Falcons, Atlanta United sue insurers over COVID-19 losses

Fans are seated socially distance as the Atlanta Falcons take on the Denver Broncos at Mercedes-Benz Stadium Sunday, Nov. 8, 2020, in Atlanta (Alyssa Pointer/Alyssa.Pointer@ajc.com)

Credit: Alyssa Pointer/Alyssa.Pointer@ajc.com

Credit: Alyssa Pointer/Alyssa.Pointer@ajc.com

Fans are seated socially distance as the Atlanta Falcons take on the Denver Broncos at Mercedes-Benz Stadium Sunday, Nov. 8, 2020, in Atlanta (Alyssa Pointer/Alyssa.Pointer@ajc.com)

The Falcons and Atlanta United have filed a breach-of-contract lawsuit against two insurance companies alleging a failure to cover claims for financial losses caused by interruption of business amid the coronavirus pandemic.

The complaint contends that “all risks” insurance policies purchased by the teams and Falcons Stadium Company, operator of Mercedes-Benz Stadium, should pay for business income lost because the stadium and the team’s training facilities are “unusable in the way that they had been used before COVID-19.”

The dispute appears to center around whether the virus constitutes a covered “direct physical loss or damage” to property, a legal area of much current litigation between businesses and insurers around the country.

“The policies provide business interruption coverage for business income and other related losses caused by ‘direct physical loss or damage,’” attorneys for the Falcons, Atlanta United and Falcons Stadium Company state in the lawsuit. “Due to COVID-19, Plaintiffs’ properties have suffered ‘direct physical loss or damage’ — under the plain and ordinary meaning of that term.

“Instead of being able to pack fans into Mercedes-Benz Stadium and The Home Depot Backyard to enjoy football, soccer and other sporting events, concerts, entertainment events and tours, (the teams) had to keep the properties closed, and upon reopening had to substantially limit public attendance … Plaintiffs are asking the insurers to pay for their loss of business income occasioned directly by being unable to use their properties.”

The 44-page complaint likens the effect of COVID-19 on the stadium to the way that “on a rainy day, a crumbling and open roof from the aftermath of a tornado would make the interior space of a business unusable.”

The complaint was filed by lawyers for the Falcons, Atlanta United and Falcons Stadium Company in state court in Providence, R.I., against Rhode Island-based related entities Factory Mutual Insurance Company (FM Global) and Affiliated FM Insurance Company (AFM) on Oct. 30.

“This action for breach of contract, declaratory judgment and bad faith arises out of FM Global’s and AFM’s failure to comply with their obligations and provide coverage for Plaintiffs’ claims,” the complaint states.

A spokesman for the insurers, Steven Zenofsky, reacted to the litigation with this comment via email to The Atlanta Journal-Constitution: “FM Global and AFM value the long-term relationships we have with our policyholders, and we are proud in leading the industry for claims service. It is unfortunate when legal matters arise because we strongly believe our insurance policies are clear on the coverage provided.”

At least one NBA team, the Houston Rockets, and a number of minor-league baseball teams have filed similar lawsuits against their insurers for denial of claims for business-interruption losses caused by COVID-19.

“These cases are just starting to surface, and we do expect more to be filed by other sports teams,” a spokesperson for Falcons and Atlanta United parent company AMB Sports & Entertainment (AMBSE) told the AJC.

Outside of sports, a large number of businesses around the country have sued insurance companies over COVID-related losses, with many – but not all -- of the early court rulings going in favor of the insurers.

AMBSE declined to comment on specific details of its case “since this is active pending litigation.”

The complaint doesn’t specify how much money the teams and stadium have lost because of the virus, but states that the two policies provide up to $1.6 billion and $142.1 million “in coverage for property damage per occurrence, which includes business interruption losses.”

Asked by the AJC for an estimate of the teams’ COVID-related losses, the AMBSE spokesperson said in an email that the losses continue “with each passing day” and “we are in the midst of calculating these costs.”

Whether the insurers are liable for the losses could depend on how the court interprets the policies’ provisions.

FM Global and AFM haven’t yet filed their legal response to the lawsuit, according to the Providence/Bristol County Superior Court case summary.

According to the lawsuit, the financial losses suffered by the Falcons and Atlanta United include reduction of revenue and income from football and soccer games that have been canceled, postponed or played with limited attendance, as well as from cancellation or postponement of concerts, private events, tours, youth camps and public training camps.

Falcons Stadium Co. also lost a “marquee event” payment from stadium naming-rights partner Mercedes-Benz as a result of college basketball’s Final Four being canceled, the complaint states. The amount of that would-be payment wasn’t provided. Pre-pandemic, the Final Four was scheduled to be played at Mercedes-Benz Stadium in April.

The Falcons organization also has suffered losses from “a sizable reduction in the hotel and motel tax revenue that (it) would have received but for COVID-19,” according to the complaint. A percentage of the Atlanta hotel-motel tax goes toward stadium costs each year.

The Falcons and Atlanta United are represented in the lawsuit by 14 attorneys from five firms in Rhode Island, Texas, Wisconsin, Illinois and Ohio.