The Minnesota Court of Appeals recently handed policyholders an important win in Life Time, Inc. v. Zurich American Insurance Co., reversing a trial court ruling that had capped coverage under a communicable disease endorsement at the $1 million per occurrence limit. Relying on the express language of the communicable disease coverage at issue, the appellate court held that government shutdown orders—not the COVID-19 pandemic itself—constituted the operative “occurrences” under Life Time’s policy. By interpreting the cause of loss in this way, the court expanded Life Time’s recovery from a single $1 million limit to 29 separate limits, one for each jurisdiction that independently ordered closure of Life Time’s business locations.

The Dispute
Life Time, a national fitness company, purchased a Zurich commercial all-risk insurance policy for the policy period of December 15, 2019, to December 15, 2020. In addition to broad coverages for physical loss and damage to property, the policy provided a stand-alone grant of coverage for “Interruption by Communicable Disease.” This coverage provided up to $1 million per occurrence, without any aggregate limit other than the policy’s full coverage limit of $350 million, when orders regulating communicable disease resulted in the suspension of Life Time’s business activities. In 2020, state and local authorities issued orders shuttering Life Time’s 150 health clubs nationwide. The insurer argued that the totality of Life Time’s claimed loss resulted from the pandemic – a singular “cause” of loss – thus limiting coverage to a single $1 million sublimit. The trial court agreed, awarding summary judgment to Zurich.

The Court’s Decision
The Court of Appeals reversed. It correctly began its analysis with the coverage grant of the policy, which expressly predicated coverage on “order[s] of an authorized governmental agency enforcing any laws or ordinance regulating communicable disease.” Without such an order, there could be no coverage. The court concluded, therefore, that it was government action that triggered coverage under the policy. From that, the court reasoned that Life Time’s losses, which stemmed directly from its closure, were “caused” by each independent order or body of orders. Zurich argued that it was the pandemic that caused Life Time’s loss. The court rejected that argument as being inconsistent with the policy language and requiring it to effectively rewrite the policy.

The court also rejected Zurich’s reliance on proximate cause cases, and noted that Minnesota courts apply a more pragmatic approach of relying on the policy language in determining what constitutes an occurrence. Here, the court held that Life Time’s losses did not flow directly from the mere existence of COVID-19, but from discrete government decisions to close gyms at different times and in different places. Each order was an independent cause of loss and separate from the threat of the spread of communicable disease, even if prompted by the same underlying public health threat.

Having determined that shutdown orders were the operative cause of Life Time’s losses, the court next turned to the orders to determine the number of occurrences, each of which implicated its own per occurrence limit. In doing so, the court examined whether multiple orders could be treated as part of a “series of similar or related causes.” It held that orders from different jurisdictions were issued independently and therefore should be treated as separate occurrences. Consistent with that reasoning, the court held that multiple orders from the same jurisdiction—such as renewed shutdowns after temporary reopening—were sufficiently connected such that they would aggregate to a single occurrence. Applying this framework, the court found that Life Time sustained 29 independent occurrences, affording Life Time a potential recovery up to $29 million.

Key Takeaways
The ruling is a significant reminder that policy wording is paramount. Here, the court held that Zurich’s interpretation of the pandemic as one sweeping cause was contrary to the endorsement’s plain terms, which explicitly tied coverage to governmental action. By focusing on what actually triggered coverage—shutdown orders—the court gave meaningful effect to the coverage Life Time purchased and avoided reading limitations not in the actual policy language. Policyholders should take confidence from the Minnesota Court of Appeal’s decision that courts will enforce insurance policies as written.