Fountain Enters., LLC v. Markel Ins. Co.

568 F.Supp.3d 613

FOUNTAIN ENTERPRISES, LLC d/b/a Anytime Fitness – West Point, Vita Grata LLC d/b/a Anytime Fitness – Spokane Valley, KZone Sports, Fitness, and Wellness LLC d/b/a Anytime Fitness – Schulykill Haven, B Fit B You LLC d/b/a Anytime Fitness – Danville, EWT Enterprises Inc. d/b/a Anytime Fitness – Irwin, GMT Fitness Enterprises LLC d/b/a Anytime Fitness – Glenshaw, and Northwest Wellness & Fitness LLC d/b/a Anytime Fitness Redmond, individually and behalf of all other similarly situated, Plaintiffs,

v.MARKEL INSURANCE COMPANY, Defendant.

Civil No. 2:21cv27

United States District Court, E.D. Virginia, Norfolk Division.

Signed October 26, 2021

Kip Andrew Harbison, Marc Christian Greco, Michael Andrew Glasser, William H. Monroe, Jr., Glasser & Glasser PLC, Norfolk, VA, for Plaintiffs Fountain Enterprises, LLC, Vita Grata LLC.

William H. Monroe, Jr., Glasser & Glasser PLC, Norfolk, VA, for Plaintiffs KZone Sports, Fitness and Wellness LLC, Northwest Wellness & Fitness LLC, EWT Enterprises Inc., GMT Fitness Enterprises LLC, B Fit B You LLC.

John Becker Mumford, Jr., Lindsay Lankford Rollins, Hancock Daniel & Johnson, Glen Allen, VA, Henrik Jonathan Redway, Dickinson Wright PLLC, Washington, DC, Timothy Mark Strong, Pro Hac Vice, Dickinson Wright PLLC, Phoenix, AZ, for Defendant.

ORDER

Arenda L. Wright Allen, United States District Judge

Pending before the Court is Defendant Markel Insurance Company's Motion to Dismiss and related Motion for Hearing on the Motion to Dismiss. ECF Nos. 11 & 17. For the following reasons, Defendant's Motion to Dismiss (ECF No. 11) is GRANTED and the Motion for Hearing (ECF No. 17) is DENIED .

I. BACKGROUND

In deciding a motion to dismiss for failure to state a claim, courts accept a complaint's well-pled factual allegations as true and draw any reasonable inferences in favor of the plaintiff. See Wag More Dogs, LLC v. Cozart , 680 F.3d 359, 365 (4th Cir. 2012). This Court considers the following facts as alleged in Plaintiffs' Amended Class Action Complaint (ECF No. 9) ("Amended Complaint" or "Complaint").

A. The Parties

Plaintiffs are a group of Anytime Fitness franchise owners. Am. Compl. at 2, ECF No. 9. Anytime Fitness is a 24-hour health and fitness club with locations in all fifty states. Id. Plaintiffs are franchisees who seek to represent themselves and a national class of Anytime Fitness franchise owners whose businesses were negatively impacted by government shutdowns to prevent the spread of the novel COVID-19 virus and its variants.¹ Id.

The Plaintiffs are as follows: Fountain Enterprises is a Mississippi limited liability company that operates Anytime Fitness franchises in four locations: Fulton, Mississippi; West Point, Mississippi; Brewton, Alabama; and Monroeville, Alabama. Id. at 2. Vita Grata is a Washington limited liability company and operates an Anytime Fitness franchise in Spokane Valley, Washington. Id. KZone is a Pennsylvania limited liability company and operates an Anytime Fitness franchise in Schuylkill Haven, Pennsylvania. Id. B Fit B You is a Pennsylvania limited liability company and operates an Anytime Fitness Franchise in Danville, Pennsylvania. Id. at 3. EWT is a Pennsylvania corporation, and GMT is a Pennsylvania limited liability company. Id. Together, EWT and GMT operate two Anytime Fitness franchises in Irwin, Pennsylvania and Glenshaw, Pennsylvania. Id. Northwest Wellness is a Washington limited liability company and operates an Anytime Fitness franchise in Redmond, Washington. Id.

Defendant Markel Insurance Company ("Defendant" or "Markel") is an insurance company with which Plaintiffs have bilateral contracts for insurance coverage. See id. at 3–4. Plaintiffs were notified by the franchisor that Markel was the preferred insurance provider for Anytime Fitness franchisees. Id. at 3.

B. Insurance Policies

i. Fountain Enterprises

Fountain Enterprises became an Anytime Fitness franchisee in 2009. Id. It subsequently purchased insurance coverage from Markel. Id. On April 1, 2019, Fountain Enterprises purchased a commercial policy and renewed it on April 1, 2020 (collectively referred to as the "Policy"). Id. ; Ex. A to Am. Compl., ECF No. 9-1. Fountain Enterprises paid for and received coverage under a Health Clubs Commercial Property Elite Enhancement ("HCLPE") endorsement to its Policy. Id. at 4; Ex. A to Am. Compl. at 1, ECF No. 9-1.

The HCLPE endorsement is intended to protect Fountain Enterprises from loss of business income resulting from suspension of operations. Id. at 4. Fountain Enterprises also obtained Extra Expense coverage. Id. This is intended to pay necessary expenses that Fountain Enterprises would not have incurred without direct physical loss of property. Id. One aspect of the HCLPE is "Civil Authority" coverage, through which Fountain Enterprises could recover loss of business income sustained and necessary "Extra Expenses" incurred because access to the premises was prohibited by civil authorities. Id.

The relevant provisions read as follows:

(a) Civil Authority

In this Additional Coverage, Civil Authority, the described premises are premises to which this endorsement applies. When a Covered Cause of Loss causes damage to property other than property at the described premises, we will pay for the actual loss of Business Income you sustain and necessary Extra Expense you incur caused by action of civil authority that prohibits access to the described premises, provided that both of the following apply:

(i) Access to the area immediately surrounding the damaged property is prohibited by civil authority as a result of the damage, and the described premises are within that area but are not more than one mile from the damaged property; and

(ii) The action of civil authority is taken in response to dangerous physical conditions resulting from the damage or continuation of the Covered Cause of Loss that caused the damage, or the action is taken to enable a civil authority to have unimpeded access to the damaged property.

Ex. A to Am. Compl. at 95–96, ECF No. 9-1.²

(3) Extra Expense

Extra Expense means the necessary expenses you incur during the "period of restoration" that you would not have incurred if there had been no direct physical loss or damage to property caused by or resulting from a Covered Cause of Loss. We will pay Extra Expense (other than the expense to repair or replace property) to:

(a) Avoid or minimize the "suspension" of business and to continue at the described premises or at replacement premises or temporary locations, including relocation expenses and costs to equip and operate the replacement location or temporary location.

(b) Minimize the "suspension" of business if you cannot continue "operations." We will also pay Extra Expense to repair or replace property, but only to the extent it reduces the amount of loss that otherwise would have been payable under this Coverage Form.

Ex. A to Am. Compl. at 95, ECF No. 9-1.

The Policy, like all others described below, also has a Virus Exclusion clause that states the following:

We will not pay for loss or damage caused by or resulting from any virus, bacterium or other micro-organism that induces or is capable of inducing physical distress, illness or disease. However, this exclusion does not apply to loss or damage caused by or resulting from "fungus", wet rot or dry rot. Such loss or damage is addressed in a separate exclusion in this Coverage Part or Policy.

Ex. A to Am. Compl. at 253, ECF No. 9-1 (emphasis added).

In March and April of 2020, Fountain Enterprises had to suspend business operations in Fulton, Mississippi; Clay County, Mississippi; and West Point, Mississippi. Id. at 5. It was required to close both of its Anytime Fitness franchises in Alabama as well. Id. at 6. Fountain Enterprises sent a Notice of Loss to Markel on April 18, 2020, describing loss of business income it incurred as a result of government shutdowns. Id. On April 23, 2020, Markel denied Fountain Enterprises' claim for coverage. Id. Fountain Enterprises alleges that Markel breached its insurance policy and seeks a declaratory judgment requiring Markel to extend coverage under the relevant provisions of the insurance policy. Am. Compl. at 71 ¶ B, ECF No. 9.

ii. Vita Grata

Vita Grata became an Anytime Fitness franchisee in 2019. Id. at 14. On May 16, 2019, it purchased an insurance policy similar to that which Fountain Enterprises purchased. Id. Its policy contained the same HCLPE endorsement, which allegedly allowed recovery under the Extra Expense and Civil Authority provisions. Id. Its policy also contained the Virus Exclusion clause. Am. Compl. at 14–16, 82, ECF No. 9.

Vita Grata shut down operations of its franchises on March 16, 2020. Id. at 14. As a result, it incurred losses and expenses related to the inability to use the physical locations. Id. It filed a Notice of Loss based on government shutdowns with Markel on March 18, 2020, and Markel refused to provide coverage on April 1, 2020. Id. at 16.

iii. KZone Sports, Fitness, and Wellness ("KZone")

KZone was advised by the franchisor to purchase insurance from Markel for its Anytime Fitness franchises. Id. at 7. It purchased a commercial policy on November 14, 2019. Id. KZone's policy included HCLPE coverage similar to that purchased by Fountain Enterprises. Id. Its policy also includes Extra Expense and Civil Authority coverage. Id. at 8. The Virus Exclusion clause described above is in this policy. Id.

KZone's Anytime Fitness locations in Pennsylvania were shut down on March 16, 2020, pursuant to government mandate. Id. The Amended Complaint does not describe when or if KZone filed a Notice of Loss with Markel and when it was rejected. Id. Nonetheless, KZone seeks recovery for loss of business for the duration it was shut down as a result of the Pennsylvania Governor's Executive Order. Id.

iv. B Fit B You ("B Fit")

When B Fit became an Anytime Fitness franchisee, it obtained commercial insurance coverage from Markel. Id. at 9. It purchased a...