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Washington Fitness Center Asked Ninth Circuit to Reinstate Business Interruption Claim

February 8, 2022 – Matt Albrecht

According to a report from Law360, a Washington-based fitness company is asking the Ninth Circuit Court of Appeals to reinstate its business interruption claim. In the Wellington Athletic Club, LLC v. Allied World Surplus Lines Ins. Co., a federal court in Washington ruled that an insurance company was within its right to deny the policyholder’s COVID-19 related business interruption claim. In this article, our Spokane insurance lawyers provide a more comprehensive analysis of the dispute.

Insurance Case Review: Wellington Athletic Club, LLC v. Allied World Surplus Lines Ins. Co.

Background & Facts

The plaintiff, Wellington Athletic Club, LLC, owned and operated a fitness center in Seattle. Similar to virtually every other business in the fitness industry, the Wellington Athletic Club was adversely affected by the COVID-19 pandemic and the resulting public health restriction. The plaintiff has an “all-risk” business policy from Allied World Surplus Lines Ins. Co. In March of 2021, Wellington Athletic filed a business interruption claim through its policy. The business interruption claim was denied on the grounds that the COVID-19 pandemic did not constitute a qualifying event.

The Decision

Upon review, the United States District Court for the Western District of Washington ruled in favor of the insurer. In its decision, the court emphasized the importance of the specific policy language. As explained by the federal court, the all-risk commercial policy at issue in this case covered “actual loss of business income” when that loss was sustained because of a necessary suspension of operations. However, the federal court also noted that the policy stated that coverage would only apply if the suspension of operators was caused by “direct physical loss of or damage to property.”

Policyholder is Appealing 

Business interruption insurance is designed to provide much needed financial protection to companies who are forced to halt operation. As you can imagine, many business interruption claims have been filed in relation to the COVID-19 pandemic. Unfortunately, a significant portion of policyholders have run into problems getting these claims paid. Many of them face a similar issue that the Seattle-based fitness center came up against in this case.

All-risk and/or specific business interruption policies often contain terms stating that some form of “physical loss” or “physical damage” is required for coverage to apply. Thus far, state and federal courts in Washington have largely found that virus spread does not constitute “physical damage” under the meaning of the policy. Still, this issue is not over. The policyholder is appealing. Our Washington insurance lawyers will keep a close eye on any relevant legal or legislative updates.

Call Our Spokane Insurance Law Attorneys for Immediate Help 

At‌ ‌Albrecht‌ ‌Law‌ ‌PLLC, our Spokane insurance lawyers are proud to fight for the rights and interests of policyholders and beneficiaries—not the big insurance companies. Contact us now for a no cost, no commitment review and assessment of your case. We provide legal to policyholders throughout Eastern Washington, including in Spokane, Spokane Valley, Opportunity, Cheney, and Liberty Lake.

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