This report is excerpted from a longer report by Gfeller Laurie LLP. We thank Charles Gfeller for sharing it with SAM.

SAM Magazine—West Hartford, Conn., Feb. 5, 2021—Many ski areas and ski industry vendors have been adversely impacted by the Covid-19 pandemic and associated shutdowns. In the business world generally, this has led to a wave of business interruption insurance claims and resultant insurance coverage litigation. While these claims have been mostly denied, and courts have sided with insurers, litigation continues to pursue avenues for relief. 

The vast majority of decisions on claims for coverage for Covid-19 business income losses continue to find no coverage, with decisions based on the absence of direct physical loss or analogous coverage terms, or on the presence of virus exclusions, or both.

Major League Baseball

This case is one of the few in which the plaintiffs claim that physical attributes of the virus caused property damage. In many other cases, insureds have alleged that the presence of the virus, standing alone, was sufficient to constitute property damage under a policy.

In Oakland Athletics Baseball Co. et al. v. AIG Spec. Ins. Co. et al., all thirty Major League Baseball teams, the Office of the Commissioner of Baseball and other affiliated entities (collectively, “MLB”) filed a lawsuit in California state court seeking declaratory relief and claiming breach of contract against three insurers based on their denial of MLB’s claim for losses stemming from the Covid-19 pandemic.

MLB alleges that it suffered losses during the 2020 Major League Baseball season arising from government orders that initially prevented teams from playing and, once permitted to play, prohibited fans from attending the games.

Regarding the virus specifically, MLB alleges that the presence of the virus as “respiratory droplets and nuclei” on surfaces in the various insured locations altered those surfaces and/or made it so that physical contact became dangerous, thus causing and continuing to cause direct physical damage to physical property and ambient air at the premises.

In addition, MLB alleges that the three All Risks policies in issue cover their business income losses and the costs of crisis management because the policies include coverage for “communicable disease caused by virus.” Two of the policies cover actual losses, and extra expenses under certain specified conditions. The policies also provide the same coverage if ingress or egress from the insured locations is either partially or totally physically prevented.  

MLB also seeks coverage under one policy’s crisis management coverage, which applies when an insured location is partially or totally closed as a result of the actual or suspected existence or threat of hazardous conditions.

MLB claims that the contamination exclusion on which the insurers based their denial of coverage “refers to ‘virus’ and to ‘disease causing or illness causing agent,’ but not to communicable disease, which is expressly covered by the Policies.” MLB also alleges that the exclusion applies to “costs” but does not mention “losses,” which it claims accounts for nearly all of the “losses” in issue as that term is used in the policies.

Major League Soccer follows suit. Perhaps taking a cue from the MLB suit, at least one Major League Soccer team (Keystone Sports Entertainment, LLC et al. v. Federal Insurance Company et al.) has sued for business income coverage on the theory that there is a “direct physical damage” element to its players and employees becoming infected with Covid-19 allegedly due, in part, to their exposure to the virus at the team’s stadium and practice facilities.

Federal Insurance Company initially denied coverage in June on the ground that there was no physical damage. Plaintiffs claim Federal did not conduct "any meaningful investigation" and never visited the insured locations. They also allege that “Covid-19 has physically infested” the insured premises and that various players and employees contracted the virus (allegedly, at least in part, as a result of their exposure to it at the insured premises). They also allege that Covid-19 made the insured premises "unusable in the way that they had been used before the onset of the Covid-19 pandemic.” They claim their policy provides coverage for business income and other related losses caused by “direct physical loss or damage” and that their properties have suffered such direct physical loss. The policy does not contain a virus exclusion.

Watch to see whether this alleged connection between the affected facilities and infected personnel is held to demonstrate the requisite “direct physical loss or damage” to property.

Risk Management of Covid-19 Exposures in Youth Sports

Vaccines have not yet been approved for use in children and it is unclear when a pediatric vaccine will become available. Since the majority of children will remain unvaccinated through the winter and even as the start of the spring sports season occurs, for youth sports organizations and communities who have moved forward, or are planning to move forward in some fashion, with youth sports, there are certain risk management and litigation considerations.

Litigation in the youth sports arena most likely will stem from Covid-19 transmission during practices and games and the resulting illness of an athlete and/or family members. The grounds for these claims and possible lawsuits could include: 

• failure to implement appropriate safety measures, 
• failure to warn of the risk of exposure and/or 
• failure to follow applicable Federal, state, and CDC guidelines. 

Though these claims will be very difficult to prove, they could become part of the youth sports litigation landscape.

The Centers for Disease Control and Prevention (CDC) has provided guidance and considerations to supplement state and local health and safety regulations. CDC recommendations include—but are not limited to—the standard bearers of staying home (when sick and/or exposed), wearing a mask and social distancing. NSAA, USSA, and other local governing bodies have also generated guidance documents on how to proceed with skiing and ski racing in the Covid-19 world.

Athletes should be encouraged to use their own equipment and extra precautions should be taken with shared equipment, including cleaning and disinfecting between use. Coaches and athletes should promote hand hygiene and respiratory etiquette and they should be equipped with adequate supplies for such purposes. The CDC also suggests that verbal announcements be made and signs posted in highly visible locations that promote protective measures and describe how to stop the spread of germs. 

Notably, CDC guidelines place responsibility on coaches to educate and keep track of players, maintain a safe and sanitary environment, and implement the CDC suggestions. Nonetheless, youth sports organizations and communities also should educate parents and participants on risks of exposure and mitigation of those risks. 

To avoid potential liability, youth sports organizations should consider implementing risk management techniques and protocols to educate participants and parents and to mitigate the spread of Covid-19 consistent with CDC guidelines.

Youth sports organizations also may consider employing specific Covid-19 exculpatory agreements, though their enforceability varies significantly by state.