Lakers sue insurance company for denying COVID business loss claims

Another NBA team sued its insurance company, claiming it denied coverage related COVID-19 losses without investigating any claims, according to a federal lawsuit.

Proskauer Rose is representing the Los Angeles Lakers in its fight to collect unpaid claims submitted to Federal Insurance Co., owned by Chubb, when it had to close down the Staples Center last March because of Gov. Gavin Newsom's orders meant to curb the spread of the virus. The suspension of games league-wide resulted in tens of millions of dollars in losses from ticket sales, sponsorships and more, stated the complaint filed Monday in the Central District of California. Los Angeles Lakers v. Federal Insurance Co., 2:21-CV-2281 (C.D. Cal., filed March 15, 2021).

The COVID-19 virus was physically present at the Staples Center and surrounding properties, wrote Manuel Cachan, a partner at Proskauer Rose. The virus caused physical loss and damage to the properties, forcing the team to make physical changes, installing Plexiglas, touchless plumbing fixtures, toilets, sinks and more, Clachan said in the complaint. Staples Center also had its air ventilation remodeled, Cachan wrote. The lawsuit demands $75,000 from Chubb.

"Meanwhile, the Chubb insurance company six weeks ago posted quarterly gross income from premiums of over $10.2 billion, with profits of over $2.4 billion -- in excess of $1.2 billion more than the profits posted the same quarter last year," Cachan wrote in the lawsuit. "The past year may have been terrible for the rest of us, but it has been terrific for the insurance companies. From March 10, 2020 to today Chubb's stock price has risen approximately 25%."

The Lakers bought a broad commercial property premium policy for $145,052 that covered business interruptions due to physical loss or property damage, Cachan stated. However, Chubb's policies did not define what constitutes a physical loss or damage to property, he argued in the complaint.

"As a matter of policy, we do not comment on legal matters," Eric Samansky, a spokesman for Chubb, said in an email.

Before the pandemic, Chubb reported in its filings to the U.S. Securities and Exchange Commission that it had substantial exposure to losses resulting from disasters, including pandemics, the lawsuit states.

"The insurance company has long known that viruses and communicable disease can cause physical loss or damage to property. Most insurers, including Chubb, have created contractual 'virus exclusions' to avoid providing coverage for these losses, which would otherwise be covered," wrote Cachan.

The Lakers' policy was an all-risk policy that had no virus exclusion, Cachan argued.

"Each coronavirus virion is a physical object with a material existence that can survive outside the human body in viral fluid particles that, like the virion itself, cannot be seen by the naked eye," wrote Cachan. "As with other small particles like dust, the physical viruses linger in the air, traveling on air currents until they attach to an object or other surface."

Merely cleaning or disinfecting a surface is not enough to get rid of the virus, the complaint states.

The case has been assigned to U.S. District Judge Andre Birotte Jr. in Los Angeles.

The Lakers' complaint follows a similar one filed last week by the Sacramento Kings seeking $850 million in the Eastern District of California. Sacramento Downtown Arena LLC, et al v. Factory Mutual Insurance, 2:21-at-215 (E.D. Cal., filed March 11, 2021).