Elegant Massage, L.L.C. v. State Farm Mutual Automobile Insurance Co.

Elegant Massage, L.L.C. (plaintiff) owned Light Stream Spa (the spa), which provided therapeutic massage services in Virginia Beach, Virginia. Elegant Massage purchased an all-risk commercial insurance policy from State Farm Mutual Automobile Insurance Company (State Farm) (defendant) for the spa. The policy covered damage to the premises from all risks except those explicitly excluded—such as damage from viruses—and included coverage for loss of income and extra expense due to the suspension of business operations. During the COVID-19 pandemic, Virginia’s governor enacted executive orders closing certain businesses and heavily restricting businesses’ ability to operate. Elegant Massage closed the spa from March to May 2020, initially voluntarily and later in compliance with the governor’s executive orders. Elegant Massage submitted an insurance claim for loss of income and extra expenses, which State Farm denied. State Farm denied coverage because Elegant Massage voluntarily closed the spa and the policy did not cover damage caused by viruses. Elegant Massage filed a class-action lawsuit against State Farm for declaratory judgment, breach of contract, and breach of the covenant of good faith and fair dealing in denying benefits under the all-risk policy to 111 policyholders who experienced business closures due to the executive orders. Elegant Massage filed a motion for class certification, which State Farm opposed.