A Minnesota Court of Appeals ruled that Life Time Inc. was shut down during the pandemic due to government shutdown orders, not the pandemic itself, and each shutdown order constituted an occurrence, resulting in a much larger payout for the fitness club. The case is Life Time, Inc. v. Zurich Am. Ins. Co., 25 N.W.3d 901 (Minn. Ct. App. 2025).
Background
Life Time, Inc. operated 150 health and fitness clubs throughout the United States during 2020. With the outbreak of the COVID-19 pandemic, Life Time, along with other gyms and businesses, was ordered by various governmental authorities throughout the country to close its locations.
By April 2, 2020, all 150 locations had been ordered to close. The shutdown orders came from 29 separate jurisdictions, including states, counties, and municipalities. Including subsequent orders after a period of reopening, Life Time claimed there were 41 distinct shutdown orders.
Life Time had a commercial property insurance policy with Zurich American Insurance Company that covered all 150 locations. The policy promised to pay Life Time's gross earnings losses if its business was suspended due to the order of an authorized governmental agency enforcing any law or ordinance regulating communicable diseases.
Coverage was capped at $1 million per occurrence. When Life Time filed a claim, Zurich claimed that all the closures throughout the country constituted a single occurrence since they were all due to the pandemic. Because it was one occurrence, Life Time's total payout was capped at $1 million. Life Time argued that since there were 41 distinct shutdown orders, there were 41 occurrences.
District Court
Life Time sued, and the matter was brought before the Hennepin County District Court of Minnesota. The district court sided with Zurich, finding that COVID-19 was the single cause of Life Time's losses, meaning that the losses were all caused by one occurrence. They stated, "the COVID pandemic was a singular force causing the shutdown of Life Time's clubs."
The court granted Zurich's motion for summary judgment and denied Life Time's motion. Life Time appealed the ruling and the case was raised to the Minnesota Court of Appeals.
The Policy Language
The policy defined an occurrence as "all loss(es) or damage that is attributable directly or indirectly to one cause or a series of similar or related causes."
The Interruption By Communicable Disease (ICD) endorsement stated: "The company will pay for the actual Gross Earnings loss sustained by the Insured, as provided by this policy, resulting from the necessary suspension of the insured's business activities at an insured location if the suspension is caused by order of an authorized governmental agency enforcing any law or ordinance regulating communicable diseases and that such portions of the location are declared uninhabitable due to the threat of the spread of communicable disease, prohibiting access to those portions of the location."
Court of Appeals
The court of appeals had to determine whether the district court was correct in deciding that COVID-19 was the cause of Life Time's losses and not the shutdown orders, and if the shutdown orders were the cause, whether multiple orders issued in a single jurisdiction were a "series of similar or related causes."
One Occurrence or Multiple?
The court found that the ICD endorsement language was instructive for what constituted the cause of loss. The endorsement stated that coverage is provided if suspension is "caused by order of an authorized governmental agency enforcing any law or ordinance regulating communicable disease."
The endorsement mentions communicable disease, but the endorsement states that coverage is triggered by a shutdown order. If there is no shutdown order, there is no coverage. The mere existence of a communicable disease threat alone did not trigger the policy.
An occurrence was defined in the policy as "all loss(es) or damage that is attributable directly or indirectly to one cause or a series of similar or related causes." Following the logic above, it would be inconsistent to then say that the cause was the pandemic, and not the government orders.
It would be inconsistent to read "cause" one way in determining if there is coverage and another way in determining the number of occurrences. As such, the court determined that the district court erred in ruling that the pandemic was the sole cause of Life Time's losses and ruled that the governmental shutdown orders were the cause.
One Cause or a Series of Similar Causes?
Since the shutdown orders were deemed the cause of the loss, the court then had to determine if multiple orders from the same jurisdiction were each a separate order, and therefore a separate cause, or if they were a series of similar or related causes.
The policy defined "occurrence" as "all loss(es) or damage that is attributable directly or indirectly to one cause or a series of similar or related causes."
Life Time argued that there were 41 occurrences, one for each distinct shutdown order, including second-round closures in the same jurisdiction after periods of reopening. Zurich argued for one.
In another case, American Commerce, the Minnesota Supreme Court stated that "a court may consider several factors in concluding whether...acts are part of a 'series or related acts,' including whether the acts are connected by time, place, opportunity, pattern, and most importantly, method or modus operandi."
The court used the plain meaning of "series" as "a number of objects or events arranged or coming on after the other in succession," and applied the Supreme Court's description in American Commerce, which defined series as acts that followed each other in time.
The court reasoned that many of the orders by separate states came on different days, by different authorities, and with no coordination or relationship between them. Even when orders were released on the same day, there was no connection between them. The court concluded the orders from different jurisdictions could not logically be considered a series, so orders from different jurisdictions were each their own occurrence.
However, the court found that multiple orders within the same jurisdiction did constitute a series and were thus one occurrence. If a jurisdiction ordered a shutdown, had a period of reopening, then issued a second shutdown, that would constitute a series since the orders occurred in succession.
After consolidating shutdown orders from the same jurisdiction as one occurrence, the court determined that there were 29 total occurrences and reversed the ruling of the trial court.
Editor's Note
The policy language was important in deciding this case. The district court found that it was governmental shutdown orders that triggered the Interruption By Communicable Disease endorsement, and not the communicable disease itself. Since shutdown orders triggered the endorsement, it was also shutdown orders that should be used when determining the number of occurrences.
However, the court did find that successive shutdown orders from the same jurisdiction were only one occurrence, limiting the potential occurrences from 41 to 29 total.
(Photo credit: gumpapa/stock.adobe.com)
© Touchpoint Markets, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.