The cancellation of the 2020 Minor League Baseball season has sparked a legal battle over who should absorb the financial loss.
A litigation in Pennsylvania illustrates how the battle is playing out.
In May, SWB Yankees LLC—a group that owns the New York Yankees’ Triple A affiliate Scranton/Wilkes-Barre RailRiders—sued three insurance companies (CNA Financial, Continental Insurance and Continental Casualty) in Lackawanna County court. The insurers’ refusal to pay a business interruption policy, SWB Yankees LLC insists, constitutes breach of contract and bad faith.
After several pandemic-related postponements, MLB cancelled the 2020 minor league season in June. The RailRiders lost significant revenue from the absence of ballgames at PNC Field. Expected proceeds from ticket sales, concession sales, sponsorships and advertising never materialized. The team was also set to host the 2020 AAA All-Star game, a multi-day event that would have included a banquet, celebrity softball game, home run derby and the all-star contest.
Like other ownership groups, SWB Yankees LLC is insured through a commercial property policy. The team’s policy provides recovery for losses resulting from a “necessary interruption of business caused by direct physical loss of or damage to their property.” It therefore contemplates fires, earthquakes and other types of disasters that directly damage property but does not mention SARS-CoV-2, COVID-19 or other viruses and infectious diseases. However, it refers to exclusions for pollutants, microbes and fungi; the parties disagree about the applicability of such language.
Since the pandemic began, many insurance companies have balked at paying COVID-19 related claims. In the context of baseball, the virus doesn’t inflict obvious damage to the ballpark. While SARS-CoV-2 might remain on surfaces for nearly a month, household cleaning solutions can neutralize it. Also, although government gathering restrictions and related measures impede the playing of baseball games in front of crowds, the games themselves can go on. MLB played a 2020 season and its teams’ prospects participated in intrasquad games held in minor league ballparks—including Scranton/Wilkes-Barre’s PNC Field.
In court filings, attorneys representing CNA and Continental insist that SWB Yankees LLC is misreading the policy. They maintain, among other points, that there is no direct physical loss or damage to the ballpark.
To bolster this position, the attorneys assert that “courts across the nation have dismissed COVID-19 business interruption cases under substantially similar circumstances,” citing a recent Michigan case, Gavrilides Management Company vs. Michigan Insurance Company. In it, the insurer successfully argued that COVID-19 did not cause a “physical loss” since there was no “distinct, demonstrable, physical alteration of the property.” The attorneys also mention Sandy Point Dental v. Cincinnati Insurance, which was tried in Illinois. Holding for the insurance company, U.S. District Judge Robert Gettleman observed there were no facts showing physical alteration, structural degradation or property repairs since March 2020.
Attorneys for the SWB Yankees highlight their own set of cases on COVID-19 and business interruption. They emphasize case law from Pennsylvania, which can have a greater precedential effect in Pennsylvania litigation. The attorneys underscore Dianoia’s Eatery v. Motorists Mutual Insurance, wherein U.S. District Judge Nora Barry Fischer maintained that the COVID-19 pandemic presents “novel insurance coverage issues” and there is “little persuasive authority from state courts on these issues.”
The litigation between SWB Yankees LLC and its insurers is only a handful of months old but has already migrated from state court to federal court and now back to state court. On Oct. 1, U.S. District Judge John Jones granted the SWB Yankees LLC’s motion to remand the case back to Lackawanna County.
It is also not the only case of its kind. More than 20 other minor league teams have filed business interruption lawsuits against insurance companies.
