Lookouts Among Minor League Clubs Suing Insurance Companies For Not Paying Off On Business Interruption Policies

Wednesday, June 24, 2020

The Chattanooga Lookouts is among 15 minor league clubs suing insurance companies for failure to pay off claims on business interruption policies.

The lawsuit filed in the Eastern District of Pennsylvania said the failure of baseball to get underway this season due to the coronavirus has caused "catastrophic financial losses" to the Minor League operations."

The Lookouts have a policy with the National Casualty Company.

The suit says, "The vast majority of MiLB teams’ operating expenses, by contrast, bears little relationship to whether the teams are able to bring fans to the ballpark for ball games. The largest expense for many teams is the lease they pay to the municipal owners of the ballpark in which they play games. Most teams are responsible for a fixed lease payment of as much as one million dollars or more.

"In addition, MiLB teams generally have permanent employees needed to operate the team over an annual business cycle. The teams also have incurred many 2020 expenses related to marketing and advertising and the purchase and stocking of merchandise and food and beverage in preparation for the 2020 baseball season.

"Thus, on average, MiLB teams incur more than $2,000,000 in expenses to operate their teams without regard to whether they suffer interruption of their operations.

"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. 7.

"Given the business model for MiLB as described above, prudent owners of MiLB teams, including the Plaintiff Teams, purchased business interruption insurance from the Defendant Insurers and paid significant premiums to protect themselves from business interruption, including the cancellation of games. These “all risks” policies cover the MiLB teams for business interruption in circumstances where, as here, there has been direct physical loss or damage, including, but not limited to loss of use, to the teams’ ballparks or elsewhere caused by the SARS-CoV-2 virus, the governmental response to it, or the MiLB teams’ inability to obtain players. As described in detail below, however, the Insurers have failed to meet their obligations, thereby placing the Teams in serious risk of economic failure and jeopardizing the future of America’s Pastime as we know it."  

Plaintiffs are:

Chattanooga Professional Baseball LLC d/b/a Chattanooga Lookouts; Agon Sports and Entertainment LLC; Boise Hospitality and Food Services LLC; Boise Professional Baseball LLC; Columbia Concessions & Catering LLC; Columbia Fireflies LLC d/b/a Columbia Fireflies; Eugene Emeralds Baseball Club Inc. d/b/a Eugene Emeralds; Evans Street Baseball Inc. d/b/a Binghamton Rumble Ponies; Fort Wayne Professional Baseball LLC d/b/a Fort Wayne TinCaps; Fredericksburg Baseball LLC d/b/a Fredericksburg Nationals; Greenjackets Baseball LLC; Greenjackets Hospitality Food & Beverage Services LLC; Greenville Drive LLC; Idaho Falls Baseball Club Inc. d/b/a Idaho Falls Chukars; Inland Empire 66ers Baseball Club of San Bernardino Inc. d/b/a Inland Empire 66ers; Panhandle Baseball Club Inc. d/b/a Amarillo Sod Poodles; SAJ Baseball LLC; San Antonio Missions Baseball Club Inc. d/b/a San Antonio Missions; 7th Inning Stretch LLC d/b/a Stockton Ports; 7th Inning Stretch LP d/b/a Delmarva Shorebirds; 

Defendants are:

Philadelphia Indemnity Insurance Co.; Acadia Insurance Co.; National Casualty Co.; Scottsdale Indemnity Co.; Scottsdale Insurance Co. 


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