Fifteen minor league baseball teams have filed a lawsuit against their insurance providers for denying their COVID-19-related business interruption claims.
In March, Baseball Commissioner Rob Manfred indefinitely suspended minor league baseball to stop the spread of the coronavirus. And while play and the income it generated were put on hold — likely until 2021 at the earliest — franchises continued to pay insurance premiums. Included in those business insurance policies is business interruption insurance, which provides coverage for payroll and other operating expenses in the event a business must temporarily close due to a disaster, such as a tornado or fire.
When minor league baseball temporarily halted across the country, many franchises filed business interruption claims with their insurers only to be told that viruses were not covered. This was disheartening for teams, most of which are small, independently owned businesses.
The minor league baseball teams claim in their lawsuit that they are left with more than $2 million in expenses from ballpark lease payments, marketing costs, food and beverage supplies, and salaries and benefits for their employees — expenses they say should be covered under their business interruption policies.
However, insurers are claiming that COVID-19 closures are not covered because 1.) the teams did not experience any physical damage that forced them to close or 2.) their policies specifically state that they don’t cover losses due to viruses.
The lawsuit was filed in U.S. District Court in Philadelphia against Philadelphia Indemnity Insurance Co., Acadia Insurance Co., National Casualty Co., Scottsdale Indemnity Co., and Scottsdale Insurance Co.
It was a treacherous time for minor league teams even before the global pandemic hit. The Professional Baseball Agreement between MLB and the minor league expires after the 2020 season. MLB had said it was considering reducing the guarantee minimum affiliates to 120 teams, down from 160. According to BaseballAmerica.com, this would be “the most dramatic restructuring of the minor leagues in more than half a century,” eliminating more than 25% of MiLB teams.
According to Fox13 Memphis, the minor league clubs listed in the suit are the Chattanooga Lookouts, Augusta GreenJackets, Boise Hawks, Columbia Fireflies, Eugene Emeralds, Binghamton Rumble Ponies, Fort Wayne TinCaps, Frederick Keys, Greenville Drive, Idaho Falls Chukars, Inland Empire 66ers, Amarillo Sod Poodles, San Antonio Missions, Stockton Ports and Delmarva Shorebirds.
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.