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The Houston Rockets have joined the list of sports franchises to file lawsuits against their insurance carriers for losses related to COVID-19. In June, a group of 15 minor league baseball teams filed a lawsuit in the United States District Court in Philadelphia, Pennsylvania, alleging catastrophic financial loss due to governmental action and inaction and seeking coverage of its claims for business interruption. Just last week, the Houston Rockets organization followed suit. After a denial of a claim under its $400M insurance policy, Clutch City Sports & Entertainment , L.P. (d/b/a Toyota Center) and Rocket Ball, Ltd. (Houston Rockets) sued their insurance carrier Affiliated FM Insurance Company in Providence/Bristol County Superior Court. The complaint alleges, among other things, that the existence and presence of COVID-19 has triggered the “all-risks” coverage under its insurance policy, has caused physical loss and damage to the property, has led to impairment and loss of functionality, and has caused plaintiffs to experience covered business interruption. In addition to the all risks coverage, plaintiffs also assert that coverage was triggered under multiple “Additional Coverages” and “Coverage Extensions” due to property damage and business interruption. Plaintiffs cited the nature of COVID-19 as a communicable disease, the civil authority orders issued to stem the spread of the disease, and the fact that the NBA’s plan to resume play for the 2019-2020 season did not include Toyota Center as support for its claims of breach of contract, breach of the covenant of good faith and fair dealing, and violation of the Texas Unfair Claim Settlement Practices Act. Plaintiffs seek declaratory relief as well as special and consequential damages. As stated in the complaint, “[s]imply put, Toyota Center has lost its functionality and has been impaired by the existence of COVID-19.”
Whether lawsuits such as this will be the coming trend remains to be seen. A lot might depend on the success of the Rockets’ lawsuit and the federal action filed by the minor league teams. Until then, we’ll just have to wait for the buzzer and see how the court rules.