568 F.Supp.3d 613
E.D. Va.2021Background
- Plaintiffs are multiple Anytime Fitness franchisees across Mississippi, Pennsylvania, Washington, and Alabama who closed locations during COVID-19 government shutdowns in March–April 2020 and submitted insurance claims to Markel.
- Each plaintiff purchased a Markel commercial policy with a Health Clubs (or Washington Health Clubs) Property Elite Enhancement endorsement providing Extra Expense and Civil Authority coverage triggered by “direct physical loss of or damage to” property.
- All policies include an identical Virus Exclusion: “We will not pay for loss or damage caused by or resulting from any virus, bacterium or other micro‑organism...”
- Markel denied coverage; it moved to dismiss the amended class action complaint under Rule 12(b)(6). The court applied choice‑of‑law rules and treated claims under Mississippi, Pennsylvania, and Washington law depending on where each policy was delivered.
- The court held (1) losses from COVID‑19 government shutdowns do not constitute the required “direct physical loss or damage,” and (2) even if they did, the Virus Exclusion unambiguously bars coverage; it therefore dismissed the insurance and civil‑authority claims and dismissed bad‑faith claims tied to the denied coverage.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether government COVID‑19 shutdowns constitute “direct physical loss of or damage to” insured property | Shutdowns rendered premises unusable and therefore caused direct physical loss | Loss of use alone is not physical damage; no physical alteration, destruction, or dispossession occurred | Court: Loss of usability is not direct physical loss; plaintiffs fail to plead physical loss triggering coverage |
| Whether the Virus Exclusion (“caused by or resulting from any virus”) bars recovery for shutdown losses | Shutdown orders, not the virus itself, caused plaintiffs’ losses; exclusion should not apply | COVID‑19 caused the shutdowns; exclusion’s “caused by or resulting from” language bars coverage | Court: Exclusion unambiguous; shutdowns resulted from COVID‑19 and thus claims are excluded |
| Whether Civil Authority coverage provides recovery for losses from government orders | Civil Authority provision covers loss when access is prohibited by authorities | Civil Authority only applies when access prohibition is due to covered physical damage; virus exclusion still bars recovery | Court: Civil Authority claims dismissed because virus exclusion precludes coverage for shutdowns |
| Whether bad‑faith claim survives (failure to pay in bad faith) | Markel acted in bad faith by denying meritorious claims | Denial was proper because no coverage exists; no bad faith where denial is justified | Court: Bad‑faith claims dismissed because plaintiffs cannot establish coverage |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (establishes plausibility pleading standard)
- Ashcroft v. Iqbal, 556 U.S. 662 (applies plausibility standard to Rule 12(b)(6))
- Seabulk Offshore Ltd. v. Am. Home Assur. Co., 377 F.3d 408 (4th Cir.) (policy delivery governs choice‑of‑law analysis)
- Real Hosp., LLC v. Travelers Cas. Ins. Co. of Am., 499 F. Supp. 3d 288 (S.D. Miss.) (virus exclusion bars COVID‑19 closure claims)
- Newchops Rest. Comcast LLC v. Admiral Indem. Co., 507 F. Supp. 3d 616 (E.D. Pa.) (virus exclusion unambiguous; bars recovery)
- Elegant Massage, LLC v. State Farm Mut. Auto. Ins. Co., 506 F. Supp. 3d 360 (E.D. Va.) (contrasting decision interpreting a different exclusion narrowly)
- Goines v. Valley Cmty. Servs. Bd., 822 F.3d 159 (4th Cir.) (attachments to complaint control over conflicting allegations)
- Wag More Dogs, LLC v. Cozart, 680 F.3d 359 (4th Cir.) (procedural standard for accepting well‑pled factual allegations)