Philadelphia Eagles Seek to Extend Covid-19 Business Insurance Bid Into Overtime

The Philadelphia Eagles football organization wants to force its case for Covid-19 business interruption insurance against insurer Factory Mutual Insurance Co. into overtime, arguing that its situation is unlike any other that already has been decided.

The Pennsylvania Supreme Court in October kicked the Eagles case back to the federal court with a ruling that appeared to end the dispute. The Supreme Court, reversing lower courts, ruled in a case involving CNA Insurance Co. that dentist Timothy A. Ungarean was “not entitled to insurance coverage under the plain and unambiguous language of the CNA Policy because his business properties covered thereunder did not sustain any physical loss or damage.”

After that state high court ruling, U.S. District Judge Michael Baylson dismissed the Covid-19 insurance lawsuit by the Philadelphia Eagles and another by the Philadelphia 76ers basketball team. The federal court said it followed the state’s high court reasoning in Ungarean in its dismissals of what it saw as similar cases.

The Eagles have now asked the federal court for a review of the dismissal. The team asserts that the state high court ruling should not apply to its case because the language in its Factory Mutual Insurance Co. (FM) policy is different and less restrictive than the language in the CNA policy the state’s high court analyzed in Ungarean.

The Eagles purchased a $1 billion insurance policy for coverage relating to “physical loss or damage of property.” In 2022, after suffering a large loss of revenue, which the Eagles allege was due to Covid-19, the Eagles sought payment from FM, which denied coverage.

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FM contended that the terms of the Eagles’ policy limited coverage to the $1 million Communicable Disease Response, which it paid. FM asserted it had no duty to pay for the “physical loss or damage to property and business interruption” because of an exclusion for losses caused by “contamination.” FM further argued that loss of use does not constitute physical loss because the latter requires a change to some physical condition of the property.

The Pennsylvania Supreme Court sided with CNA in holding that “physical loss or damage” required a “physical alteration” of property, in order to give meaning to the “period of restoration” provision in CNA’s policy. The CNA provision called for the “repair,” “replacement,” or “rebuilding” of property. The Ungarean court ruled that “physical alteration” was required to trigger the CNA policy’s business interruption coverage because there otherwise would be nothing to “repair,” “replace,” or “rebuild,” and because recognizing coverage in such circumstances would “render” the ‘period of restoration'” language in the CNA policy “superfluous.”

The Eagles contend that unlike the CNA policy, the FM policy terms cannot properly be read to limit coverage to losses solely for physical alteration of property. Its memorandum seeking reconsideration claims that language like that in the FM policy was not considered in Ungarean or it appears in any of the other of the federal circuit’s cases.

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According to the memorandum, the Ungarean court did not address what physical impact on property, if any, was required to trigger coverage under a policy that does not require physical repairs or rebuilding of the insured property. The Eagles say the FM policy does not require the insured to physically “repair” or “replace” its property in order to trigger business interruption coverage. For coverage for lost “gross profits” to apply, the policy instead “simply prescribes a 12-month time period for insurance without stating any requirement of physical repairs to the property that suffered physical loss or damage.”

According to the Eagles, reading a blanket “repair” or “replacement” requirement into the FM policy imposes a restriction where none exists and the less restricted coverage that FM’s policy grants for gross profits underscores that FM’s policy must be read to provide broader coverage than that contained in the CNA policy.

The Eagles further argue that courts have not considered FM’s own interpretation of the policy as “revealed by coverage-favoring admissions it has fought tooth and nail to protect from disclosure” in the COVID-19 coverage cases against it across the country. The Eagles maintain that, contrary to its current position, FM has admitted multiple times in other contexts that “physical loss or damage” covered by its policy can be caused by a communicable disease such as Covid-19. To date, the Eagles petition maintains, only one federal court (in Nevada) has considered these admissions and denied FM’s summary judgment motion.

“Because Ungarean predicated its decision on the different and more restrictive language of the CNA policy, that decision does not control interpretation of FM’s policy,” the football team insists.