The teams, led by JetHawks Baseball LP, said in a brief the lower court "incorrectly presumed" that all of their losses were caused by COVID-19, while their three Nationwide insurers never demonstrated that the virus exclusion should fully apply to bar coverage.
Specifically, the teams said, the virus exclusion does not have an "anti-concurrent causation," so the lower court had no reason to conclude that all of the teams' losses were caused directly and indirectly by the virus.
In November, U.S. District Judge Douglas L. Rayes granted a bid by National Casualty Co., Scottsdale Indemnity Co. and Scottsdale Insurance Co. 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.
The teams have maintained that their losses were also caused by government closure orders and Major League Baseball's decision to not send players down to the minors after the 2020 season was canceled.
"Most cases applying an exclusion to bar coverage for COVID-19 losses contain an ACC clause, notably absent here," the teams said. "At a minimum, causation is a quintessential question of fact that cannot be resolved against the teams at this preliminary stage of the proceedings."
The lower court also erred in refusing to estop insurers from applying the virus exclusion, the teams said. The exclusion is unenforceable because the carriers secured the exclusion by lying to regulators that the policies did not cover viruses and the exclusion simply clarified matters, they added.
When insurers were trying to get virus exclusions approved in 2006, the only parties "negotiating" for policyholders were regulators, the teams said, "a misrepresentation to a regulator is thus equivalent to a misrepresentation to the policyholder."
"Even if the Court could attribute the Teams' losses entirely to the COVID-19 virus ... under federal common law or state law, Insurers should be estopped from relying on the Exclusion to bar coverage based on the misrepresentations they made to insurance regulators to obtain approval of the Exclusion," the teams said.
Additionally, the lower court wrongly held that the teams' inability to obtain players from MLB teams triggered the policy's cancellation exclusion, the teams said. The exclusion solely applies to cancellation of a contract, but the teams never alleged "MLB suspended, cancelled or caused its player development contract with the Teams to lapse," they said.
"The complaint alleges only that MLB breached or failed to comply with the terms of its ongoing and existing contractual obligations, which the Policies cover," they added.
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 country 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.
Counsel information for the insurers was not immediately available.
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 Regan Estes.
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