A Minnesota appeals court has ruled that insurance claims tied to health club closures during the COVID-19 pandemic may be treated as multiple occurrences rather than a single event, a decision that could have significant implications for policyholders and insurers.
The case involves Life Time Inc., a health club chain that sought coverage under a Zurich American Insurance Co. commercial property policy. The policy included a $1 million per occurrence limit for “interruption by a communicable disease,” which covered government-mandated closures.
Zurich did not dispute that Life Time suffered covered losses but argued that the pandemic itself constituted a single occurrence, according toa Best Wire report. The Hennepin County District Court agreed, granting summary judgment to the insurer on the grounds that COVID-19 was the cause of the closures.
Life Time challenged that view, contending that the shutdowns were caused by separate government orders issued across multiple jurisdictions. The company pointed to 41 orders across 29 jurisdictions that forced its clubs to close, asserting each order should be considered a separate occurrence under the policy.
The Minnesota Court of Appeals sided with Life Time in part, overturning the lower court’s ruling. The panel highlighted policy language specifying that coverage would be triggered “if suspension is caused by order of an authorized governmental agency.” Without such an order, the court noted, there would be no coverage, meaning the orders - not the pandemic - were the direct cause of losses.
Drawing from a Minnesota Supreme Court precedent involving embezzlement, the court concluded that multiple orders from the same jurisdiction should be treated as a single “series of acts,” or one occurrence. However, orders from separate jurisdictions could not be grouped together. As a result, the court determined there were 29 occurrences, not 41 as claimed by Life Time.
The appeals court reversed the lower court ruling and remanded the case for further proceedings consistent with its opinion. Zurich declined to comment on the decision.
The ruling adds to ongoing legal debates over how pandemic-related losses are categorised for insurance purposes. In a similar case in the United Kingdom, the High Court of Justice ruled in July that a racecourse operator could file COVID-19 closure claims on a per-premises basis, though extended or modified orders would not generate additional claims.
