(Article from Insurance Law Alert, October 2025)
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Holding
Under the specific language of an insurance policy endorsement, the cause of the insured’s loss was the government shutdown orders, rather than the pandemic, for purposes of determining the number of occurrences. Life Time, Inc. v. Zurich Am. Ins. Co, 2025 Minn. App. LEXIS 269 (Minn. Ct. App. Aug. 11, 2025).
Background
Life Time, a fitness club operator with 150 locations across the country, closed its centers in response to government orders issued by state authorities at various times during March and April in 2020.
Life Time sought coverage from Zurich American under an Interruption by Communicable Disease (“ICD”) endorsement that covered loss resulting from the suspension of business “caused by an order of an authorized governmental agency enforcing any law or ordinance regulating communicable diseases and that [sic] such portions of the location are declared uninhabitable due to the threat of the spread of communicable disease.”
The policy included $1 million per-occurrence limits and defined “occurrence” as “[a]ll loss(es) or damage that is attributable directly or indirectly to one cause or a series of similar or related causes.” Zurich took the position that all Life Time’s business closures were due to the same cause (the COVID-19 pandemic) and thus constituted a single occurrence under the policy, subject to a single $1 million limit.
Life Time sued, arguing that it was entitled to $1 million in coverage for each of its insured locations, or alternatively, that there were 41 occurrences based on the 41 orders it received to close its locations.
A trial court granted Zurich American’s summary judgment motion, ruling that the COVID-19 pandemic, rather than the government orders, was the operative event for purposes of determining the number of occurrences, and therefore that there was only one occurrence. The appellate court reversed.
Decision
The appellate court ruled that the lower court erred by finding that the cause of Life Time’s loss for purposes of establishing an “occurrence” was the pandemic. The appellate court focused on the following language in ICD endorsement: “Suspension caused by order of an authorized government agency.” (Emphasis in original). The court noted that while the ICD endorsement requires the order to relate to the threat of the spread of communicable disease, the threat alone does not cause loss covered under the endorsement. Rather, the operative “cause” of Life Time’s losses were the shutdown orders.
Additionally, the court concluded that all government orders within a specific jurisdiction constituted one occurrence. Focusing on the “series of related acts” language in the definition of “occurrence,” the court reasoned that orders within a single jurisdiction were part of a single “series of similar or related causes,” even if authorities allowed a business to reopen after a closure period but then issued a subsequent shutdown order. However, the court held that orders from different states, which were often released on the same day rather than in succession, could not be considered a single occurrence. Applying this framework, the court concluded that there were 29 occurrences.
Comments
The reach of the appellate court’s number-of-occurrences analysis may be limited. Most jurisdictions employ a cause-based test for determining the number of occurrences, focusing on whether there is “but one proximate, uninterrupted, and continuing cause which resulted in all of the injuries and damages.” However, the Minnesota Supreme Court has rejected this standard and instead endorsed “a more pragmatic approach” that “begins with the language of the policy itself.”
The court noted that even if it were to apply a cause-oriented test, it would still find that the losses were attributable to the government orders rather than the pandemic, but other courts applying a cause-based analysis have reached the opposite conclusion. See, e.g. Count Basie Theatre Inc. v. Zurich Am. Ins. Co., 2024 U.S. Dist. LEXIS 95978 (D.N.J. May 29, 2024) (finding that the insured’s damages stemmed from a common cause—the spread of the COVID-19 virus—rather than from governmental orders).