According to Rick Westhead of the popular TSN Canada website, the NHL filed a lawsuit against multiple insurance companies for losses sustained due to the COVID-19 pandemic. This news comes as many teams have been feeling the financial pressures of the pandemic and as Canadian buildings have started reopening with reduced capacity. According to Westhead’s reporting, 20 NHL teams, including five Canadian teams, are named on the lawsuit filed in June of 2021 in the Superior Court of California in Santa Clara.
The claim, released as a public record, does not say how much each club is looking for in compensation. Still, it stipulates that the organizations in combinations are seeking upwards of one billion dollars in damages for unpaid insurance claims. The companies named in the suit are Factory Mutual Insurance Company, The Cincinnati Insurance Company, Starr Surplus Lines Insurance Company, Lexington Insurance Company, and Federal Insurance Company.
What is the NHL Saying?
In the court documents released to the public, the NHL outlines the horrendous business impacts they have suffered from buildings having to shut down, the teams having to play in bubbles, and the facilities needing health and safety upgrades. These challenges scale far beyond just cutting ticket sales which hurt the league but extend to what the teams had to accomplish in their facilities to reopen. These issues meant installing touchless payment systems, physical barriers, and advanced HVAC upgrades for many teams—all expenses not planned for when considering their business model for the upcoming years.
“Fan attendance is a life-blood of the plaintiffs’ revenues. A significant source of the plaintiffs’ revenue comes from arena-related activities, such as ticket sales, concessions, parking, and in-arena merchandise sales… The extra expense the NHL incurred to host the 2020 playoffs and Stanley Cup Final was enormous. The hockey plaintiffs’ loss of revenue, initially from canceled games and then from playing games without fans in the arenas, and their extra expenses to get arenas ready to play and host fans once safe, exceeds one billion dollars”Quote from NHL Claim filed in the Superior Court of Calofirnia in Santa Clara.
How have the Insurance Companies Replied?
According to Westhead’s article and the interviews he did as part of his research, the insurance companies are using the term “physical losses” to define their defense to this lawsuit. According to Factory Mutual, the one insurance company we have any insight on, it would appear that the NHL is not protected as they interpreted their “communicable disease” clause. While Factory Mutual did not respond to a request for comment, the information coming out would indicate that while there is an infectious disease policy in their coverage, that policy is to protect against “physical loss,” as in, needing to clean a facility after an outbreak of a disease in the building. Not for more subjective losses like ticket sales. In addition to the argument that the ‘loss type’ is not covered, it would appear the policy is a one million dollar policy and would not come close to covering the NHLs damages.
Where is this Lawsuit Now?
It would appear that the NHL provided documentation of loss to the defendants in March of 2020 to outline their losses from their perspective. According to a court motion filed on November 12th, 2020, Factory Mutual tried to have the suit dismissed. The reason for dismal was that the plaintiff (NHL) “does not allege any ‘physical loss or damage’ to plaintiffs’ property, which is a threshold requirement of the coverages plaintiffs seek.” The NHL responded to that motion with an objection and argued their policies, “cover revenue lost when a government order issued because of physical damage within five miles of the hockey plaintiffs’ property restricts access to those insured arenas, regardless of whether the hockey plaintiffs’ property itself is damaged.” Factory Mutual responded to that again by arguing that “physical loss” had still not been identified.
It’s not uncommon for lawyers to attempt to throw out a lawsuit, but it does appear that the insurance companies are ready to fight this. The NHL is not the only league to sue their insurers either. The NCAA won a lawsuit related to the cancellation of March Madness. Major League Baseball and the OHL also have current lawsuits pending for similar type protection from their insurance companies.
One thought on “NHL Files Lawsuit Against Insurance Companies for Over $1 Billion in Losses”