Flyers Owner Seeks Stay in COVID-19 Insurance Fight, While Insurer Seeks Dismissal

Factory Mutual Insurance seeks the dismissal of Comcast Spectacor’s COVID-19 insurance complaint for failure to state a claim, while Spectacor seeks a stay of the proceedings until the final resolution of two similar cases on appeal now pending before Pennsylvania Supreme Court, said the nearly simultaneous Factory Mutual and Spectacor motions Thursday (docket 2:23-cv-02476) in U.S. District Court for Eastern Pennsylvania in Philadelphia.

Spectacor, owner of the Philadelphia Flyers and the Wells Fargo Center, is suing Factory Mutual to recover losses it incurred when COVID-19 forced the cancellation or curtailment of Flyers' games in 2020 and 2021, alleging that Factory Mutual refuses to honor the terms of the property insurance policy the team bought to protect it against catastrophic losses (see 2306290001). But the 3rd U.S. Circuit Court of Appeals, plus other courts nationally, “have dismissed similar complaints on several grounds that apply here,” said Factory Mutual’s memorandum of law in support of its motion to dismiss.

Spectacor’s complaint fails, even if every fact it pleads “is accepted as true,” said Factory Mutual’s memorandum. Spectacor fails to plead facts that could establish “physical loss or damage,” a condition that’s “precedent” to the coverage sought under the policy’s property damage and time element coverage provisions, it said.

Even if Spectacor could establish the required physical loss or damage to its property, which it can’t, the policy that the Flyers bought contains a “contamination exclusion” that expressly precludes coverage for COVID-19 losses, said the memorandum. The exclusion specifically defines contamination to include viruses, plus disease-causing or illness-causing agents and pathogens or pathogenic organisms, all of which were at play during the COVID-19 pandemic, it said. The policy’s additional “loss of use” and “law or ordinance” exclusions “independently bar” Spectacor’s attempt “to recover for any alleged losses from its inability to fully utilize its properties or caused by the governmental orders issued in response to the pandemic,” it said.

Spectacor’s regulatory estoppel claim “is simply without merit,” said the memorandum. Factory Mutual’s position in this case “is consistent with information previously submitted to regulators,” despite Spectacor’s “best efforts to argue otherwise,” it said. The court should dismiss Spectacor’s complaint in its entirety, with prejudice, it said.

But important issues of Pennsylvania state law “that are at the heart of the currently pending state and federal pandemic-related business interruption insurance claims,” like those asserted by the Flyers, are presently up for decision before the Pennsylvania Supreme Court, said Spectacor’s memorandum of law in support of its motion for a stay. The Pennsylvania Supreme Court’s ruling in the pending COVID-19 insurance cases “could govern the result” of Factory Mutual’s motion to dismiss, it said.

The Flyers submit that, under these circumstances, a stay of the proceedings pending final resolution of the Pennsylvania appeals “will serve the interests of justice, promote judicial efficiency, and preserve both court and party resources,” said Spectacor’s memorandum. The Flyers also submit that that such a stay won’t cause Factory Mutual “to suffer any prejudice,” it said. A stay will merely preserve the “status quo,” with Factory Mutual retaining, and gaining profit from, “the money that the Flyers contend Factory Mutual owes them," it said.