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Houston Rockets sue FM Global unit for COVID-19 coverage

Posted On: Jul. 15, 2020 5:08 PM CST


The Houston Rockets basketball organization and its venue the Toyota Center sued FM Global’s midmarket unit on Wednesday seeking business interruption coverage for coronavirus-related losses.

In the suit, Clutch City Sports & Entertainment LP (d/b/a Toyota Center) and Rocket Ball Ltd. v. Affiliated FM Insurance Co., which was filed in state court in Providence, Rhode Island, where FM Global is based, the team and the venue said the insurer wrongly denied their claim last month.

According to the suit, the Rockets and the Toyota Center, which hosts concerts and other shows in addition to National Basketball Association games, bought an “all risks” commercial insurance policy from Affiliated FM that provides $412 million in property damage limits “with a substantial portion of that amount in coverage for business interruption losses.” The policy includes $100,000 sublimits for property damage due to communicable disease and business interruption due to communicable disease.

The organizations paid $719,490 in premium for the coverage, which went into effect on Oct. 6, 2019, court papers say.

The Toyota Center attracted nearly 1.3 million people to events in 2019 but has attracted only 340,000 in 2020 due to the forced closure of the venue during the COVID-19 pandemic, court papers say.

City and state officials issued various orders in March imposing restrictions on businesses in Houston and issued further orders in June after an increase in COVID-19 cases in the state.

The venue and the Rockets contend in the suit that the presence of COVID-19 at the Toyota Center constitutes physical damage that triggers coverage for lost revenue under various clauses in its policy, including business interruption, extra expense, attraction and communicable disease coverage, according to the suit.

The communicable disease sublimits “do not purport to reduce other coverages available under the Policy. They are additive,” according to the suit.

“AFM is unable to discuss because it is a legal matter,” a spokesman for FM Global said in an email in response to a request for comment. 

The suit is one of scores of suits filed by businesses across the country. Most of the suits are pending, but judges in Michigan and New York ruled in favor of insurers in two cases.

More insurance and risk management news on the coronavirus crisis here