Preview: Business Valuation Case Law Yearbook, 2022 Edition

The year 2021 was a year of change not only for the broader world, but also for the legal landscape; the U.S. ushered in a new administration with promises to increase taxes in a broad spectrum of areas, including reviving the estate tax levels to years gone by. This and the increase in litigation activity, perhaps also rebounding from the pandemic, have created an increase in the demand for business valuations and litigation services.

Every year, BVLaw codifies its reporting on case law in a yearbook. The resulting compendium is a resource for financial experts, as well as attorneys, who want a quick and easy way to stay on top of legal developments in their practice area. Read on to get a preview of one of our case analyses for the case: Life Time, Inc. v. Zurich Am. Ins. Co.

In COVID-19 Case, Federal Court Declines to Decide Contentious ‘Direct Physical Loss’ Issue and Sends Case Back to State Court

COVID-19-related damages cases are making their way through state and federal courts. Plaintiffs typically are businesses that have suffered economic losses because of various mandatory shutdowns. They file claims with their insurance agency, which frequently denies coverage for business interruption losses. However, more often than not, courts have sided with the defendant insurance company and dismissed the plaintiff’s case or ruled against the business owner. In the instant case, the plaintiffs, Life Time Inc. and related entities, operated nearly 150 health and fitness centers throughout the US. They argue their total business interruption and damages amounted to over $200 million.

Background. Plaintiffs submitted a claim for coverage under the “Interruption by Communicable Disease” (ICD) endorsement of their EDGE Global insurance policy (policy) issued by Zurich. Plaintiffs allege that this endorsement provides $1 million in coverage for each location, while defendant argues that the coverage is for $1 million in the aggregate for all locations.

The policy and related matters. The policy was issued to Life Time, but there was a broad definition of the insured, to include “Life Time, any subsidiary of Life Time, and LifeTime’s ‘interest in any partnership, joint venture or other legal entity in which [Life Time] has management control or ownership as now constituted or hereafter is acquired.” The policy also provides for ‘additional insureds.’” Bloomingdale Life Time Fitness, in Bloomingdale, Ill., represents one of the plaintiffs’ locations. Bloomingdale is a party to an operating and management agreement with Life Time that provides that Bloomingdale will obtain insurance and, with several other members, will be listed as additional insureds.

The case began in state court, but the defendants succeeded in removing it to federal court based on diversity jurisdiction. At this stage in the proceedings, the plaintiffs seek a remand to state court based on the Bloomingdale entity. The parties’ motions in this case focus on whether Bloomingdale is a “real” party in interest and has standing to sue under the policy. Based on the citizenship of its members, “Bloomingdale LT is a citizen of Illinois and the party that destroys complete diversity.” Zurich is also a citizen of Illinois.

Analysis. The burden of proving federal jurisdiction is always on the party seeking to establish it.

Title 28 U.S.C. Section 1332(a)(1) allows district courts jurisdiction over civil cases where the amount in dispute exceeds …

Want to see our full analysis of this case? Make sure that you are up-to-date on all the most important business law valuation events from 2021 with this must-read book. Learn more about this essential read here; while you’re at it, make sure that you’re up-to-date on all the most impactful valuation law cases of 2021 by checking out the Business Valuation Yearbook, 2022 edition.