The Last Word
Professional Sports Teams Move Off the Field and Into the Courtroom Over COVID-19 Claims
Lost revenue caused by pandemic-related shutdowns has sparked a rise in litigation against insurers over the failure to pay for business interruption losses.
- Lori Chordas
- June 2021
On March 11, 2020, the NBA announced during a game between the Oklahoma City Thunder and Utah Jazz that it was suspending the remainder of its season due to COVID-19 after Jazz center Rudy Gobert tested positive for the virus. Soon, leagues in nearly every sport followed suit, postponing or canceling competitions in arenas and stadiums around the world. Even when games resumed several months later, many were played in front of few or no spectators. COVID-19 robbed sports organizations of billions of dollars in lost ticket and merchandise sales, sponsorships, TV broadcasts and naming rights.
That financial hit prompted several teams to shift some of their focus off the field and into the courtroom. Earlier this year, the NBA's Los Angeles Lakers and the NFL's Philadelphia Eagles joined the roster of teams suing their property insurers over the denial of business interruption claims related to the pandemic.
In March, the Lakers sued Chubb subsidiary Federal Insurance Co. for allegedly issuing blanket denials of claims incurred by the COVID-19 shutdown and the closure of the Staples Center. Several days later, the Philadelphia Eagles Limited Partnership filed a suit in the Philadelphia Commonwealth Court against Factory Mutual Insurance Co., alleging the insurer failed to provide coverage on its all-risk policy.
Insurers, however, are fighting back on those and similar allegations, stating their policies are largely intended only for physical damages and not for losses stemming from a viral outbreak such as COVID-19.
So far there have been few, if any, payouts, said Robert E. Wallace Jr., a partner at Thompson Coburn LLP. But as insurers await verdicts or settlements, he said, the lawsuits already have raised issues and sparked discussions among insurers and other stakeholders about more-specific policy exclusions related to pandemics.
The Eagles' complaint said team officials expected coverage after it shut down its stadium, Lincoln Financial Field, in response to the pandemic. The suit asked the court to order Factory Mutual to cover all of the team's losses, attorneys' fees and other costs, noting the team paid top dollar for “best-in-class” coverage and expected that Factory Mutual would cover up to $1 billion in losses. But the insurer said it would pay only for claims under its “Communicable Disease Response” and “Interruption by Communicable Disease” coverages.
In the Lakers suit, team officials claimed they paid a premium of $145,052 for an all-risk policy with no exclusion for viruses and said they expected “Chubb would provide the coverage it had promised.” But instead, the suit said, Chubb “curtly” dismissed the Lakers' claim with a form letter and without conducting any investigation of the facts. The insurer said the virus did not cause the direct physical loss or damage required under the contract, according to the suit.
Wallace expects more cases could soon arise, continuing to spark conversations and much-needed changes, including policy exclusions that would no longer have “everyone guessing whether these events are covered or not.”