Law360 (March 1, 2021, 2:24 PM EST) -- Federal Insurance Co. has urged a New Jersey federal judge to strike out the remaining allegation in a lawsuit by minor league baseball teams seeking coverage for income lost due to COVID-19, arguing the public health crisis didn't lead to the type of loss that would trigger the policy's protections.
In a Friday motion for judgment on the pleadings, the insurer asked the court to drop the claim by Whitecaps Professional Baseball Corp., owner of the West Michigan Whitecaps, for the same reason it tossed the Everett AquaSox and Asheville Tourists' allegations against Arch Insurance Co. — because the coronavirus didn't literally harm actual property.
"Under applicable law, 'direct physical loss or damage' requires an actual, tangible, physical alteration to the insured's property in order to trigger coverage under a first-party property insurance policy, which WPBC has failed to plead," the motion said.
"Additionally, the COVID-19 virus has not rendered WPBC's premises uninhabitable or unusable, as access to its premises was never prohibited by any of the government orders issued to mitigate the spread of the COVID-19 virus," according to the motion.
The dismissal of WPBC's claim would comport with the court's previous dismissals in the lawsuit, as well as align with similar rulings by courts across the country in cases seeking insurance coverage related to the pandemic, the motion said.
The teams' July lawsuit asserted claims of breach of contract against Federal Insurance and anticipatory breach of contract against Arch Insurance, and sought a declaration against each insurer that coverage was triggered by the pandemic.
The teams alleged the pandemic, which prompted government-mandated business limitations starting around March 2020, caused the first-ever shutdown of a Minor League Baseball season.
WPBC in particular was impacted by Michigan Gov. Gretchen Whitmer's executive order for residents to largely stay home and for nonessential businesses to shut down, which forced the closure of its stadium to ball games, the motion said.
The Federal Insurance policy at issue provided coverage to WPBC from March 1, 2020, to March 1, 2021, according to the motion. The policy required WPBC to "demonstrate that its losses constitute, were caused by, or resulted from 'direct physical loss or damage' to property," the motion said.
Federal Insurance denied WPBC's coverage claim in May, according to the motion. The insurer reasoned there was no evidence of the direct physical loss or damage to property that was required to trigger coverage and that "access to insured premises was not prohibited."
The teams have argued that the loss of the stadiums' intended use fits the "physical loss" requirement and that game attendance created the main source of their income, and have pointed out case law to that effect.
In November, U.S. District Judge Susan D. Wigenton trimmed from the suit claims by Everett AquaSox owners 7th Inning Stretch LLC and Asheville Tourists owners DeWine Seeds Silver Dollars Baseball against Arch Insurance Co.
Judge Wigenton said in her ruling that the teams hadn't alleged the required "direct physical loss or damage to property" to trigger coverage. Rather, they'd alleged the stay-at-home orders and other government action forced the cancelation of the season, and the resulting loss of income. That was "not enough," Judge Wigenton wrote.
Representatives for the parties didn't immediately respond to requests for comment.
WPBC is represented by Andrew L. Sandler, Stephen M. LeBlanc and Rebecca Guiterman of Mitchell Sandler LLC and by Robin L. Cohen and Orrie Levy of Cohen Ziffer Frenchman & McKenna LLP.
Federal Insurance Co. is represented by Daren S. McNally, Barbara M. Almeida, Meghan C. Goodwin and Nicholas S. Pradaxay 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 Mike Curley. Editing by Marygrace Murphy.
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