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Law360 (October 9, 2020, 5:58 PM EDT) -- One of the world's largest holders of rodeo events has accused Hallmark Specialty Insurance Co. of wrongfully denying its COVID-19 loss claim by asserting it suffered no physical damage to property, when government closure and quarantine orders specifically mentioned "the physical presence" of COVID-19 in its rodeo stadium in Houston.
Houston Livestock Show and Rodeo Inc., which organizes one of the largest rodeo shows in the world, says it had to close its 2020 season weeks early after the Houston Health Department issued a quarantine order to NRG park, its annual venue for the March rodeo shows, according to a suit filed in Texas state court Thursday.
HLSR is an additional insured under a $600 million Hallmark policy that its landlord, Harris County Sports & Convention Corp., holds with the insurer. The policy provides more than $79 million "all-risks" coverage for business interruption loss and $5 million coverage for pollution cleanup, according to the petition.
The rodeo organizer says its policy's civil authority coverage was triggered because it ceased business due to "valid" government orders, which specifically referenced the "existence and physical presence" of COVID-19 at the NRG stadium. According to HLSR, that language established that it experienced physical damage from the virus and lost use of the property in being unable to carry out business as intended.
Since 2003, HLSR has held rodeo shows at the stadium, which begin in February and continue through March. More than 2.5 million people attended the rodeo events in 2019. Attendance dropped to 851,000 people this year because the Houston Health Department ordered the company to close and quarantine on March 11, two days before Texas Gov. Gregg Abbott issued statewide closure orders.
The rodeo organizer says the Houston Health Department's quarantine order was carried out after visitors brought COVID-19 to the NRG stadium. HLSR says it lost revenue because it had to close about 12 days early for the 2020 season. It filed a claim to Hallmark on April 6, and the insurer denied coverage in late May, asserting a lack of requisite physical damage to property.
In the petition, the entertainment company alleges Hallmark failed to fully investigate its loss, did not conduct any testing of the virus contamination at its property, and never interviewed its staff about the damage and effects of the government orders.
As a result of the COVID-19 shutdown orders, "numerous income-generating concerts and events were canceled," causing significant financial loss, HLSR says. The company says its business model depends on large group gatherings, such as trade shows and carnival attractions, which are exactly what was prohibited by the civil authority orders.
The rodeo organizer is accusing Hallmark of breach of the insurance contract and bad faith, asking the court to hold that its loss should be covered under the policy, and demanding damages to be determined in a jury trial and attorney fees.
Representatives of the parties could not be immediately reached for comment on Friday.
HLSR is represented by Denman H. Heard, Derek Merman and Kane Kenney of Heard Law Firm PLLC.
Counsel information for Hallmark was not available.
The case is Houston Livestock Show and Rodeo Inc. v. Hallmark Financial Services Inc., case number 2020-64224, in the District Court of Harris County in the State of Texas.
--Editing by Janice Carter Brown.
For a reprint of this article, please contact reprints@law360.com.
