By Brian S. Scarbrough and Jan A. Larson
Live professional sports are set to return soon in the U.S. MLB will begin a shortened season on July 23 and 24. The NBA’s modified season returns on July 30 in Orlando, Florida. The NHL is planning a modified resumption with Stanley Cup qualifiers starting on August 1. The NFL still plans to open its regular season on September 10. While this all could change depending on how the coronavirus pandemic continues to develop in the U.S., at some point live sports will return. Whether it’s later this month, later this year, or next year, teams, leagues, and sports venue owners and operators should not lose sight of important insurance considerations as they plan and implement a season return. This article discusses some, though by no means not all, considerations these constituents should keep in mind.
Liability to fans in attendance or other third parties such as vendors or service providers on the premises
While leagues, teams, and venue owners and operators plan to have precautions in place to mitigate the risk of coronavirus exposure among those attending resumed sporting events, they still face the potential for demands or suits brought by third parties alleging bodily injury while on premises through exposure to coronavirus and/or a diagnosis of COVID-19. There will be decision points for individual leagues, teams and venue owners and operators regarding whether to try to implement liability waivers and/or releases from fans and the enforceability of such agreements. In any event, commercial general liability insurance policies could be a source of potential recovery as they typically provide defense and indemnity coverage for bodily injury or property damage liability claims brought by third parties. Policy language should be carefully analyzed for potential exclusions, including any virus exclusions or pollution or contamination exclusions. Exclusionary language varies widely and should be carefully examined before ruling out potential coverage.
Liability to players and other team or league employees
Even with precautions in place, teams and leagues may face claims by players, and venue owners and operators could be at risk of other employees alleging workplace injury as a result of the coronavirus. Some of these liability issues may be addressed in collective bargaining agreements with player unions and should be examined, as should the issue of the enforceability of implementing liability waivers. In any event, workers’ compensation and employers liability policies may serve as a source of potential recovery for a variety of employment-related injuries. Workers’ compensation coverage is governed by regulations in each state, and state laws vary regarding whether an employee testing positive for COVID-19 is presumed to be work related and whether workers’ compensation is the exclusive remedy.
Liability for third party claims alleging mismanagement, misrepresentation, misleading statements, or other wrongful acts
Teams, leagues, and venue owners and operators may also face the potential for claims seeking redress for alleged financial mismanagement, misrepresentations, errors or omissions in providing services, or other wrongful acts related to the resumption of live sports. Directors and officers (D&O) liability, errors and omissions (E&O) liability, or other professional liability policies may respond in such cases. Exclusions to look for include bodily injury exclusions, insured versus insured exclusions, and pollution or contamination exclusions, though language varies widely and should be carefully examined for favorable coverage carve-backs and before ruling out potential coverage.
Protections in case of another shutdown
Depending on how the pandemic develops, once live sports resume, teams, leagues, and venue owners and operators should carefully monitor any new government orders or guidance that might require another partial or complete shutdown and impact their operations. Commercial property insurance could offer a source of recovery for loss of business income/business interruption losses due to another shutdown of either a team, a league, or a venue directly or properties and suppliers that these entities depends upon in order to operate. Hundreds of lawsuits already have been filed against property insurers by policyholders in a number of industries impacted by the initial government shutdown orders, including restaurants and hospitality providers as well as by a number of minor league baseball teams.[17] While such policies often are written on an “all risks” basis to apply to all risks unless specifically excluded, a key issue is the presence of direct physical loss or damage and whether any virus exclusion might apply. Separately, event cancellation policies could apply for revenue loss from the cancellation, postponement, or relocation of an event due to covered perils. As to both types of policies, if they were recently placed since March 2020, particular attention should be paid to whether there is a specific coronavirus exclusion.
Insurance underwriting and renewal issues
Whenever your insurance policies come up for renewal and without regard to the line of coverage, this will be a challenging year for renewals. Insurers may try to add pandemic or coronavirus specific exclusions, raise premiums, reduce limits, put in place sub-limits for particular types of coverage, or even refuse to renew altogether. An insurer that has issued you policies for a number of years may seek to completely re-underwrite the account as if you were a new insured rather than a standard renewal. This will be a time to work closely with those in your organization in charge of risk management, your insurance broker, and outside coverage counsel to be fully aware of the changes being sought and to push back or narrow adverse changes during policy renewals.
Mr. Scarbrough is a partner in the Washington, DC, office of Jenner & Block, LLP. He is co-chair of the firm’s Insurance Recovery and Counseling Practice and represents policyholders in disputes with insurers. Mr. Scarbrough has significant experience both in counseling on insurance coverage and in litigating insurance coverage disputes. He has successfully pursued hundreds of millions of dollars of insurance recoveries for policyholders in state and federal court as well as in domestic and international arbitrations.
Ms. Larson is a partner in the Los Angeles, California office of Jenner & Block, LLP. She has broad experience representing corporate policyholders nationwide in complex disputes with their insurers, as well as counseling corporate policyholders on insurance coverage placements and renewals. Ms. Larson has been recognized by Chambers USA on its Insurance: Policyholder “Up and Coming” list and by Legal 500 as a “Next Generation” attorney in the Insurance: Advice to Policyholders category.
[17] See, e.g., Chattanooga Professional Baseball, LLC v. Philadelphia Indemnity Insurance Co., No. 2:20-cv-03032-TJS (E.D. Pa.), filed June 23, 2020 in federal court in Pennsylvania. The suit was brought on behalf of minor league baseball teams, their owners, and other insured service providers against their commercial property insurers after the minor league baseball teams’ seasons were cancelled. The plaintiffs subsequently voluntarily dismissed that suit and instead began refiling as individual suits against single insurers or groups of affiliated insurers. See, e.g., complaint filed on July 2, 2020 in 7th Inning Stretch LLC v. Arch Insurance Co., No. 2:20-cv-08161-SDW-LDW (D.N.J.); complaint filed on July 2, 2020 in Nostalgic Partners LLC v. Philadelphia Indemnity Ins. Co., No. 200700054 (Phil. Cty. Ct. Common Pleas).
