way they do business.

So far, courts have largely found that losses from the pandemic aren't covered, with some finding that the virus didn't cause damages or losses that would trigger insurance coverage, and others citing contractual language in the policies that exempted insurers from having to pay.

Law360 set out to find some of the business owners on the other end of those rulings, to talk about how the pandemic affected their lives, and about their relationships with their insurers after months of litigation. In the first of this series of stories, Law360 spoke with Gorino, who runs Master Gorino's Pil-Sung Tae Taekwondo, aka Kim-Chee LLC and Yup Chagi Inc.

'Things Got A Little Weird And Creative'

Gorino got the news he would have to close his Amherst, New York, studio in March 2020, when then-Gov. Andrew Cuomo issued a series of orders forcing businesses throughout New York to close their doors in an effort to slow the spread of the coronavirus.

Now in his 60s, Gorino, who founded his business in 1994, would have to learn how to hold martial arts classes online. In the early days of the virus when people were isolating themselves for safety, a few of the studio's instructors moved in with Gorino and his wife to form their own pod so they could keep classes going.

The studio began offering virtual classes for his student base, which eroded by about half during the shutdown. And in some cases, students were still taking classes, but weren't paying their fees, he said.

He was hurting financially. He estimates that his direct losses from the pandemic were $150,000 for one year that he hoped were covered by insurance. He filed claims over his losses, but was rejected.

"I've been fighting my whole life, so this was just another fight," the grand master said.

He turned to his insurance policies, where it was clear to him — after speaking with the law firm Duke Holzman Photiadis & Gresens LLP — that one policy had a virus exclusion, but another didn't.

He felt that it meant his losses should have been covered and went back to his insurer, Philadelphia Indemnity Insurance Co., to ask again, he said. Later, when he went to renew the policy, his carrier notified him that a virus exclusion would be added to the policy.

"From the little guy's standpoint, it was bullshit," he said.

This was the first time that Gorino had to litigate a claim with an insurance company. But he felt confident that there would be coverage due to the lack of virus exclusion in one of the policies.

A federal judge and the Second Circuit didn't see it that way, and on March 16, the appeals court declined to give the taekwondo studio a rehearing after previously upholding dismissal of the coverage dispute.

In its January ruling, the court found that Gorino's business, Kim-Chee, hadn't shown the studio was physically damaged by the virus in a way that would trigger insurance coverage.

The judges said the studio's policy could cover damage from perils such as radiation, chemical dust, gas and asbestos — but not from viruses such as the one that causes COVID-19. That's because the coronavirus doesn't have the ability to "persistently contaminate" and physically alter property, unlike the other perils, the panel said.

But Gorino didn't see the virus as being any different than a car driving through his studio. The studio wasn't safe because the government said no one could be there, and he lost student tuition and direct sales of merchandise that he felt should have been covered.

"I feel like the judge lumped me in with everyone else who had a virus exclusion," he said. "I'm sure there was pressure from the insurance company in not having a mass of claims coming in. I just felt the judge took the easy way out."

A representative of the insurer didn't immediately respond to a request for comment Friday. The insurer has not responded to recent requests for comment about the litigation.

Despite the loss in court, Gorino said he's still a Philadelphia Indemnity customer, even without the pandemic coverage, because they "have the best rate."

Gorino said he and his staff got creative when it came to adjusting to the new world of online classes and a student base in the grips of a global pandemic, improving classes by angling cameras on a 24-foot ladder to video the class from above.

He also realized he wanted to help his younger students deal with the struggle of isolation and stress, he said. He got into the habit of recording himself reading a bedtime story and saying goodnight so parents could play it for the students.

For classes at home, some students set up their own dojangs — a martial arts training space — in their houses and decorated them. One student chose a disco theme for their space, complete with bright red and blue spinning lights, so Gorino played disco music to match during a class.

"Things got a little weird and creative," he said.

The students who stuck with the classes were "very appreciative," and Gorino said he is seeing a "stronger-minded breed" of students who want to get healthier. In the end, he saw the pandemic as just another challenge.

"Nothing keeps me down, so I wasn't going to let something like this stop me."

Master Gorino's is represented by Charles C. Ritter Jr., Christopher M. Berloth and Steven W. Klutkowski of Duke Holzman Photiadis & Gresens LLP.

Philadelphia Indemnity is represented by Michael Glascott and Adam R. Durst of Goldberg Segalla LLP and Stephen E. Goldman and Wystan M. Ackerman of Robinson & Cole LLP.

The case is Kim-Chee LLC et al. v. Philadelphia Indemnity Insurance Co. et al., case number 21-1082, in the U.S. Court of Appeals for the Second Circuit.

--Additional reporting by Ben Zigterman and Eli Flesch. Editing by Nick Petruncio.

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