Rockets sue after insurance claim denied
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LOS ANGELES • The Houston Rockets and its billionaire owner Tilman Fertitta are suing their insurer for denying the National Basketball Association (NBA) franchise's bid to tap its business-interruption insurance policy over revenue losses from the coronavirus pandemic.
Rocket Ball and Clutch City Sports & Entertainment, the respective holding companies for the team, and Toyota Centre, where the Rockets play, sued Affiliated FM Insurance, a division of FM Global, on Wednesday in a state court in Rhode Island.
The suit is the first by an NBA team seeking to recover losses tied to the economic body blows wrought by the coronavirus.
The league has been suspended since March and no further games will be held at the Toyota Centre this season.
The Rockets are instead in Orlando, Florida, where the competition is set to resume on July 30 at Disney World, although guard Russell Westbrook has yet to join their training camp after testing positive for the virus on Monday.
Fertitta said in court filings he paid around US$719,000 (S$1 million) in annual premiums for more than US$400 million in business-interruption insurance.
He added the policy covers the pandemic because it was not specifically excluded and the lawsuit contends loss of use of the arena constitutes "physical damage", triggering the coverage.
"The property has been impaired," the team's lawyers said in the complaint. "The loss of functionality is no less physical than the impact of a property having lost its roof to a tornado or hurricane."
Steven Zenofsky, a spokesman for FM Global, declined to comment on the Rockets' suit.
Fertitta, who also owns the Golden Nugget casino in Las Vegas and the Landry's restaurant chain, joins more than 50 other businesses across the US who have sued insurers for denying claims on business-interruption policies, according to data compiled by Bloomberg.
The stakes in this wave of business-interruption cases are high for insurers, who say such policies were intended only for physical damage and were never priced to cover a global virus outbreak, and many specifically exclude pandemics.
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$1m
Insurance premiums paid annually by the Houston Rockets to protect the franchise from business interruption losses.
Insurers are facing as much as US$100 billion in losses from the pandemic, Wells Fargo & Co. analyst Elyse Greenspan has estimated.
BLOOMBERG
