The Houston Rockets have filed a lawsuit against their insurance company for denying a $400 million business interruption claim to recover losses suffered during closures to stop the spread of COVID-19. The Rockets’ lawsuit is the first among National Basketball Association (NBA) teams to be publicized.

Business interruption insurance is one of the core coverages included in a business owners policy along with general liability insurance, crime insurance, and commercial property insurance. Business interruption insurance provides coverage in the event a business must temporarily close due to disaster. For example, if a fire breaks out in a business and the business is forced to temporarily close for repairs, the commercial property insurance portion of the policy will cover building repairs while the business interruption insurance portion will provide coverage for payroll and other operating expenses.

According to the lawsuit, Rockets owner Tilman Fertitta’s Rocket Ball and Clutch City Sports & Entertainment, the holding company for the team, and the Toyota Center collectively paid Affiliated FM Insurance more than $700,000 in annual premiums. But the insurer denied the claim.

Many businesses are shocked to learn their insurers will not cover their COVID-19-related claims. Insurance companies allege that since businesses didn’t suffer physical damage from the pandemic, the businesses’ claims should not be covered. Others claim to have virus exclusions in their policies.

Not all sports franchises have been left in the lurch during the global pandemic. Wimbledon reportedly received $141 million from its insurance company and the NCAA collected $270 million, which enabled both franchises to cover operating expenses despite canceling events. Unfortunately, those examples are the exceptions.

Many businesses are not taking the denials sitting down and are filing lawsuits against their insurance companies demanding the insurers step up and cover the losses.

Beasley Allen lawyers are actively investigating and filing similar claims against various insurance companies for denial of business interruption coverage during the COVID-19 pandemic, and are involved in advocating for consolidation of these actions in an MDL. Dee Miles, head of our Consumer Fraud & Commercial Litigation Section, Rachel Boyd, and Paul Evans, lawyers in the Section, are spearheading this litigation for our firm and are monitoring all MDL developments as they arise.

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