Houston Chronicle sport reporter David Barron interviewed Andrew Sommerman regarding the Houston Rockets’ Covid 19 lawsuit against its insurance carrier for damages related to the shutdown of NBA games and concert performances in the wake of the COVID 19 pandemic.
Rockets sue insurance carrier over arena’s lost events amid pandemic
The Rockets have filed suit in Rhode Island against the team’s insurance provider, which last month rejected the team’s claim for damages related to the shutdown of NBA games and concert performances in the wake of the COVID-19 pandemic.
The lawsuit, filed in Providence County Superior Court on behalf of Clutch City Sports & Entertainment and Rocket Ball Ltd., accuses Affiliated FM Insurance Co. of breach of contract by refusing last month to honor a policy that provides a maximum of $412 million in coverage for which the team paid $790,490.
The Rockets did not specify the amount of the claim but note in the lawsuit that the policy provides “a substantial portion … in coverage for business interruption losses on a per occurrence basis.”
Toyota Center has lost at least 29 scheduled events, consisting of 20 concerts and nine Rockets games, plus undetermined postseason NBA games because of the COVID-19 shutdown. The pandemic’s impact, the team said, is akin to a natural disaster in its impact on the arena.
“The loss of functionality is no less physical than the impact of a property having lost its roof to a tornado or hurricane,” the Rockets’ attorneys said. “Where once the property could carry on its business function, the property with a blown away and crumbling roof cannot operate in that way. … That is physical damage, as is the loss of function at Toyota Center caused by COVID-19.”
The team claims no exclusions in the policy would limit coverage for physical damage or business interruption losses resulting from the COVID-19 shutdown. Affiliated FM, however, denied the Rockets’ claim on June 29 “by contending that no physical loss has taken place and that various exclusions apply to plaintiffs’ loss.”
“AFM has done so in bad faith, based on an apparent systematic company practice designed to minimize payments for covered COVID-19 payments,” the Rockets said in the lawsuit.
The Rockets are believed to be the first NBA team to file suit over insurance claims related to losses after the NBA season was halted in mid-March.
Dallas personal injury attorney Andy Sommerman said the Rockets likely opted to file in Rhode Island because state courts move cases at a faster pace than federal courts.
Had the case been filed with a state court in Houston, he said, it would have been moved to federal court because the Rockets and the insurance companies are based in different states.
Sommerman also said he expects the wave of COVID-19-related cases will change the way insurance companies market policies.
“When you had the SARS virus a few years ago, insurance companies in states where they had SARS started excluding viruses from their policies,” he said. “With this pandemic, you will see all insurance companies, while still marketing themselves as all-risk, will now have an exclusion regarding pandemics.”
The stakes in this wave of business interruption cases are high for insurers, who say such policies were only intended for physical damage and were never priced to cover a global virus outbreak.