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Vegas casino, Treasure Island, says its coronavirus business interruption insurance claim cannot be capped at $200,000.
Treasure Island lodged a lawsuit against its insurer, Affiliated FM, alleging the company wrongly denied its business interruption insurance claim for damages it suffered during state mandated COVID-19 restrictions.
According to the Vegas casino, its “all risks” policy should have covered more than $320 million in business interruption losses and $850 million in property damage.
Affiliated FM (AFM) reportedly filed a motion to dismiss the complaint, arguing that a contamination exclusion caps Treasure Island’s claim to a total of $200,000. The insurer also argued that a “loss of use” exclusion also precludes the Vegas casino’s business interruption claim.
Treasure Island shot back against these arguments, contending that the contamination and loss of use exclusions do not apply to their claim.
“The Contamination exclusion either does not apply or is fundamentally inconsistent with the coverage that AFM granted for communicable diseases,” states Treasure Island’s opposition motion. “The so-called loss of use exclusion, as AFM construes it, would eviscerate the very purpose of business-interruption coverage and impermissibly make that coverage illusory.”
Specifically, the casino points to a pair of provisions in its policy that they say “expressly recognize” that communicable diseases, like the coronavirus, turn air and physical surfaces into “dangerous instrumentalities.”
“Once either Communicable Disease coverage is triggered by physical loss or damage caused by communicable disease, other coverages are also implicated by the Policy’s plain terms,” asserts Treasure Island’s opposition motion.
The casino points the finger at AFM, noting that it drafted the business interruption policy and it is responsible for any ambiguity in the terms of the insurance contract.
“AFM drafted these provisions and must face the consequences of having done so poorly,” states Treasure Island in court documents.
In its motion to dismiss the business interruption lawsuit, AFM also argued that Treasure Island suffered no physical loss or damage to its property.
“AFM ignores its own prior argument—an admission—that loss of functional use alone constitutes physical loss or damage and the wide body of law holding that a policyholder can suffer physical loss or damage even where the impact is not visible to the naked eye,” Treasure Island responds in its opposition.
Treasure Island also accuses AFM of asserting that courts have upheld the denial of business interruption claims in the context of the coronavirus pandemic.
Calling the tactic a “ruse,” Treasure Island contends that AFM’s business interruption policy does not contain the same exclusions as the cases cited by the insurer in its motion to dismiss.
“No court has attempted to wrestle with conflicting provisions of the type in the Policy that AFM issued to Treasure Island,” explains Treasure Island in its court filing. “This case presents facts and policy language materially different from any other case before today. The Policy does not contain a virus exclusion as present in many other cases. The Policy does contain communicable-disease coverage, absent in many other cases.”
Indeed, a number of legal actions related to the denial of business interruption insurance claims are working their way through the courts. Treasure Island’s claim stems from the unprecedented shut down of Las Vegas in the spring of this year to stem the spread of COVID-19.
The Vegas casino alleged that it had to shut down its massive 2.1 million square foot gaming area and resort, along with its 3,000 hotel rooms under an order by Nevada’s governor that went into effect on March 17, 2020. It also contended that further orders from the government, based on conclusions that COVID-19 could exist on surfaces for an indeterminate amount of time, led to further losses.
Treasure Island accused AFM of scheming to avoid paying on its business interruption policy during this time. The casino says it paid a million-dollar premium for the coverage that the insurer is attempting to dodge now that Treasure Island is in a situation were the company needs a payout.
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Treasure Island Las Vegas is represented by Renee M. Finch of Messner Reeves LLP; and Michael S. Levine, Kevin V. Small, Harry L. Manion III and Christopher Cunio of Hunton Andrews Kurth LLP.
The Treasure Island Las Vegas COVID-19 Insurance Lawsuit is Treasure Island LLC v. Affiliated FM Insurance Company, Case No. 2:20-cv-00965-JCM-EJY, in the U.S. District Court for the District of Nevada.
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