Houston Rodeo Files $79M COVID-19 Losses Lawsuit

Houston Rodeo says that their insurer wrongfully denied their business interruption claim despite the rodeo losing millions due to COVID-19.

According to the Houston Rodeo lawsuit, Hallmark Specialty Insurance Company should have covered the rodeo’s losses after Texas authorities forced the company’s property to quarantine and then issued state-wide closures. However, Hallmark allegedly “acted in bad faith and breached its contract” when it denied the Houston Rodeo’s claim.

In early March, individuals reportedly visited the NRG Park Complex Property which the rodeo calls its home. Unknowingly, these individuals reportedly carried the COVID-19 virus onto the property and contaminated handrails, doorknobs, equipment, walls, doors, and other parts of the property. On March 11, the City of Houston Health Department responded to these risks by ordering a quarantine of the property. As a result, Houston Rodeo says it had “no choice” but to close its doors.

Days later on March 13, Texas Governor Gregg Abbott declared a state of disaster in the state due to COVID-19. As a result, the Houston Rodeo once again faced pressure from authorities to close their doors in the interest of public health.

Although these measures were in the interest of public health. Houston Rodeo reportedly suffered from significant losses for the remainder of the 2020 season. According to the rodeo, these closures and subsequent losses should have been covered by the company’s $79 million “all risks” business interruption policy through Hallmark.

Houston Rodeo contends that their losses during the 2020 season were significant and physical due to the loss of functionality. Before the coronavirus outbreak, rodeo attendees could sit close together or even stand shoulder to shoulder. However, due to the risk of COVID-19 and the subsequent civil authority orders, this was no longer possible – posing a significant loss of functionality.

As such, the company submitted a claim in early April seeking coverage for the losses sustained as a result of the two civil authority closure orders. Unfortunately, in late May, Hallmark responded to the company’s claim with a reservation of rights letter notifying Houston Rodeo that their policy coverage may not apply.

Typically, a reservation of rights letter allows the insurer to investigate the claim without waiving their ability to deny the claim in the future. However, Hallmark allegedly failed to fully and thoroughly investigate Houston Rodeo’s losses and simply denied the rodeo’s claim.

According to Houston Rodeo’s lawsuit, Hallmark “failed to interview employees of [Houston Rodeo] about the loss, failed to consider or even address the civil authority closure orders or the quarantine order, and otherwise failed to do what any other reasonable property insurer would have done when investigating a catastrophic loss of this magnitude.”

Previously, insurance companies have denied COVID-19 business interruption claims by arguing that the resulting losses are not physical. However, the Houston Rodeo lawsuit contends that “the loss of functionality is no less physical than the impact of rain and wind on a property having lost its roof to a tornado, hurricane, fire or other covered event.”

The business interruption insurance lawsuit seeks a judgement against Hallmark Insurance ordering the company to pay the benefits of the Houston Rodeo claim, along with interest, attorneys’ fees, and court costs.

Has your business been affected by the coronavirus? Was your business interruption insurance claim denied? Share your experiences in the comment section below.

Houston Rodeo is represented by Denman H. Heard, Derek Merman, and Kane Kenney of Heard Law Firm PLLC.

The Houston Rodeo COVID-19 Insurance Lawsuit is Houston Livestock Show and Rodeo Inc. v. Hallmark Financial Services Inc. d/b/a Hallmark Specialty Insurance Company, Case No. 2020-64224, in the District Court of Harris County, Texas.

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