Editor’s note: This story first appeared on AMNY.com
Up to 15 minor-league baseball teams are suing five-different insurance companies to recover financial losses experienced during the coronavirus pandemic. The lawsuit, which will be held in the U.S. District Court in the Eastern District of Pennsylvania, is being led by Robin Cohen of McKool Smith and Andy Sandler of Mitchell Sandler.
Minor-league owners have continued to pay business interruption policies to remain protected from economic distress that would come with unforeseen circumstances — such as COVID-19 — but those insurers have denied coverage for the 15 teams despite continuing to collect the annual premiums.
“A typical commercial insurance policy provides coverage not just for loss or damage to property itself but for business-income losses that flow from that loss or damage. If a restaurant burns down, for example, the insured has coverage for the building and for revenue losses that accrue during the period of the building’s restoration. So too here,” Cohen told Metro. “Our teams have suffered physical loss or damage due to the actual presence of and threat of the virus at their ballparks—both of which render them uninhabitable—and due to the mere loss of use of their ballparks.”
“In a decision that will be influential in this case, the Supreme Court of Pennsylvania recently held that SARS-CoV-2 in fact causes substantial damage to property. Because of this loss or damage, moreover, our teams are unable to play ballgames.”
Such actions from those companies are further hurting the small communities of these clubs who are dependent on receiving players and personnel from MLB clubs while relying on state and local officials to allow fans in the stadiums, thus creating revenue via ticket sales, parking, concessions and merchandise.
“The cancellation of ballgames threatens our teams’ survivals. Each of our clients is associated with a major league team. Though their major league counterparts can generate significant revenue even without fans in attendance—think broadcasting and licensing revenue—nearly all of our teams’ revenues flow from ticket sales,” she continued. “Without games played in front of live audiences, therefore, our teams have virtually no revenue whatsoever.”
Recent track records suggest that there is a strong case to be made, especially when considering illnesses or viruses have been suitable reasons to implement coverage.
“In similar cases to date, insurers have closed ranks and advanced functionally identical arguments to SARS-CoV-2-related coverage claims,” Cohen said. “In denying coverage, insurers have argued that the virus is not physical loss or damage and that losses resulting from viruses are excluded from coverage. Our teams’ insurers have advanced or will advance the same arguments. Yet courts around the country have long held that physical yet invisible substances akin to a virus, like ammonia and asbestos, are sufficient to trigger coverage.”
Three of the teams — the Binghamton Rumble Ponies, which is a double-A affiliate of the New York Mets, the Chattanooga Lookouts, and Idaho Falls Chukarsere — are among the 42 minor-league clubs facing elimination after a proposal last year during negotiations with MLB over operating agreements that expire at the end of 2020.
Despite Major League Baseball agreeing to start their season on July 23 or 24, Minor League Baseball is unlikely to play at all.
“The insurers’ denials of our teams’ respective requests for coverage violate their contractual commitments. Our teams are some of the oldest sports franchises in the United States,” Cohen said. “Indeed, some of our teams date to the nineteenth century. Due to these insurers’ wrongful conduct, this lawsuit is thus critical to protecting that legacy and securing the tradition of minor league baseball for generations to come.”
