Law360 (March 12, 2021, 9:09 PM EST) -- The owners of the Sacramento Kings and their arena have put Factory Mutual Insurance Co. on defense in a suit filed in California federal court, alleging they are owed $850 million for pandemic-related losses from having to cancel live entertainment events this past year in response to government shutdown orders.
Factory Mutual must cover for business interruption losses arising from canceled events such as NBA basketball games, NCAA tournament games, concerts by Billie Eilish and Camila Cabello, and a talk by former first lady Michelle Obama, according to the suit Sacramento Kings Limited Partnership and a group of other Sacramento retail and hospitality owners filed Thursday.
Without those events and with people being asked to stay home, the owners of Sacramento's Downtown Commons and the Kimpton Sawyer Hotel also suffered lost revenue, according to the suit. Like other live venue operators across the country, the policyholders said they "lost an entire year of revenue."
The policyholders accuse Factory Mutual of wrongfully denying their claim without giving them a proper investigation of coverage. Rather, the insurer has "talking points" already given to its claims personnel on what portions of every COVID-19 claim can be accepted and denied, according to the suit.
This is the latest in suits being filed against Factory Mutual. Currently, the insurer is fighting coverage disputes of $750 million with ITT Inc., $700 million with Ralph Lauren Corp., $500 million with Amphenol Corp. and $400 million with Cinemark Holdings Inc. All of these companies allege Factory Mutual owes coverage for their pandemic-related losses under "all risks" insurance policies.
In Thursday's complaint, the Kings and Golden 1 Center owners allege Factory Mutual is responsible for losses caused by the presence of the coronavirus and government orders.
Sac MUB1 Hotel LLC and SGD Retail LLC, which own a hotel and retail spaces, were also impacted by the canceled events at the Golden 1 Center, according to the suit. The owner of the hotel saw its occupancies drop along with profits and has been operating at a reduced capacity ever since reopening, according to the suit, and the retail owner of the Sacramento Downtown Commons lost rents.
They allege COVID-19 has been present at their facilities from individuals carrying the virus.
"Coronavirus-containing fomites [i.e., inanimate objects], respiratory droplets, and nuclei from those individuals have come into contact with, adhered to, and attached to the surfaces of the property," the insureds said.
As an example, the policyholders said a game between the Sacramento Kings and the New Orleans Pelicans at the Golden 1 Center, where thousands of fans were present, was canceled due to COVID-19 concerns.
Factory Mutual is acting in bad faith with its claims investigation process, according to the suit, because the insurer has adopted a company-wide position on coverage for COVID-19 claims and gave claims handlers certain guidelines to ensure the same conclusion is reached for all COVID-19 claims.
Factory Mutual spokesperson Steve Zenofsky told Law360 the company "values the long-term relationships" with its policyholders and is "proud to be leading the industry for claims service."
"It is unfortunate when legal matters arise because we strongly believe our insurance policies are clear on the coverage provided," Zenofsky said in a written statement Friday.
Counsel and representatives for the insureds didn't respond to requests for comment Friday.
The Sacramento businesses are represented by Richard R. Patch, Howard A. Slavitt, Fredrick C. Crombie and Benjamin C. Pulliam of Coblentz Patch Duffy & Bass LLP.
Counsel information for the defendants couldn't be immediately determined.
The case is Sacramento Downtown Arena LLC et al. v. Factory Mutual Insurance Co. et al., case number 2:21-cv-00441, in the U.S. District Court for the Eastern District of California.
--Additional reporting by Daphne Zhang, Hailey Konnath, Katie Buehler and Jeff Sistrunk. Editing by Janice Carter Brown.
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