Minor league baseball teams sue insurers over coronavirus claims

A federal lawsuit filed Tuesday by 15 minor league baseball teams against five insurance companies alleges that "action and inaction by federal and state governments" contributed to "catastrophic financial losses" for ballclubs.

The suit in U.S. District Court in the Eastern District of Pennsylvania is over rejections and anticipated rejections by the insurers of the teams' coronavirus-related business interruption claims. It states teams incur more than $2 million in expenses to operate, "without regard to whether they suffer interruption of their operations."

"In the first few months of 2020," the suit says, "the federal government failed to recognize the severity of the pandemic and did not contain the virus." And it notes a "failure of the federal government to build an effective wall preventing the continued migration of the virus from states that were hit early to the rest of the country."

The complaint accuses the insurance companies of breach of contract and asserts that teams are not precluded from collecting on business interruption claims, despite policy provisions excluding losses "caused by or resulting from any virus" and "acts or decisions, including the failure to act or decide, of any person, group, organization or governmental body."

When contacted by ESPN, Andy Sandler, an attorney with one of the two law firms representing the plaintiffs, said, "We will prove in a court of law why the exclusions don't apply." He said he would not elaborate on how they will do that at this time.

The teams also contend that insurers are failing to recognize that being unable to use ballparks due to restrictions on gatherings and lack of access to players constitutes direct physical loss -- and should be covered under the policies.

Twelve of the teams have policies with subsidiaries of Nationwide Insurance.

"We are committed to doing all we can within the coverage our members have purchased," Nationwide said in a statement to ESPN on Tuesday night. "Business interruption coverage due to a virus outbreak has been excluded from standard policies issued to business owners across the insurance industry for quite some time. The risk for such an event is so vast, including it in standard coverage would make such coverage unaffordable or even unavailable."

Major League Baseball's 30 teams provide and pay the players for their 160 minor league affiliates, which in turn handle most operating expenses. It's widely assumed that the minor leagues won't be able to launch a season this year, and the suit says, "It is now clear that MLB teams will not provide players to MiLB teams for the entire 2020 season."

The lawsuit's 15 teams represent levels from short-season rookie ball to Triple-A, in towns and cities coast to coast with populations ranging from Binghamton, New York's 45,000 to San Antonio's 1.5 million. Three teams -- the Binghamton Rumble Ponies, Chattanooga Lookouts and Idaho Falls Chukars -- were among 42 teams designated by MLB for elimination, in a proposal made last year at the start of negotiations with Minor League Baseball over their operating agreement that expires at the end of this season.

Sources close to those negotiations said Sandler, who owns a team in North Carolina that isn't a party to Tuesday's lawsuit, is the lead member of MiLB's seven-person committee for the talks with MLB. Sandler declined to comment about the committee, MLB's controversial contraction proposal or the negotiations, but others have told ESPN there have been no substantive discussions during the pandemic, as MLB's focus has been on a possible 2020 major league season and its contentious dealings with the MLB players' association.

The lawsuit against the insurers contains this characterization of the 15 teams' losses: "As a result of the virus, the governmental response, and Major League Baseball's failure to provide baseball players, the teams have been deprived of their primary source of revenue -- fans coming to the ballpark and paying for game tickets, merchandise, food and beverage, and partaking in other amenities."