The Jacksonville Jaguars have sued their insurer, Axis Surplus Insurance Company, alleging that Axis failed to provide coverage for the Jaguars’ claim for revenue lost during the pandemic.
The Jaguars are the latest in a line of teams from the NFL and other leagues, including the NHL and MLB, to sue their insurers over the loss in revenue. Looking at litigation in Cook County and the Seventh Circuit, the Jaguars may be charting a new path.
The Jaguars policy covers the Jaguars for “business income losses and expenses incurred by ‘direct physical loss of or damage’ to [the Jaguars’] covered property,” which is common in many policies. In the litigation, the Jaguars claim that the pandemic and presence of COVID-19 at TIAA Bank Field caused a “direct physical loss of or damage to” TIAA Bank Field.
While not discussed below, the Jaguars note that “[t]he insurance industry, including Axis, has long known that viruses and communicable diseases can cause physical damage to property.” In support, the Jaguars allege that the insurers, including Axis, created broad “virus exclusions” to avoid covering damage to physical property caused by viruses and other communicable decisions. A virus exclusion was not included in the Jaguars’ policy.
The Jaguars utilize scientific support to demonstrate that the presence of COVID-19 causes physical damage or alterations to the property. “When viral spike proteins bind with property surfaces through physical and chemical adsorption, those surfaces change physically in several ways.” Among other changes, the Jaguars note that the chemical composition of the surface changes, the roughness increases, and the surface becomes more likely to repel water.
Lastly, the Jaguars allege that routine cleaning cannot prevent or restore property from the damage caused by COVID-19. “Cleaning of surfaces along is insufficient, as touched surfaces will be recontaminated.” In sum:
The coronavirus damages properties by physically altering their condition such that they are no longer fit for occupancy or use without extensive physical alterations, protocols, and testing to reduce the risk of further physical damages and prevent complete shutdowns.
Notably, in October 2020, Florida Governor Ron DeSantis allowed sports venues to operate at full capacity beginning that month, including TIAA Bank Field. Even though they were able to operate at full capacity, the Jaguars allege that the damage and alterations caused by COVID-19 forced the Jaguars to operate at a reduced capacity and caused the Jaguars to incur extra expenses to address the physical damage and alterations.
Analyzing Recent Opinions
The Jaguars have done their research on decisions regarding COVID-19 business interruption that judges have rendered in the United States Court of Appeals for the Seventh Circuit, which encompasses Illinois, and decisions in the Circuit Court of Cook County, where the Jaguars filed this case. Even so, the Jaguars face an uphill battle. An estimate of over 90% of federal cases and over 70% of state court cases have been dismissed.
In August 2021, Circuit Court of Cook County Judge Moshe Jacobius ruled in favor of the insurer, Society Insurance, in 17 different lawsuits, finding that the policies provided no coverage for the income the business lost or extra expenses incurred due to contamination and product spoliation during lockdown orders. Judge Jacobius agreed with Society’s argument that the business could still be used for carryout and delivery. “Under the policy in question, a physical loss is a sine qua non of coverage. A loss of use without physical loss doesn’t count.”
While the Jaguars’ case is in state court, the Jaguars can look to the federal court for persuasive authority. On the federal side, the United States Court of Appeals for the Seventh Circuit interpreted “direct physical loss” under Illinois state law in Sandy Point Dental, P.C. v. The Cincinnati Insurance Company. The Court utilized the Illinois Supreme Court’s holding in Travelers Insurance Co. v. Eljer Manufacturing, Inc., which defined “physical injury” as “an alteration in appearance, shape, color or in other material dimension.” Ultimately, the Court found that none of the claims sufficiently alleged a loss of income due to the physical alteration of the property.
Based on the above opinions, many plaintiffs have had a difficult time alleging alterations in appearance, shape, color or other material dimension. However, the Jaguars’ approach utilizing scientific reasoning and studies to support their allegations could create a new wave of litigation.
In light of Judge Jacobius’s opinion, it will be interesting to watch whether Governor DeSantis’s October 2020 removal of restrictions, which allowed sports venues to operate at full capacity, will impact the decision in this case.
Courts have dismissed most COVID-19 business interruption cases. In the wake of their dismissal, judges have left a trail of decisions that the Jaguars will use to carve their own path. If the Jaguars survive a motion to dismiss, we could see many others follow their path.
Originally Published on offthecourtdocket.com