By decision of 28 October 2022, the California Eastern District Court ruled that the operators and manager of the stadium of the Sacramento Kings – an American professional basketball team based in Sacramento, California – and the owners of nearby businesses can proceed with their COVID-related coverage lawsuit.
Plaintiff had purchased an all-risk policy that provided several hundred million dollars' annual aggregate coverage against physical loss or damage to the insured properties. They filed suit against their insurer claiming that the policy covered the losses they had suffered on account of the pandemic and related closures. Defendant filed a motion to dismiss arguing that plaintiffs’ losses were not the result of “physical loss or damage”.
The Court noted that, among the additional coverages for “insured physical loss or damage”, the policy expressly included “the reasonable and necessary costs incurred in response to government orders regulating the actual presence of a communicable disease”. According to the Court, given that the policy expressly classified the loss and damage resulting from a communicable disease as one of a physical nature, “an insured could reasonably expect that the presence of a communicable disease such as COVID-19 fits under the “physical loss or damage” umbrella for the policy as a whole”. Since plaintiffs had thus offered a reasonable interpretation of the policy that would bring their alleged losses within the scope of the coverage, the Court denied the defendant's motion to dismiss and held that the case could proceed.
Reference: Sacramento Downtown Arena LLC et al. v. Factory Mutual Insurance Co.