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Law360 (September 14, 2020, 1:55 PM EDT) -- Three units of Nationwide are asking an Arizona federal court to throw out a suit by 19 Minor League Baseball teams alleging they were wrongfully denied coverage for business losses due to COVID-19, saying a virus exclusion in their policies bars coverage.
In a motion filed Friday, National Casualty Co., Scottsdale Indemnity Co. and Scottsdale Insurance Co. said it was "black letter law" that the court should apply the policies as written, and that an exclusion specifically states that they will not cover losses resulting from bacteria or viruses.
That exclusion applies to all coverage in the policies, the insurers said, noting that in several places in the complaint, the teams, led by Chattanooga Professional Baseball LLC, allege that their losses were caused by or resulted from the coronavirus that causes COVID-19.
The insurers also noted that several other courts have ruled that virus exclusions bar coverage related to COVID-19, such as a Michigan case for a chiropractor's office that was decided Sept. 3.
The baseball teams' suit stems from a case originally filed in Pennsylvania federal court in June, which targeted several insurance companies. The teams later dropped that suit, and refiled in Arizona, Pennsylvania and New Jersey, with each suit focused on individual insurers.
In the Arizona suit, the teams and their concessions companies alleged that the insurers had wrongfully denied coverage for their losses stemming from the cancellation of the season.
The complaints in Arizona and New Jersey came days after Major League Baseball announced it would not be providing players to the Minor League teams, canceling the 2020 season, citing the "unprecedented" times the country is currently experiencing related to the pandemic. Major League Baseball is playing a shortened, 60-game regular season that will end later this month, according to media reports.
In Friday's motion, the insurers also took aim at the teams' argument that the insurance industry misled insurance regulators in 2006 regarding the exclusion and are making contrary arguments here, known as the "regulatory estoppel" argument. The insurers argued that regulatory estoppel is a New Jersey state law argument that no other court has recognized and that Arizona has previously refused to apply.
They further argued that the insurers' representations to regulators about the content and purpose of the exclusion and their arguments in this case are consistent with one another, so even if the argument was accepted in Arizona, it would still not apply.
The insurers also argued that other provisions in the policy bar coverage. In response to the teams' argument that their losses stem from MLB's refusal to provide players, the insurers argued that a provision in the policy precludes coverage for any loss resulting from "suspension, laps or cancellation" of a contract.
Finally, regarding the teams' claims under the civil authority provision, the insurers argued that it only applies if access is prohibited to both the teams' property and the immediate surrounding area, and neither of those has occurred.
"The insurance companies are represented by good lawyers and they made their best case," Andrew L. Sandler of Mitchell Sandler LLC, representing the teams, told Law360 on Monday. "The arguments they made were completely expected and we'll look forward to judicial resolution of those issues."
The insurance companies are represented by Brian A. Cabianca, Gregory T. Saetrum and Aneca E. Lasley of Squire Patton Boggs (US) LLP; Jay R. Sever and Katie W. Myers of Phelps Dunbar LLP; and Michael H. Carpenter of Carpenter Lipps & Leland LLP.
The teams are represented by J. Michael Hennigan, Robin Cohen, John Briody and Patrick Pijls of McKool Smith PC and Andrew L Sandler, Stephen M. LeBlanc and Rebecca Guiterman of Mitchell Sandler LLC.
The case is Chattanooga Professional Baseball LLC et al. v. National Casualty Co. et al., case number 2:20-cv-01312, in the U.S. District Court for the District of Arizona.
--Additional reporting by Daphne Zhang and Jeff Sistrunk. Editing by Alyssa Miller.
For a reprint of this article, please contact reprints@law360.com.
