Fitness International LLC, which owns over 700 gyms in the U.S. and Canada, said Thursday that its insurers, including Zurich American Insurance Co., Travelers Property Casualty Co. of America and AIG Specialty Insurance Co., wrongfully denied coverage and failed to acknowledge that the COVID-19 virus physically damaged its properties.
The fact that more than 1,200 staff members tested positive for the virus is direct proof that the virus physically damaged and was "deposited" on the surface of exercise equipment transiting through the air and ventilation system. Given the high percentage of asymptomatic cases, the gym owner said that the actual number of infected employees could be far greater than the known cases, it said.
"The coronavirus has and continues to physically alter and transform these surfaces into virus-spreading fomites," Fitness said, adding that "no amount of routine surface cleaning could remove the aerosolized coronavirus suspended in the air in Fitness' health clubs."
In the suit, the fitness club owner said its primary insurer, Zurich, specifically removed "virus" from the policy's contamination exclusion through a "virus deletion endorsement" when it issued the Zurich Edge policy, which promised policyholders broad and flexible coverage, the school said.
The company said that after the insurance regulator approved Zurich's addition of a Louisiana geographical limitation into its virus deletion endorsement last fall, the insurer has tried to use that limit to argue that the endorsement only applies to Louisiana policyholders.
But the carrier never included the location limit into Fitness' policy when it issued the insurance last February, the gym chain said, and Zurich cannot use the newly approved language to limit coverage to policies it issued before the approval.
The Thursday complaint came one day after Beazley Underwriting Ltd., which issued a $100 million policy to Fitness, sued the company in California federal court, seeking a declaration that the gym chain cannot get coverage because it suffered no property damage caused by the pandemic. The UK insurer said LA Fitness failed to respond and assist it with claim investigation, but slapped it with a notice of litigation even though the insurer had not denied coverage.
Fitness referenced scientific studies on COVID-19 that it said show the virus can't be eliminated from properties by regular cleaning, claiming the coronavirus is "much more resilient to cleaning than other respiratory viruses." The virus is shown to cause physical damage to and survive on textiles, such as towels used at gyms, and transfer to skin and other surfaces, it said.
The gym owner said its property experienced direct physical loss or damage through the virus' actual presence on the premises of its facilities, and it lost use of its property due to business suspension ordered by state-mandated closures and incurred extra costs to ensure social distancing and disinfect property surfaces once allowed to reopen.
The company is alleging breach of the insurance contract and seeking a declaration that its losses are covered under the policy and demanding damages to be determined in a jury trial.
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 Wednesday.
LA fitness is represented by Christopher S. Marks, Malika Johnson, and Alice C. Serko of Tanenbaum Keale LLP; Joseph D. Jean, Scott D. Greenspan, and and Benjamin D. Tievsky of Pillsbury Winthrop Shaw Pittman LLP.
Counsel information for the insurers was not immediately available.
The case is Fitness International LLC v. Zurich American Insurance Co. et al., case number 21-2-04704-8, in the King County Superior Court.
--Additional reporting by Shawn Rice.
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