eNotes: Liability – February 2025 – Federal

SIGNIFICANT CASE SUMMARIES

Federal Case Summary

Phila. Eagles L.P. v. Factory Mut. Ins. Co.
United States District Court for the Eastern District of Pennsylvania
No. 21-1776

Decided: December 13, 2024

Eastern District of Pennsylvania denies Philadelphia Eagles Limited Partnership’s Motion for reconsideration of an Order dismissing its Declaratory Judgment Complaint seeking coverage for losses resulting from COVID-19 pandemic, ruling that the Complaint did not plead facts sufficient to trigger coverage for physical loss or damage to the insured properties.

Background

In March 2020, Philadelphia Eagles Limited Partnership closed its insured properties including Lincoln Financial Field (“the Linc”) because of a government Order requiring “all non-life sustaining businesses to close.” In fall 2020, the National Football League allowed the Eagles to have up to 7,500 fans in attendance. However, after a mid-November 2020 COVID surge, the Eagles no longer permitted fans to attend games. Consequently, the Eagles made a claim to their insurance provider to recover for the substantial financial losses caused by the forced cancellations. The insurer denied coverage because the alleged loss did not satisfy the threshold requirement of physical loss or damage. As the Court put it, the Eagles “argue it has made a clean pass for coverage” and that the Complaint “crossed the goal line for ‘physical loss or damage’” under the instant policy triggering coverage for loss “directly resulting from physical loss or damage” because COVID-19 viral droplets physically changed the airspace and surfaces of the insured properties. The insurer claimed that under state and federal precedent it scored a “no coverage touchdown.” On October 16, 2024, the Court granted the insurer’s Motion to dismiss. The Eagles’ Motion for reconsideration followed.

Holding

The Court first analyzed the recent decision by the Pennsylvania Supreme Court holding that the near-identical operative language of “direct physical loss of or damage to property” required either “(1) a physical disappearance, partial or complete deterioration, or absence of a physical capability or function of the property (loss), or (2) a physical harm or injury to the property (damage),” and that the “Restoration Language” requirement only provided “further support” for that Court’s conclusion. Similarly, the Court analyzed Third Circuit precedent that established the standard for physical loss or damage from COVID-19, that is, a substance unnoticeable to the naked eye, specifically “that the functionalities of the properties were nearly eliminated or that the properties were made useless.” Holding that the abovementioned analysis governed the instant policy, the Court concluded that under Pennsylvania Law the Eagles “sustained economic loss, not physical loss” as demonstrated by the fact “that the Linc began reopening, albeit with mitigating measures.” Likewise, the Eagles failed to properly plead under Third Circuit standard because the team only lost “the ability to use properties for their intended purpose.”

Questions about this case can be directed to Javier Zurita at (267)-861-7591 or jzurita@tthlaw.com.