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A federal district court has ruled that the Los Angeles Lakers can proceed with COVID-19-related property damage and bad faith claims against a Chubb Ltd. unit, although it reiterated its earlier ruling dismissing the NBA team’s business interruption claim.
In August, the U.S. District Court in Los Angeles had dismissed the Lakers’ COVID-19-related business interruption litigation against Chubb unit Federal Insurance Co., in which it alleged that the virus’ presence at the Staples Center and the surrounding transportation stations physically altered the property. The court called these “merely legal conclusions couched as factual allegations” and said the team had failed to support its conclusion that the virus’ presence constituted “direct physical loss or damage.”
The team had more success with a first amended complaint, filed with the court in October, that alleged the same previously dismissed claims but with additional factual allegations.
The Lakers contended the virus caused physical alterations to covered properties when it “landed on, and adhered to, surfaces such as fabric seats, elevator buttons and air ducts, causing a physical and chemical reaction that transformed the surfaces into vectors of viral spread called fomites,” said the March 17 ruling, reported on by Sportico.com.
The ruling said that as a result, the team upgraded its properties to include “new air filters; touchless light switches, toilets, and sinks; sleeves or coatings for high-touch surfaces; and plexiglass dividers,” contending the properties were not usable until those upgrades were completed.
“The Lakers alleged both the Covered Properties were physically altered, and that those alterations caused detrimental economic impact. Accordingly, Lakers stated a claim, here, for declaratory judgment and breach of contract as to the Policy’s Property Damage clause,” the court said, in permitting the litigation to proceed.
The court also ruled the Lakers can proceed with their bad faith claim with respect to the property damage. The team said Federal sent a form demand letter “instead of thoroughly investigating the tendered claim,” according to the ruling.
The court again ruled against the team’s claim for business interruption, holding it was not caused by physical damage or loss.
Attorneys in the case did not respond to requests for comment.