By Shawn Rice

Law360 (June 4, 2021, 4:47 PM EDT ) The owners of Madison Square Garden and related entertainment entities pushed back Thursday against their insurers' bid to toss a New York suit over losses from the presence of the coronavirus at their properties, arguing one of the insurers acknowledges ambiguity in the meaning of "physical loss or damage."

The owners of the Garden, the New York Knicks, the New York Rangers and dozens of other sports and entertainment entities kicked off their brief, saying Factory Mutual Insurance Co., one of their insurers, admitted in another federal suit that "physical loss or damage" has more than one reasonable interpretation.

"MSG has four insurance policies that should be fully integrated and harmonized, but they are irreconcilable," the arena and related entities said, adding that two of the four policies issued to them omit "direct" as it pertains to the meaning of "physical loss or damage" from their coverages.

MSG and the other entities, which include venues like the Beacon Theatre and Radio City Music Hall, slammed four insurers with a suit in March. They allege that they should be able to tap into $1.8 billion in property and business income coverage for losses from closing under government orders and the coronavirus.

Last month, Factory Mutual and the other insurers asked to have the suit tossed, arguing that there needs to be physical damage to trigger coverage. The mere presence of the coronavirus isn't a "physical loss or damage," the insurers said. And the policies bar coverage for contamination and loss of use, they added.

The insurers argued that MSG and the related entities can't tap into civil authority coverage without any physical damage to their properties or properties within 5 miles. Also, the stay-at-home orders were issued to stop the spread of the virus, not in response to physical damage, the insurers said.

In Thursday's brief, the arena and related entities argued that science confirms the presence of the coronavirus — citing positive cases at the arena and venues — does physically alter the air and surfaces in property, preventing those properties from being used for their intended purpose.

In response to their insurers' position on "physical loss or damage" as to the virus, MSG and the related entities pushed back with Factory Mutual's admission in Factory Mutual Insurance Co. v. Federal Insurance Co. that the phrase is ambiguous and "must" be construed against insurers.

There is civil authority coverage available for the pandemic-related losses, according to the policyholders, as the government orders barred patrons and employees of MSG from entering or using the properties. Also, the insurers ignore the mitigation coverage, MSG and the related entities said.

"Had MSG's businesses not closed in accord with the government orders, SARS-CoV-2 would have remained in and on MSG's properties," they said, adding that the arena and venues "avoided actual and imminent covered property damage, as well as potential third-party claims."

Finally, MSG and the related entities argued that the exclusions don't apply as the insurers are recasting the actual words of several of those exclusions "to fit their narrative."

A representative for Factory Mutual told Law360 in an emailed statement that the company appreciates its relationships with policyholders and finds it "unfortunate when legal matters arise."

"We strongly believe our insurance policies are clear on the coverage provided," the representative said.

A representative for Allianz Global Corporate and Specialty SE, one of the insurers named in the suit, told Law360 that the company didn't comment on individual claims or pending legal matters. But the representative noted that the insurer has received a number of claims related to the pandemic.

"We will certainly honor COVID-19-related claims where they are part of our policies and cover is clear," the Allianz Global representative said. "However, many businesses will not have purchased cover that will enable them to claim on their insurance for COVID-19 pandemic losses."

Representatives for the other parties did not immediately respond to requests for comment Friday.

MSG and the other owners are represented by Jeffrey L. Schulman, Peter A. Halprin, Stephen Wah, Kirk Pasich and Christopher T. Pasich of Pasich LLP.

Factory Mutual is represented by Harvey Kurzweil, Kelly A. Librera, George E. Mastoris and Matthew A. Stark of Winston & Strawn LLP.

AIG Specialty Insurance Co. is represented by Sandra D. Hauser and Catharine Luo of Dentons.

Allianz Global Corporate and Specialty SE is represented by Michael D. Hynes and John O. Wray of DLA Piper.

Assicurazioni Generali SPA (UK Branch) is represented by Wayne R. Glaubinger and Jared Markowitz of Mound Cotton Wollan & Greengrass LLP.

The case is Madison Square Garden Sports Corp. et al. v. Factory Mutual Insurance Co. et al., case number 651521/2021, in the Supreme Court of the State of New York, County of New York.

--Editing by Vincent Sherry. 

For a reprint of this article, please contact reprints@law360.com.