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The Chanhassen-based fitness giant Life Time Inc. has sued its insurance company for $130 million for allegedly failing to cover losses tied to the COVID-19 pandemic and the government-ordered business shutdowns that followed.

The lawsuit against Zurich American Insurance Co. said Life Time bought the insurance policy in December 2019 and had sufficient coverage for business-interruption losses related to communicable diseases.

Life Time said in the complaint that it filed an insurance claim after losing more than $200 million due to COVID-19 business shutdowns that affected 150 fitness locations.

While Life Time expected to receive many millions in insurance relief, it was offered just $1 million from the Illinois-based Zurich, according to the lawsuit filed Aug. 19 in Hennepin County District Court.

The complaint goes on to say Life Time bought an Edge Global policy with limits up to $350 million to ensure it had ample coverage for all of its locations. The policy included special coverage limits for "interruption by communicable disease," the lawsuit said.

"But when governmental suspension orders began to be issued in states and locales around the country [due to COVID-19], Zurich denied coverage for the full amount of Life Time's mounting losses, offering just $1,000,000 in [total] coverage to Life Time, a measly quarter of 1% (0.28%) of the 2020 Zurich Policy's overall limit."

Life Time officials argue that the policy should be covering $1 million per insured location, not $1 million in aggregate as Zurich officials contend.

A spokeswoman at Zurich said the insurer does not comment on ongoing litigation.

A Life Time spokeswoman similarly declined to comment.

According to the lawsuit, Life Time is demanding $130 million in damages for breach of contract. It also wants a court declaration of its rights and of Zurich's responsibilities.

The lawsuit is just one of many expected in the coming months as companies wrestle with business interruptions and losses due to the pandemic as well as liability issues stemming from illnesses and deaths.

Zurich is not alone in facing litigation over coverage disputes amid the pandemic. Other insurers such as Chubb and Hartford were sued this summer by restaurant policyholders whose COVID-19 claims for business losses were denied.

Some companies such as Hartford and Travelers recently issued policy statements clarifying that their business-interruption insurance is largely meant to help cover losses stemming from direct physical damage to a property.

In New York, Massachusetts, New Jersey and Ohio, COVID-19 losses from mandatory government shutdowns are being dealt with via legislative proposals that aim to make insurers cover COVID-19 related business-interruption claims.

Months ago, the Minnesota Department of Commerce warned businesses to read their insurance policies carefully. It noted that some policies specifically exclude losses due to viruses or the fear of a virus. Other policies state that any business-interruption loss must be tied to a physical loss of an insured property.

Still other policies don't address how insurers will deal with losses stemming from government orders to close businesses.

Minnesotans wrestling with questions about business-interruption insurance can contact the Commerce Department's Consumer Services Center at 651-539-1600 or submit concerns online.

Dee DePass • 612-673-7725