Lawsuit Details Minor League Teams’ Struggles Amidst Pandemic
Image credit: (Photo by Brian Westerholt/Four Seam Images)
Fifteen minor league teams have filed a lawsuit against their insurance companies alleging breach of contract for denying their business-interruption insurance claims during the coronavirus pandemic.
The case, Chattanooga Professional Baseball, LLC, et al. v. Philadelphia Indemnity Insurance Co., et al, provides an inside look at the difficulties minor league teams are facing with Minor League Baseball shut down by the coronavirus pandemic.
The suit claims minor league teams, on average, incur more than $2 million in expenses to operate their teams whether games are played or not, with the largest expense for most teams the lease they pay to play in their ballparks. While those expenses are fixed, income is largely reliant on attendance, and thus, whether or not games are played.
The suit states: “Because of this business model, which requires variable revenue tied to game attendance but significant fixed operating expenses, and the fact that most MiLB team owners are small business owners or family businesses rooted in the community in which they own a team, the teams have little prospect for economic survival if the operation of their businesses is interrupted for any significant period of time within a season. These dire economic consequences are worsened by the obligation many teams will have to refund ticket, event, advertising, and sponsorship revenue received in expectation that a full season of minor league baseball would be played in 2020.”
The 15 teams listed as plaintiffs are the short-season Eugene Emeralds, Boise Hawks and Idaho Falls Chukars; the low Class A Fort Wayne TinCaps, Greenville Drive, Columbia Fireflies, Augusta Greenjackets and Delmarva Shorebirds; the high Class A Fredericksburg Nationals, Inland Empire 66ers and Stockton Ports; the Double-A Chattannooga Lookouts, Binghamton Rumble Ponies and Amarillo Sod Poodles; and the Triple-A San Antonio Missions.
The five insurance companies listed as defendants are Philadelphia Indemnity Insurance Co.; Acadia Insurance Co.; National Casualty Co.; Scottsdale Indemnity Co.; and Scottsdale Insurance Co.
The suit states insurers denied teams’ claims for coverage on the grounds that losses “did not result from physical loss or damage to the property” and are barred by an exclusion for “loss or damage caused by or resulting from any virus, bacterium or other microorganism that induces or is capable of inducing physical distress, illness or disease.”
In the suit, teams claim that their loss of players—from MLB not sending players to minor league affiliates—and their inability to host games due to government restrictions or other factors do constitute a “physical loss.” The suit also alleges the exclusion from coverage due to a virus is “is void, unenforceable, and inapplicable.”
Teams are seeking damages to be determined during the trial, plus consequential damages, attorney’s fees and pre-and post-judgement interest.
The suit was filed in United States District Court for the Eastern District of Pennsylvania. The teams are represented by Robin Cohen and Patrick Pijls of McKool Smith LLC and Andy Sandler of Mitchell Sandler LLC.
Twelve of the teams’ policies are held by subsidiaries of Nationwide Insurance. In a statement to ESPN, Nationwide said “We are committed to doing all we can within the coverage our members have purchased. Business interruption coverage due to a virus outbreak has been excluded from standard policies issued to business owners across the insurance industry for quite some time. The risk for such an event is so vast, including it in standard coverage would make such coverage unaffordable or even unavailable.”
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