Houston Rockets file COVID-19 lawsuit against its insurance company

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The NBA team has become the first to sue its insurer for denial of a business interruption claim.

The Houston Rockets NBA team has filed a lawsuit against its insurer, Affiliated FM Insurance, for the denial of its coronavirus pandemic-related business interruption policy claim, said a Bloomberg Law report.

The lawsuit involves the denial of a $400 million claim on the policy relating to losses from COVID-19.

Houston Rockets owner, Tilman Fertitta’s company Rocket Ball and Clutch City Sports & Entertainment is the holding company for both the NBA team and the venue where they play, the Toyota Center. That company paid over $700,000 in annual premiums on a business interruption policy worth about $400 million, said the Bloomberg Law report. The company filed the lawsuit against the insurer in Rhode Island.

This filing has made the basketball team the first among the National Basketball Association’s teams to file a publicly known lawsuit for COVID-19 pandemic loss recovery. According to many media reports, including on CNBC, insurers are not offering coverage for losses suffered as a result of the pandemic. This form of outbreak-related covered stopped being offered in 2016 following that year’s Summer Olympic Games in Brazil at the height of the zika epidemic.

The Houston Rockets lawsuit was filed at a time in which other sports franchises have been recovering losses.

Among the other sports franchises that have managed to recover some of the losses they faced due to the pandemic include Wimbledon and the NCAA. Their insurance policies were triggered the moment the COVID-19 crisis was officially declared a pandemic. The NCAA received a payout of $270 million. Wimbledon received an estimated $141 million. Those payouts made it possible for the organization to cancel the events but recover some of the expenses that were lost as a result. However, policies similar to those are no longer being sold.

“The NCAA was able to stay afloat despite that lack of revenue (from the NCAA Tournaments) based upon the fact that it had insurance for something unforeseeable and in my life has never occurred,” explained Segal McCambridge Singer & Mahoney’s Alan Taylor, co-chair of the law firm’s professional liability unit, as quoted by CNBC.

However, some companies are trying to cite the government-forced shutdowns and not the pandemic as the reason for their filings, in the effort to recover some of their Houston Rockets - NBA basketball on courtlost revenue through business interruption policies. This may be the strategy the Houston Rockets intend to use as well.

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