By Shushan Dai
The 30 Major League Baseball clubs along with the Office of the Commissioner of Baseball, MLB Advanced Media, Inc., The MLB Network, LLC, and Tickets.com, LLC filed a lawsuit to enforce the insurance promises made by their insurers including AIG Specialty Insurance Company, Factory Mutual Insurance Company, and Interstate Fire & Casualty Company.
According to the lawsuit filed on October 16, 2020 with the Superior Court of the State of California for the County of Alameda, the plaintiffs are claiming during 2020 season, due to the harm of COVID-19 and a series of orders, their “loss of revenue and additional expenses, initially from canceled game and then from playing games without fans in the stands, is in the billions of dollars” Plaintiffs’ Complaint, Oakland Athletics Baseball Company et al. v. AIG Specialty Insurance Company et al., Cal. at 5-6 (2020). Luckily, the plaintiffs allege that they paid millions of dollars in top-flight insurance premiums every year—all risks business interruption coverage (the “All Risks Policies”)—for more protective coverage and to protect them from such a catastrophe. All the plaintiffs claim that they are insured under the All Risks Policies, and they are seeking to obtain the insurance coverage of a wide array of COVID-19 losses. However, the insurers have publicly refused to provide coverage for nearly all of the plaintiffs’ losses.
The Major League Baseball (MLB) is divided into two leagues—the American League and the National League—including 15 clubs in each subdivision. The baseball season consists of a pre-season (Spring Training), a regular season and a postseason Plaintiffs’ Complaint, Oakland Athletics Baseball Company et al. v. AIG Specialty Insurance Company et al., Cal. (2020). Through the lawsuit filed by the plaintiffs, “in 2020 and in recently year, each of the 30 Clubs was scheduled to play 162 games, for a total of 2,430 regular season games” Plaintiffs’ Complaint, Oakland Athletics Baseball Company et al. v. AIG Specialty Insurance Company et al., Cal. at 12 (2020). For baseball the main sources of revenues are from attendance of fans and ballpark-related activities including the tickets sales, in-park concessions, suite and luxury seat license, in-park merchandise, and parking. For example, “in 2019, in-park sales totaled well into the billions of dollars” Plaintiffs’ Complaint, Oakland Athletics Baseball Company et al. v. AIG Specialty Insurance Company et al., Cal. at 13 (2020). In addition, baseball also generated substantial revenues from media, digital platforms and rental incomes.
In each year, the plaintiffs allege they purchased the All Risks Policies in order to protect their property and business interests. Coverage in the Policies includes a variety of physical losses and damages caused by a communicable disease such as COVID-19. In accordance with the plaintiffs, because of the outbreak of COVID-19, from March 2020 to late July 2020, the Clubs suffered from more than 1500 cancellation of scheduled games—the final weeks of Spring Training and more than half of the normal regular season. In the meantime, a number of orders as the result of COVID-19 has prohibited, limited, restricted, or impaired access to the ballparks. Accordingly, baseball’s ballparks and other facilities could not function properly and operate as usual. With above impacts, the complaint filed by plaintiffs describes huge losses and extra expenses resulting from COVID-19 which should be paid by insurance coverage.
The coronavirus or coronavirus-containing fomites, respiratory droplets, and nuclei will be active in physical substances and emitted to the air. When individuals carrying the coronavirus contact the surfaces of the facilities, they also bury a potential danger to others who may physically touch those facilities. In addition, the coronavirus will also be emitted and remain in the air through the breath, talk, cough and sneeze from an infected person. This directly leads to the limited use of facilities and the high risks of contamination inside buildings. Meanwhile, with the widespread of COVID-19, there are particular governmental orders issued in attempt to prevent against future proliferation and transmission of the coronavirus. These orders concurrently restrict and prohibit the access to each insured location.
Moreover, in order to reduce and eliminate the presence of coronavirus, each plaintiff spent substantial sums on cleaning and disinfecting supplies, repairing or changing air filtration systems, additional security at closed facilities, and other actions. Consequently, due to the inaccessibility to the insured property and consistent remediation measures, according to the plaintiffs, they incurred physical damage and loss which should be covered by the All Risks Policies.
As a direct result of aforementioned physical damage and loss, the plaintiffs alleged that each of them “sustained losses of gross earnings, additional operational expenses, loss of other operational earnings, losses of gross profits, diminished sales, extra expenses, increases in the cost of doing business, crisis management expenses, claim preparation costs, leasehold and rental insurance losses, and other covered losses” Plaintiffs’ Complaint, Oakland Athletics Baseball Company et al. v. AIG Specialty Insurance Company et al., Cal. at 44 (2020). As alleged by plaintiffs the losses and additional expenses should be paid by insurance coverage and no exclusions contained in the All Risks Policies. Nevertheless, the insurance providers declare that they will not provide coverage for the losses.
COVID-19 has had a significant influence on the sport industry. Although still pending, the judgement in this case could impact similar issues caused by the pandemic such as the postponement of the Olympic Games Tokyo 2020 and the cancelation of the 2020 NCAA Men’s Basketball Tournament. There is no doubt that live sporting events generate enormous income for sport industry. With various unstable factors, many sport teams and organizations have to cancel or change schedules, resulting in different losses and extra expenses. Whether insurance carries should pay for pandemic-related losses is an open question.
Shushan Dai, a doctoral student in Florida State University, studies issues regarding cultural politics and physical culture in sport.
