LA Lakers’ Insurer Seeks Redo of Covid Damages Claim Ruling

A California federal court ruling green lighting some of the Los Angeles Lakers’ Covid-related insurance claims should get a second look, a Chubb Ltd. affiliate says, citing a recent state appeals court decision.

The US District Court for the Central District of California ruled in March that the Lakers sufficiently allege the Staples Center, the property covered by the policy, was physically altered by the virus and that the alterations caused “detrimental economic impact.”

The Lakers may therefore pursue coverage from Chubb affiliate Federal Insurance Co. for the cost of cleaning or replacing those allegedly damaged surfaces, the court said. The court, however, dismissed the Lakers’ claims that were based on the policy’s business interruption clause.

The insurer, citing the April 22 state appeals court ruling in United Talent Agcy. v. Vigilant Ins. Co., said the court should reconsider its decision and dismiss the Lakers’ remaining claims.

“When faced with allegations nearly identical to plaintiff’s here, the Court of Appeal held that the insured in that case did ‘not establish that the presence of the virus constitutes physical damage to insured property,’” the insurer said in a memorandum filed Monday.

The Lakers, meanwhile, asked the court to certify for immediate appeal its causation ruling denying business interruption coverage.

The complaint alleges “two independent, concurrent causes of the business interruption—property damage, which is a covered peril, and government orders,” which the court has held are not, the Lakers said in its own motion filed Monday.

The court found that the alleged property damage didn’t cause a business interruption because the interruption would have happened anyway due to the government orders.

Appellate review is warranted because the case “presents a novel and unsettled question concerning the test for causation in an insurance-coverage dispute where two perils—one covered and the other uncovered—each independently and concurrently cause a loss,” the Lakers said.

Judge Terry J. Hatter Jr. is assigned to the case.

The Lakers are represented by Proskauer Rose LLP. Federal is represented by O’Melveny & Myers LLP.

The case is LA Lakers Inc. v. Fed. Ins. Co., C.D. Cal., No. 21-cv-02281, 5/23/22.