Are “Business Interruption” Claims Now “Sports Interruption” Claims? (PA)
On Tuesday June 23, 2020, fifteen minor league baseball teams filed a complaint against their insurers in the federal district court for the Eastern District of Pennsylvania. The teams, which include, among others, the Chattanooga Lookouts in Tennessee and the Fort Wayne TinCaps in Indiana, claim that they are owed coverage under their respective business interruption policies. The teams allege that their insurers wrongfully refused to pay their claims for financial losses caused by the indefinite postponement of their seasons because of the COVID-19 pandemic.
The teams claim that “with no players, no games, and no fans, the teams’ losses of business income for the 2020 MiLB baseball season have been near total.” Further, “with virtually no source of income, and accruing expenses, the teams face catastrophic financial losses.” Thirteen of the fifteen teams that filed suit have already had their claims denied. The remaining two claim that their claims will likely be denied as well.
Like business interruption claims by restaurants and clothing stores, the outcome of the teams’ suit will likely turn on the definition of “physical damage.” The teams’ insurers will argue that their respective business interruption policies are limited to direct physical loss to the teams’ property. The teams allege, however, that they suffered “physical damage” because they lost the ability to use their ballparks.
Ultimately, the teams’ suit will provide another mechanism for the courts to further define the meanings of “physical damage” and what really is a “business”—or in this case—“sports interruption.”
Thanks to John Lang for his contribution to this post. Please email Heather Aquino with any questions.