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Law360 (March 11, 2021, 4:15 PM EST ) Three Nationwide Insurance units are asking the Ninth Circuit to toss 19 Minor League Baseball teams' suit seeking pandemic-related coverage, urging the appellate court to recognize "numerous" federal court rulings that a policy's virus exclusion bars coverage for COVID-19-related losses.
In a brief filed Wednesday, National Casualty Co., Scottsdale Indemnity Co. and Scottsdale Insurance Co. said the teams admitted that their revenue losses were caused by COVID-19, so the policy's virus exclusion should be enforced to preclude coverage.
The carriers argued it was "black letter law" that the court should apply the policies as written, and that an exclusion specifically states that they will not cover losses resulting from bacteria or viruses.
Although the baseball teams said it remains to be discovered whether the coronavirus or the state order caused their losses, they have repeatedly alleged that the virus was present on their properties and the government orders were issued as a result of COVID-19, the three Nationwide units said.
Last month, the teams, led by JetHawks Baseball LP, told the Ninth Circuit that the lower court "incorrectly presumed" that all their losses were caused by COVID-19, while their three Nationwide insurers never demonstrated that the virus exclusion should fully apply to bar coverage.
The teams said the policy's virus exclusion does not have an "anti-concurrent causation," so the lower court had no reason to conclude that all the teams' losses were caused by the virus instead of government closure orders.
In November, U.S. District Judge Douglas L. Rayes granted the insurers' bid to dismiss the case, saying that while the teams tried to argue there were other causes for their losses, those causes all stem from the virus.
On Wednesday, the insurers asked the Ninth Circuit to side with the lower court and acknowledge that "numerous federal courts have enforced identical virus exclusions in other COVID-19 business interruption lawsuits." The teams had waived their right to discuss the "anti-concurrent" clause in the original complaint, so there is no need to look at it now, the carriers said.
In the brief, the insurers also took aim at the teams' argument that the insurance industry misled insurance regulators in 2006 regarding the exclusion and are making contrary arguments here, known as the "regulatory estoppel" argument. The insurers argued that regulatory estoppel is a New Jersey state law argument that no other court has recognized.
Estoppel cannot be used to expand coverage beyond what's written in the insurance policy, the carriers said, adding that the baseball teams could not speak to how the three Nationwide units themselves misrepresented the virus exclusion to regulators.
In response to the teams' argument that their losses stem from Major League Baseball's refusal to provide them players, the insurers argued that a provision in the policy precludes coverage for any loss resulting from "suspension, lapse or cancellation" of a contract.
The baseball teams' suit stems from a case originally filed in Pennsylvania federal court in June, which targeted several insurance companies. The teams later dropped that suit and refiled in Arizona, Pennsylvania and New Jersey, with each suit focused on individual insurers.
The complaints in Arizona and New Jersey came days after MLB announced it would not be providing players to minor league teams and would be canceling the 2020 season, citing the "unprecedented" times the U.S. is currently experiencing due to the pandemic.
Representatives for the teams and the insurers could not immediately be reached for comment.
The teams are represented by Robin Cohen of Cohen Ziffer and Andrew L. Sandler of Mitchell Sandler LLC.
The insurance companies are represented by Brian A. Cabianca, Gregory T. Saetrum and Aneca E. Lasley of Squire Patton Boggs LLP, Jay R. Sever of Phelps Dunbar LLP and Michael H. Carpenter of Carpenter Lipps & Leland LLP.
The case is Chattanooga Professional Baseball LLC et al. v. National Casualty Co. et al., case number 20-17422, in the U.S. Court of Appeals for the Ninth Circuit.
--Additional reporting by Mike Curley. Editing by Ellen Johnson.
For a reprint of this article, please contact reprints@law360.com.
