While the appellate court affirmed dismissal of a majority of the claims submitted by the Los Angeles Lakers for closure of the Staples Center and other properties due to COVID-19, a portion of their claims survived. L.A. Lakers v. Fed Ins. Co., 2022 U.S. Dist. LEXIS 31503 (C.D. Calif. March 17, 2022).
Government orders closed the Staples Center in March 2020. The Lakers alleged they lost tens of millions of dollars in revenue. They further alleged that the presence of coronavirus particles on fixtures and building systems caused physical alterations to the covered properties. The Lakers had to upgrade their properties to include new air filters, touchless light switches, toilets and sinks; sleeves or coatings for high-touch surfaces; and plexiglass dividers. The Lakers also alleged that five Metro stations within a mile of the Staples Center, that was used to get to games, were closed by civil authorities due to the presence of COVID-19.
The Lakers submitted a claim for property damage and business interruption to Federal. The claim was denied and the Lakers filed suit. In February 2021, the court granted Federal's motion to dismiss without prejudice, after concluding that the Lakers' allegations of direct physical loss or damage were mere legal conclusions and not sufficient to state a claim.
The Lakers filed a first amended complaint (FAC). The same claims were alleged, but with additional factual allegations. Federal again moved to dismiss the FAC.
Regarding the property damage claim, the Lakers alleged that the virus physically altered surfaces at covered properties by changing their chemical and physical properties and creating viral vectors that required cleaning or replacement before the covered properties were safe again. The claim for property damage was sufficiently stated for declaratory judgment and breach of contract.
The business interruption claims failed, however. The closure of the Staples Center and other properties was not caused by virus damage, but by a litany of blanket NBA and government measures. There was no causal chain connecting virus-related physical alterations at the covered properties to the properties' closure.
The civil authority claim was also dismissed. The government orders closing both the covered properties and the Metro stations were aimed at limiting viral spread in the community, not at mitigation of property damage at any specific facility. The stay-at-home orders applied to the entire City of Los Angeles and would have closed the Metro stations even if the virus had never been present there. Thus, the stay-at home orders were not issued in response to direct physical loss or damage at the Metro stations.
