Major League Baseball (MLB) is scheduled to begin its COVID-delayed season on July 23, but the MLB teams’ Minor League counterparts will have no 2020 campaign. Their season has been canceled. Many Minor League teams are now seeking victories in court, suing their insurers for denying them coverage under their insurance policies for business interruption and income loss.
When 15 teams voluntarily dismissed a complaint last week that they had filed in Pennsylvania on June 23 against five insurers, two very similar suits were filed elsewhere the same day. Nearly 20 teams and their concessions companies filed suit in federal court in Arizona against three units of Nationwide Mutual Insurance. Three more filed suit against Arch Insurance Co. and Federal Insurance Co. in federal court in New Jersey. The pleading in the latter suit asserts that “the insurers have failed to meet their obligations, thereby placing the teams in serious risk of economic failure and jeopardizing the future of America’s pastime as we know it.” The plaintiffs contend that “the cancellation of the [Minor League] season is a catastrophic financial loss for all minor league teams,” which, among other things, typically profit from the attendance (in the aggregate) of more than 40 million fans per season.
The teams filing the New Jersey lawsuit blame the COVID-19 pandemic, government “action and inaction” related to it, and the decision by Major League Baseball not to send any players to the Minor Leagues for the cancellation of their season, and argue that the teams’ insurance policies should cover them for those losses. Insurers have been hit with a barrage of suits making claims of this type, often filed by restaurants, theaters, independent retailers, and other smaller businesses. “Direct physical loss” of, or damage to, property is often – but not always – required under policies for coverage to be available to the company making the claim. Some courts have shown a willingness, when that requirement exists, to take a broad view of what constitutes “direct physical loss,” and some policies provide coverage in the event of loss of access to property a category that arguably can include closures as a result of governmental mandates. As the Minor League franchises now litigating are doubtless keenly aware, scrutiny of key provisions and exclusions is necessary on a policy-by-policy basis to determine the likelihood of recovering losses related to interruption of business and resulting loss of income.
This information is intended to inform our clients and other friends about legal developments, including recent decisions of various municipalities, legislative, and administrative bodies. Because of the rapidly changing landscape related to COVID-19, we intend to send out regular updates. The information we provide is not intended as legal advice and viewers/readers should not rely on information contained in these materials to make business or legal decisions. Before making any legal decisions, consult your lawyer. Please do not hesitate to contact us should you need assistance responding to the many issues which have arisen, and will continue to arise, out of this situation.