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Factory Mutual Cries Foul On Sacramento Kings Virus Suit

By Eli Flesch · 2021-05-10 22:20:16 -0400

Factory Mutual Insurance Co. is seeking to net a dismissal in California federal court in a suit against the owners of the Sacramento Kings, saying they failed to show that COVID-19 and government shutdowns caused $850 million in insurable damage.

The "theoretical" presence of COVID-19 in the Golden 1 Center and nearby properties belonging to the basketball organization wasn't reason enough for Factory Mutual to foot the bill for pandemic losses, the insurer said Friday. That's because the virus didn't cause any physical damage or loss as required by the Kings' all-risk policy, it said.

In its bid to have the case dismissed, Factory Mutual said that finding virus particles responsible for causing physical damage "would effectively render insurers responsible for every cost associated with the billions of organic and inorganic particles that travel through the air or rest on the surfaces around us at every moment of every day."

Coronavirus particles don't alter or damage properties and can be cleaned, Factory Mutual said, citing the rulings of a slew of California courts. The insurer said a contamination exclusion for viruses in its policy with the Kings' owners would preclude coverage even if they were able to show damage or loss to their properties.

The policyholders in March said Factory Mutual owed them $850 million, the maximum amount of coverage under their policy, for the revenue they would have gained from events such as NBA basketball games, NCAA tournament games, concerts by music artists Billie Eilish and Camila Cabello, and a talk by former first lady Michelle Obama.

Government restrictions forced the policyholders to cancel events and suspend operations at their properties, which, in addition to the Golden 1 Center, includes the nearby Kimpton Sawyer Hotel and downtown Sacramento retail space. The Kings owners said individuals with COVID-19 were present at such properties, spreading "material" and "physically dangerous" respiratory droplets in the air and on surfaces.

As an example, the policyholders said an NBA game between the Kings and the New Orleans Pelicans at the Golden 1 Center was canceled due to COVID-19 concerns.

But Factory Mutual said their policyholders didn't provide any details to show that coronavirus particles were in the air or on surfaces. Neither did they adequately show evidence of infected individuals spending time at their properties, the insurer said.

The insurer said an additional loss of use exclusion in its policy with the Kings organization protected it from having to pay out claims for shutdowns stemming from government orders and from third parties such as the NBA and other event planners.

Factory Mutual is involved in at least 39 pandemic coverage suits, according to judicial data from the University Pennsylvania Carey School of Law, placing it among the insurers litigating the most of such cases. Another sports franchise, the Philadelphia Eagles, is also suing the insurer for denying coverage for pandemic losses.

In March, the Los Angeles Lakers accused a Chubb Ltd. unit of raking in profits while wrongfully refusing to cover the team's losses stemming from the COVID-19 pandemic. The team brought their federal complaint one week after the Sacramento Kings.

Counsel for Factory Mutual and the policyholders did not immediately respond to requests for comment.

Factory Mutual is represented by Joyce C. Wang and Lisa L. Kirk of Carlson Calladine & Peterson LLP.

The policyholders are represented by Howard A. Slavitt of Coblentz Patch Duffy & Bass LLP.

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 Shawn Rice, Melissa Angell, and Hailey Konnath. Editing by Jay Jackson Jr.

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