Sacramento Kings sue insurance company over failure to pay COVID losses at DoCo, arena

Mar. 12—The owners of the Sacramento Kings, Golden 1 Center and Downtown Commons are suing their insurance carrier, alleging the company failed to pay for losses incurred by the COVID-19 shutdown under an $850 million policy.

The lawsuit, filed late Thursday in federal court in Sacramento, alleges breach of contact against Factory Mutual Insurance Co. of Rhode Island for failing to pay for countless losses from canceled Kings games, concerts, restaurant and retail revenues since Gov. Gavin Newsom's coronavirus shutdown orders one year ago.

"For the live entertainment industry, these orders resulted in a complete interruption and cessation of business," the 25-page lawsuit says. "Unable to host sporting events, concerts, and other live entertainment events, venues and their operators (like Plaintiffs Sacramento Downtown Arena LLC and Sacramento Kings Limited Partnership) have lost huge sums as they heeded governmental orders meant to protect the public from the pandemic."

The suit claims Sacramento Downtown Arena LLC and affiliated business entities lost huge amounts of money from cancellations of "NCAA tournament games, concerts by top musical acts such as Billie Eilish and Camila Cabello, a talk by former First Lady Michelle Obama, and other highly-anticipated events at the Golden 1 Center."

The Kimpton Sawyer Hotel adjacent to the arena "had its occupancy plummet and its gross earnings and gross profits from the hotel, and associated restaurants and bars vanish."

"In late March 2020, the Kimpton Sawyer Hotel closed for roughly ten weeks as travel was severely restricted within the state. Occupancy since reopening has been approximately 31% compared to occupancy of approximately 85% during the same period in the prior year."

Despite the losses, the suit says Factory Mutual refused to pay its claims and that the policy "covers losses for communicable diseases."

Steve Zenofsky, assistant vice president of public relations for FM Global, said Friday that the company's obligations are clear.

"FM Global values the long-term relationships we have with our policyholders and we are proud to be leading the industry for claims service," he wrote in an email response to The Bee. "It is unfortunate when legal matters arise because we strongly believe our insurance policies are clear on the coverage provided."

The arena lawsuit disputes that, saying the policy should have covered the losses.

"The policy does not contain any exclusions that apply to preclude or limit coverage for Plaintiffs' losses and damages," the suit says. "None of the exclusions contained in the policy preclude coverage for losses or damage due to communicable disease, including COVID-19, or due to the virus that causes COVID-19.

"The exclusions in the policy do not preclude coverage for losses or damage arising out of an order of a civil authority that limits, restricts or prohibits partial or total access to an insured location, issued due to physical damage caused by COVID-19 and the coronavirus."

The suit does not spell out specific monetary losses under the policy, which is listed as having an $850 million limit, but it spells out the damages incurred by the coronavirus pandemic starting almost exactly one year ago.

"On March 11, 2020, the Sacramento Kings were scheduled to play the New Orleans Pelicans at the Golden 1 Center," the suit says. "Shortly before tipoff, the game was canceled, and the crowd already assembled had to exit the arena.

"On March 12, 2020, the same day that Governor Newsom issued the Executive Order prohibiting gatherings of 250 or more, the NCAA canceled the 2020 Men's basketball tournament, including those games being hosted in part at Golden 1 Center. On March 12, 2020, AEG and Live Nation announced that it was postponing all concerts and events nationwide.

"Ultimately, Arena plaintiffs were forced to cancel all events at the Golden 1 Center from March 12, 2020 to present."

In addition to those losses and the reduction in business at the hotel, sales at Downtown Commons' shops and restaurants evaporated, the suit says.

"Foot traffic, retail sales, and parking revenues at the Sacramento Downtown Commons also dropped to near zero as a result of the initial stay at home orders, which prohibited opening of the retail locations and prohibited consumers from visiting those locations," the suit says. "Subsequently issued orders have permitted the retail shops to reopen, but with reduced capacity, and have periodically permitted, and then again prohibited, restaurants from providing highly restricted forms of dining (such as reduced indoor capacity or outdoor-only dining).

"As a result, the rent payments from retail tenants have declined dramatically."

Each business affected are covered under the policy, according to the lawsuit.

"The policy provides coverage to each of the plaintiffs and the specified locations," the suit says. "Each plaintiff suffered the actual physical loss and damage of property insured by the policy.

"Each plaintiff has sustained actual losses and incurred extra expenses as a result of cases of COVID-19, the coronavirus, and related government orders."

The lawsuit also claims that Factory Mutual has an "orchestrated campaign" to reject COVID-19 claims nationwide, and that it has instructed its workers to issue "taking points" without investigating individual claims.

"Thus, Factory Mutual instructed all of its claims personnel to deny coverage under several pertinent coverage grants regardless of what the claims handler's investigation revealed," according to the lawsuit, which seeks a court order declaring that the insurance policy covers the plaintiff's claims.

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