Houston Rockets Lawsuit Against RI Insurer Is Playing Out in, Not on, a RI Court

Wednesday, October 14, 2020

GoLocalProv Business Team

Playing out in a Rhode Island courtroom is a legal battle between the NBA’s Houston Rockets' parent company and the arena the team plays in, as they are suing Rhode Island-based FM Global -- a case that could be worth hundreds of millions of dollars or potentially far more.

The suit filed in Providence Superior Court is before Judge Brian Stern. The Rockets' lawsuit against FM Global - the team's insurer - may be the battle of titans, but it is not an aberration in the emerging battle between businesses and insurance companies over coverage during the coronavirus. The suit is specifically against FM Global's subsidiary Affiliated FM Insurance Company.

According to Insurance Journal, as of August, more than 700 lawsuits relating to business interruption have been filed across the country. 

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The University of Pennsylvania has tracked more than 1,200 lawsuits via its Covid Coverage Litigation Tracker.

Regardless of the number of lawsuits, what may be unique is the potential size of the judgment. At the crux of the suit by the Rockets -- and many other businesses that have filed suit against their insurance carriers -- is did their "business interruption" policy covers the closure by the coronavirus.

According to the Rockets and the related companies which include the Rockets' venue the Toyota Center, they paid $719,000 in annual premiums to FM Global for business insurance.

In the suit, the Rockets assert, “The Policy provides up to $412 million in coverage for property damage, with a substantial portion of that amount in coverage for business interruption losses, on a per-occurrence basis.“

At the beginning of 2020, the coronavirus swept across the globe and impacted everyone from kindergartens to NBA teams. On March 11, the NBA canceled its season due to the virus.

 

In the suit, the Rockets and its affiliates claim, “Despite agreeing ts cover Plaintiff’s property against all risks of physical loss or damage (except as specifically excluded in the Policy), and Plaintiff resulting business interruption loss, AFM wrongfully denied coverage.”

In the 30-page suit, the Rockets claim that the coverage provided by FM Global covered business interruption - including interruption such as the coronavirus.

"The Policy also provides Civil Authority coverage for business interruption loss resulting from prohibited access to Toyota Center due to a civil authority order, provided that such an order was the direct result of physical damage of the type insured at Toyota Center or within five (5) statute miles of it. See Exhibit A, All Risk Coverage Form, at 24 of 44. 15. In addition, the Policy covers reasonable and necessary costs incurred for actions to temporarily protect or preserve the property, provided such actions are necessary to prevent insured physical loss or damage," states the Rockets' claim.

The suit against FM Global includes seven counts include operating in Bad Faith, Breach of Contract, and Violation of the Texas Unfair Claim Settlement Practices Act. 

 

FM Global Disputes 

“AFM [FM Global's subsidiary] values the long-term relationships we have with our policyholders and we are proud in leading the industry for claims service. It is unfortunate when legal matters arise because we strongly believe our insurance policies are clear on the coverage provided,” said Steve Zenofsky, Assistant Vice President of FM Global in an email to GoLocal.

The response filed in Sterns courtroom by FM Global denies nearly every charge by the Rockets, in fact, they make more than 60 denials in the 25-page filing.

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