Insurer Ducks Minor League Baseball Teams' Virus Suit

By Mike Curley
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Law360 (January 20, 2021, 2:08 PM EST) -- A New Jersey federal judge has handed Arch Insurance Co. a win in a lawsuit by several Minor League Baseball teams who claimed it wrongly denied coverage for COVID-19 related losses, finding the teams failed to allege any physical loss or damage that would trigger their policies.

In a letter order filed Tuesday, U.S. District Judge Susan D. Wigenton threw out two counts of the complaint by Everett AquaSox owners 7th Inning Stretch LLC and Asheville Tourists owners DeWine Seeds Silver Dollars Baseball, saying they failed to state a claim.

The order removes Arch from the suit, but leaves standing one claim against Federal Insurance Co., which insures the West Michigan Whitecaps, another plaintiff in the case.

According to the order, each of the coverage provisions the teams cite require "direct physical loss or damage to property," but the teams haven't alleged such a loss. Instead, the judge wrote, the teams only allege that stay-at-home orders and other government action forced the cancelation of the season, and the resulting loss of income.

"This is not enough," Judge Wigenton said. "Although this court is sympathetic to the very real losses businesses have suffered during this pandemic, it cannot grant plaintiffs the relief they seek."

In addition, the judge wrote, the policies clearly and explicitly exclude coverage for losses arising from a virus, and the stay-at-home orders were issued to slow the spread of the coronavirus, "inextricably" tying the teams' losses to the virus.

The suit, filed in July, came amid a wave of litigation concerning Major League Baseball's decision not to send any players to the Minor League due to the pandemic. Minor League Baseball teams have claimed their canceled season harmed their income and their ability to pay fixed costs, such as stadium leases and administrative employee salaries.

In October, Arch aimed to have the suit struck, arguing the coverage is only triggered by physical loss or damage, but the teams never actually claimed their properties were contaminated by the virus or a person infected with it. Nor did the teams allege they took any efforts to decontaminate their properties, the brief said. Federal did not join in that motion.

In November, the teams fired back, arguing there had been a number of recent cases that have rejected bids to dismiss similar suits with findings that COVID-19 can trigger coverage for physical loss and damage.

Representatives for the teams and the insurance companies could not immediately be reached for comment Wednesday.

The teams are represented by Andrew L. Sandler, Stephen M. LeBlanc and Rebecca Guiterman of Mitchell Sandler LLC, John Briody and Patrick Pijls of McKool Smith PC and Robin L. Cohen of Cohen Ziffer Frenchman & McKenna LLP.

Arch is represented by Eric S. Aronson, Laura Besvinick and Julie Nevins of Stroock & Stroock & Lavan LLP.

Federal is represented by Daren S. McNally, Barbara M. Almeida and Meghan C. Goodwin of Clyde & Co. US LLP.

The case is 7th Inning Stretch LLC d/b/a Everett AquaSox et al. v. Arch Insurance Co. et al., case number 2:20-cv-08161, in the U.S. District Court for the District of New Jersey.

--Additional reporting by Jeannie O'Sullivan. Editing by Marygrace Murphy.

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