The Ocean Casino in New Jersey Seeks Supreme Court's Help for COVID-19 Insurance Coverage
This week, the New Jersey Supreme Court heard arguments from attorneys representing Ocean Casino Resort. They were discussing why this Atlantic City business should be entitled to insurance coverage due to the COVID-19 pandemic.
Ocean Casino, which operates under the name "AC Ocean Walk, LLC," held property insurance policies to cover losses in case of any interruption to its operations. However, the three insurers of these policies - AIG Specialty Insurance, American Guarantee & Liability Insurance Co., and Interstate Fire & Casualty Co. - have refused to pay out the combined $50 million in coverages, claiming that Ocean Casino didn't suffer any physical damage as a result of the coronavirus.
The insurers argue in the ongoing litigation that their policies only cover business interruptions caused by "direct physical loss or damage." Moreover, most business interruption policies include virus exclusions, which means health-related events don't warrant a property insurance claim. Property insurance policies typically require the insured to demonstrate physical damage.
Ocean Casino Resort is jointly owned and operated by Luxor Capital, a New York hedge fund, and Ilitch Holdings, the parent company of Little Caesars Pizza and Detroit's MotorCity Casino Hotel. Ilitch Holdings, founded by the late Mike Ilitch, also controls MLB's Detroit Tigers and the NHL's Detroit Red Wings.
Long Shot Lawsuit
Courts across several states have consistently sided with insurance companies in lawsuits brought by their insured entities seeking pandemic relief. The crux of the case is determining if COVID-19 inflicted physical damage to a brick-and-mortar business.
To date, the majority of the lawsuits have either been dismissed or favored the insurers. Penn Law's "Covid Coverage Litigation Tracker" reveals that only 15 lawsuits won by policyholders out of the 896 cases filed against insurance companies for failing to pay out on business interruption policies.
One of these victories was the Snoqualmie Indian Tribe. It successfully sued in September 2021 to collect insurance money for losses incurred due to COVID-19 at its Snoqualmie Casino in Washington.
Judge Catherine Shaffer, of Washington State Superior Court, ruled that since "all risks of physical loss or damage" was included in the tribal casino's insurance policies, "a reasonable interpretation of the phrase is that the tribe was deprived of the ability to physically use or operate its properties because of the COVID-19-related closures."
Ocean's attorneys argued before New Jersey's highest court this week that their policies defined "Covered Cause of Loss" as "all risks of direct physical loss of or damage from any cause unless excluded." They also maintained that the policies covered "Time Element" losses, or "the loss of business income resulting from the suspension of business activities."
No Ruling Yet
The attorneys for the insurance carriers countered that Ocean Casino didn't suffer direct physical damage and failed to show how the resort had repaired or physically removed the virus from its premises. Interstate Fire & Casualty Co.'s counsel pointed out that its policy included a "Pollution Contamination Exclusion" explicitly stating that coverage wouldn't be awarded for the "release, migration, discharge, escape, or dispersal of Contaminants."
Ocean's lawsuit was initially dismissed by a state appellate court but was taken up by the New Jersey Supreme Court after its appeal. The court adjourned after hearing arguments this week. No date has been set for when a decision might be issued.
Ocean did receive $850K from the three insurers for separate coverage for "Interruption by Communicable Disease."
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Source: www.casino.org
