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Xponential Fitness Sues Insurance Firm for Not Reimbursing COVID-19 Losses



Xponential Fitness Sues Insurance Firm for Not Reimbursing COVID-19 Losses

xponential fitness covid lawsuit news
Almost 1,700 lawsuits have argued that insurers are liable for the economic carnage caused by COVID-19. Judges are skeptical.

Xponential Fitness LLC, a global franchisor of niche fitness studio brands, is the latest business to sue an insurer, arguing that revenues lost because of the COVID-19 pandemic should be covered under their preexisting policy.

Represented by the Welder Firm, the Irvine, California-based Xponential Fitness is suing the Arch Insurance Co. in a Missouri federal court, after the insurer denied COVID-19-related payouts.

Xponential claims that two provisions of policies held by many franchisees are relevant: those protecting revenues in the cases of physical damage to facilities and those prompted when an “action of civil authority” prohibits access to the clubs.

Because a vast majority of clubs within Xponential’s brands are owned by franchisors, the lawsuit seeks to create a class action for them. Xponential owns nine brands, including Club Pilates, Pure Barre, YogaSix and Rumble.

Much like L.A. Fitness parent company Fitness International LLC in its lawsuit against its insurer, Xponential is arguing that the spread of the virus within the clubs constituted physical damage.

“The presence of people infected with or carrying COVID-19 particles or pathogens at premises renders the premises, including property located at that premises unsafe, resulting in direct physical loss to the premises and property,” it argues.

The suit also claims that the mandated lockdowns, which closed fitness studios across the country in the spring of 2020, “constitute ‘civil authority actions,’” which were addressed in Arch policies.

“As a result of Arch Insurance Company’s numerous breaches of the Policies, [the company and its franchisees] have sustained substantial damages for which Defendant is liable, in an amount to be established at trial,” the suit concludes.

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As restaurants, concert venues, gyms and other businesses based on accumulating crowds try to regroup and survive the sustained economic carnage of the pandemic, some have resorted to going to court to argue that their insurance policies cover some of the losses they sustained.   

Law.com notes that almost “1,700 lawsuits have been filed by businesses against their insurers, which denied claims for business interruption coverage” in claims related to the pandemic. Often the issue rests on whether or not COVID-19 spread constituted “physical damage.”

In state and federal courts across the country, results have been mixed but most judges have sided with the insurers.

Lawsuits will soon bring the matter before three state supreme courts and two federal circuits, which could create some precedent to guide future litigation.

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