Minor League Teams Strike Out On COVID-19 Loss Coverage

By Mike Curley
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Law360 (November 13, 2020, 3:30 PM EST) -- An Arizona federal judge has thrown out a suit by a number of Minor League Baseball teams aiming to secure coverage from three Nationwide units for business losses due to the cancellation of their season because of COVID-19, finding that a virus exclusion in the teams' policies bars any recovery.

U.S. District Judge Douglas L. Rayes granted a bid to dismiss the case by National Casualty Co., Scottsdale Indemnity Co. and Scottsdale Insurance Co., saying that while the teams, led by Chattanooga Professional Baseball LLC, tried to argue there were other causes for their loss, those causes all stem from the virus.

The policies all contain language saying that the Nationwide units will not cover loss or damage resulting from any virus, the judge said. And while the teams had argued in October that their losses stem from government shutdown orders, Judge Rayes said the virus is ultimately the cause.

"Plaintiffs' amended complaint does not allege any fact supporting an alternative theory for the issuance of the government orders," the judge wrote. "There is no allegation in the complaint that absent the pandemic, the government would have been prompted to issue stay-at-home orders or otherwise inhibit access to the ballparks."

The complaint specifically blames the virus for the government orders, the judge added, saying the teams have not argued that the exclusion is unambiguous.

The baseball teams' suit stems from a case originally filed in Pennsylvania federal court in June, which targeted several insurance companies. The teams later dropped that suit, and refiled in Arizona, Pennsylvania and New Jersey, with each suit focused on individual insurers.

In the Arizona suit, the teams and their concessions companies alleged that the insurers had wrongfully denied coverage for their losses stemming from the cancellation of the season.

The complaints in Arizona and New Jersey came days after Major League Baseball announced it would not be providing players to the Minor League teams — and canceling the 2020 season — citing the "unprecedented" times the country is currently experiencing due to the pandemic.

In September, the Nationwide insurers pushed to have the Arizona suit thrown out, saying it was "black letter law" that the court should apply the policies as written, and that an exclusion specifically states that they will not cover losses resulting from bacteria or viruses.

In their October brief, the teams also contended that MLB's refusal to send players should also trigger coverage because it is not a "lapse" in their contract that would also be excluded by the policy. But Judge Rayes rejected this argument as well, saying the complaint clearly alleges that MLB is contractually obligated to send players and refused to do so.

Finally, the judge rejected the teams' argument that the exclusion is unenforceable because the insurers misrepresented the exclusion's nature to state insurance commissioners. Judge Rayes said that no state whose law applies to the case has recognized that defense and added that the teams have not claimed that the insurers misrepresented the coverage terms to them when the policies were issued.

Representatives for the teams and the insurers could not immediately be reached for comment Friday.

The insurance companies are represented by Brian A. Cabianca, Gregory T. Saetrum and Aneca E. Lasley of Squire Patton Boggs (US) LLP; Jay R. Sever and Katie W. Myers of Phelps Dunbar LLP; and Michael H. Carpenter of Carpenter Lipps & Leland LLP.

The teams are represented by J. Michael Hennigan, Robin Cohen, John Briody and Patrick Pijls of McKool Smith PC and Andrew L. Sandler, Stephen M. LeBlanc and Rebecca Guiterman of Mitchell Sandler LLC.

The case is Chattanooga Professional Baseball LLC et al. v. National Casualty Co. et al., case number 2:20-cv-01312, in the U.S. District Court for the District of Arizona.

--Additional reporting by Jeff Sistrunk. Editing by Alyssa Miller.

For a reprint of this article, please contact reprints@law360.com.

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