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Law360 (July 19, 2021, 7:28 PM EDT) —
A New Jersey gym’s business losses from the coronavirus pandemic don’t qualify as physical damage, American Zurich Insurance said in its bid to dismiss the lawsuit.
The insurer pointed on Friday to the more than 300 suits where COVID-19 coverage has been denied, both across the country and in New York federal court, where Echelon Health & Fitness’ proposed class action was filed in November.
“Federal district judges in New York have dismissed every COVID-19 business-income claim that they have considered,” Zurich wrote. “This court is among them.”
While the gym argued that its temporary closure and reduced capacity amounted to “direct physical loss,” the insurer said that phrase refers to situations where the property’s value disappears or diminishes, citing another Eastern District of New York COVID-19 suit dismissed in March from the New York Spine Institute.
The gym, based in Voorhees, New Jersey, has claimed “merely that they and their neighbors experienced the temporary inability to use property because of COVID-19-related government orders, which does not suffice,” the insurer wrote. “The policy expressly excludes mere loss of use of property unaccompanied by any property loss or damage.”
The gym’s policy also includes a virus exclusion that bars coverage, the insurer argued.
In its suit, the gym’s parent company, KBH Sports Club LLC, and its owner, David Chung, argued that the virus exclusion shouldn’t apply because COVID-19 wasn’t present and noted that its policy doesn’t include a pandemic exclusion.
The gym also contended it should have received a refund or discounted premiums while business was suspended, much like auto insurers did when fewer people were driving.
Zurich said doing so “contravenes basic principles of insurance law; insureds are not entitled to a refund because the insured risk either did not materialize or turned out to be less than anticipated.”
Counsel for the gym did not immediately respond to a request for comment Monday.
A Zurich spokesperson declined to comment.
KBH is represented by Spencer Sheehan and James Chung.
American Zurich Insurance Co. is represented by Evan M. Tager, Archis A. Parasharami, Bronwyn F. Pollock and Douglas A. Smith of Mayer Brown LLP, and Michael Menapace of Wiggin and Dana LLP.
The case is Chung et al v. American Zurich Insurance Co., case number 1:20-cv-05555, in the U.S. District Court for the Eastern District of New York.
–Additional reporting by Daphne Zhang. Editing by Roy LeBlanc.
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