Ask A Lawyer: Consequences for Gyms That Stay Open

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Ask A Lawyer is a recurring column where attorney Jason Pill answers questions submitted by people who work in the climbing industry. For this edition, Pill summarizes some of the consequences gyms could face in staying open despite local health regulations. Got a legal question that you’d like him to tackle about your gym, your employees, or anything else in the wide world of climbing? Submit your legal question here.

Consequences for Gyms That Stay Open

QUESTION: “What are the consequences for climbing gyms that choose to remain open despite local health regulations?”

PILL: The stories of businesses staying open despite COVID-19 closure orders are increasing and have even included a few climbing gyms. Unfortunately, any climbing gyms that defy local closure orders likely feel as though they have no other choice but to stay open or risk permanent closure (assuming they are not staying open purely to make a political statement). While the necessity of staying open to avoid permanent closure indeed is sympathetic, it is not likely going to hold up, and climbing gyms that flout closure orders risk some serious consequences.

 

Legal Consequences

As a starting point, consider that most state and local closure orders contain penalties for non-compliance (and, in some instances, heightened penalties if the violation was knowing or reckless, as opposed to negligent). For example, some of the orders issued by Governor Gavin Newsom in California state that violations of the order start as a misdemeanor but increase to a fine of up to $1,000, imprisonment for six months, or both, for anyone who “refuses or willfully neglects” to obey a closure order. Additionally, Governor Newsom has hinted that businesses that operate in violation of closure orders could face regulatory or licensing enforcement issues.

But, California is not alone. On the other side of the country, Florida—which few would say has taken a similar approach to COVID-19 as California—has similarly instituted stiff penalties for non-compliance with closure orders. Violations of Florida Governor Ron DeSantis’ closure orders are treated as second-degree misdemeanors punishable by imprisonment, and Florida has utilized law enforcement officers and inspectors from the Department of Business and Professional Regulation to monitor businesses for compliance.

Demonstrating this concern, a fitness gym in Arizona recently was closed down for violating an executive order to close issued by the governor of that state. The Arizona Department of Health Services closed down the gym and ordered the gym to remain closed “until it is granted permission to reopen.” The gym was fined for non-compliance, and risks legal action, including the imposition of civil and criminal penalties, if it continues to violate the governor’s order. It is unclear when the Arizona Department of Health Services will allow the gym to reopen.

 

Insurance Risks

State and local penalties and fines represent the most direct threat for climbing gyms that defy closure orders, but the analysis does not end there. Perhaps the greatest concern is the risk of losing or compromising the climbing gym’s insurance coverage. Many commercial general liability insurance policies contain a criminal acts exclusion, excluding from coverage liability arising out of certain criminal acts, which likely would include violation of a government closure order with a criminal penalty. Likewise, most commercial general liability policies require compliance with local laws or ordinances as a condition of coverage following a loss.

So what does that all mean? It means that a climbing gym operating in violation of closure orders risks losing its insurance coverage completely—which could be catastrophic should an incident or injury occur while the climbing gym is defying closure orders. As commercial insurance coverage forms vary across policies and jurisdictions, an insured climbing gym should consider consulting with its insurance agent before proceeding with a reopening plan in a jurisdiction with restrictions in place to ensure that the climbing gym does not compromise any of its insurance coverage.

 

Workers’ Comp Issues

Along those lines, climbing gyms may also experience workers’ compensation issues if an employee gets hurt while working during a period of time when the climbing gym legally should have been closed—especially if that employee contracts COVID-19. A climbing gym would lose virtually all legal arguments under workers’ compensation law and generally liability laws if an employee contracted COVID-19 during a period of time when an order mandated the gym to close to avoid the spread of COVID-19. Even in a situation not involving COVID-19 (e.g., an employee injures their foot while cleaning holds), the climbing gym would still encounter significant hurdles to defending itself in any workers’ compensation proceeding or lawsuit if the climbing gym was operating in violation of a closure order and should not have been open in the first place. And, any damages in a workers’ compensation proceeding or lawsuit would far exceed the potential penalties or fines associated with most closure orders, not to mention the bad press that would probably follow.

Presumably, most climbing gyms that decide to defy government closure orders likely feel as though they have no choice but to do so. Assuming the climbing gym will go out of business if it cannot stay open and generate revenue, some owners may be tempted to “take their chances” by staying open. However, there are many legal risks and complications with this approach, and the risks identified above are not an exhaustive list. Additional issues may be present with climbing gyms’ licensing requirements, bank or loan covenants, or employees who refuse to come to work during a closure…just to name a few. Instead of defying closure orders, climbing gyms should explore all other options to generate revenue, identifying lending sources, or restructure their debts. In the opinion of this attorney, the risk of being in bankruptcy is better than the risk of being in jail.

 


Note: This column offers general advice and is not intended to be used as direct legal counsel. Gym owners should consult a lawyer for their facility’s specific legal matters. Pill can be contacted directly here.