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Lakers Say Insurer Using Strawman To Duck Virus Coverage

By Max Jaeger · Jun 4, 2021, 5:51 PM EDT

The Los Angeles Lakers told a federal judge Thursday that the team's insurer is misrepresenting its legal arguments in a bid to get a suit over coronavirus business-interruption coverage tossed.

The team said it properly alleged direct physical loss or damage to the Staples Center, and it argued that a motion to dismiss the contract suit by Federal Insurance Co., a Chubb subsidiary, repeatedly misstated the team's claims.

"Chubb's Motion seeks to dismiss a hypothetical case it wishes the Lakers had brought rather than the actual case the Lakers have pled," the Lakers said in a brief. "A ruling in favor of Chubb would mean that there is no set of facts under which a plaintiff seeking coverage for physical loss or damage from the coronavirus could ever survive a motion to dismiss, let alone obtain coverage."

Government orders preventing public events at the arena rendered it unusable, and thus damaged for the purposes of the insurance policy, the team said. That some employees were allowed access is irrelevant, because the center makes money only if fans can attend, they said.

The Lakers say the insurer incorrectly compared their case to about 50 others dismissed in the district because plaintiffs in those cases did not allege that the virus was present on their property.

"In attempting to equate the Lakers' coverage claim with claims brought by policyholders whose properties did not experience the same physical harm, Chubb is trying to shove a square peg into a round hole," the filing says.

The Lakers say they contended the virus was present, as evidenced by the fact half the NBA and NHL players who tested positive for COVID-19 in the first few weeks of March 2020 had passed through the Staples Center that month.

At least 10 NBA players, including two Lakers, had tested positive by the end of March, according to media reports from the time. At least eight professional hockey players contracted COVID-19 in that period, including four members of the Ottawa Senators who had been to the center earlier that month, according to reports.

"This is not, as Chubb puts it, a 'handful of NBA players,'" the Lakers said in Thursday's brief.

They also argued that exclusions in their policy for items like waste left by animal infestations prove that a sufficient quantity of contaminants can render a building unusable without physically changing a building's structure.

Still, the Lakers contend that the building was physically altered by the virus' presence, and they say they made substantial repairs to the arena to make it habitable again by upgrading air filters, installing touchless fixtures, and reconfiguring spaces with plastic dividers.

The Lakers noted that their "all-risk" policy included no contagion-related exclusions, even though Chubb included them in policies after the pandemic broke out. That proves the company thinks viruses present a risk constituting direct physical loss or damage, the team contends.

"If the presence of a virus or communicable disease at a property could not cause physical loss or damage, such exclusions would be unnecessary and illusory," the filing says.

In its complaint filed March 15, the Lakers organization says Chubb is on the hook to cover property damage up to $89.3 million and business-interruption losses of up to $47.6 million. The team wants a declaration on Chubb's obligation to honor the policy, as well as damages over $75,000 to be determined at trial.

Attorneys for the Lakers and Chubb did not immediately respond to a request for comment.

The Lakers are represented by Manuel Cachán, Kyle Casazza, Shawn Ledingham, John Failla and Nathan Lander of Proskauer Rose LLP.

Federal Insurance Company is represented by Daniel M. Petrocelli, Richard B. Goetz and Zoheb P. Noorani of O'Melveny & Myers LLP.

The case is Los Angeles Lakers, Inc. v. Federal Insurance Company, case number 2:21-cv-02281, in the U.S. District Court for the Central District of California.

--Editing by Peter Rozovsky.

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