The owner of four Anytime Fitness gyms in Alabama and Mississippi has filed a lawsuit against the fitness centers’ insurer, alleging it violated its contractual obligations by denying business interruption claims for economic losses suffered due to coronavirus shutdowns.

Fountain Enterprises, the owner and operator of the four gyms, seeks a declaratory judgment from the court stating that its pandemic-related losses should be covered by Markel Insurance, the company that insures all of the 4,500 Anytime Fitness facilities in the U.S.

According to PropertyCasualty360, the complaint indicates that Fountain Enterprises and Markel entered into an agreement for an all-risk coverage policy. The policy should provide coverage for all risks, including pandemic-related business interruptions, unless they are specifically excluded or limited by the policy.

The policy also contains a “civil authority” provision that should cover losses caused by government-related shutdowns and other actions that adversely affect the business’s income. Between March 23 and April 3, state, county, and city officials mandated that all non-essential businesses be shutdown to ease the spread of COVID-19 infections.

The closures prompted the gyms to pause billing for prepaid memberships and to roll the lost time over to the end of the memberships. The shutdowns also prevented the gyms from enrolling new members and stopped the sale of merchandise on the premises, causing “pretty significant, six-figure losses,” the lawsuit contends.

The policy also covers expenses incurred in maintaining and reopening a closed business. Alabama and Mississippi have since allowed non-essential businesses to reopen, but with restrictions that continue to impact revenues. The four Anytime Fitness gyms can no longer remain open around the clock and may operate at only a 30% capacity at any time.

Additionally, exercise machines and equipment have been rearranged to comply with six-feet social distancing rules, and locker rooms, showers, and spa services must remain closed. All fitness classes are canceled for the foreseeable future and staff members are routinely screened for COVID-19.

According to PropertyCasualty360, the complaint says that Markel not only denied the Fountain Enterprises’ business interruption claims, it rejected them with an unreasonable swiftness that demonstrated it did not investigate the claims in any meaningful way.

The gym franchisee accuses Markel of breaching its contractual obligations and duties under the policy, which continues to cause the company serious financial harm. The gym owner filed the lawsuit in a federal court in Chicago, Illinois, and seeks a jury trial as well as compensatory, punitive, and other damages.

Beasley Allen lawyers are actively investigating and filing claims against various insurance companies for denial of business interruption coverage during the COVID-19 pandemic, and are involved in advocating for consolidation of these actions in an MDL. Dee Miles, head of our Consumer Fraud & Commercial Litigation Section, Rachel Boyd, and Paul Evans, lawyers in the Section, are spearheading this litigation for our firm and are monitoring all MDL developments as they arise.

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